Please accept YouTube cookies to play this video. By accepting you will be accessing content from YouTube, a service provided by an external third party.

YouTube privacy policy

If you accept this notice, your choice will be saved and the page will refresh.

In my opinion, entries are necessary. But the right entry setting is not what will make your system a winner or a loser. Like a car needs to adjust its speed to the traffic, a good trading system must be able to adjust its risk to the current market conditions. I think that some so called financial experts make a lot of money with recommendations for a future they cannot foresee.

I strongly believe that nobody is able to foresee the future. If you increase your risk, maybe the drawdown will be doubled. But that doesn’t mean that you also can expect 200% profit.

I know that my smartphone is a better navigator than Christopher Columbus. And I know that any ten year old computer is a better trader than me.

Sometimes it is hard to find the right risk setting for an algorithmic trading system.

The problem is that bad results always feel five times as bad as good results feel good. That causes mental pressure.

You might have seen these Windows updates. Restarting your computer in the middle of the game. That could cause problems. What will happen when you have a network problem and some of your broker’s data might be missing or is corrupted? Some people set a break even stop that is protecting the position from becoming a loss after it is in the profit zone.

I started to write down what I did because I wanted to be able to identify my errors. Some indicators are more popular than others. The RSI is one of the better known examples. But indicators are overrated.

Driving your car is one single thing, and that includes talking to the passengers. You would probably not be able to tell your family how often you change the gear or adjusted the speed afterwards.

Launching a profitable trading system is sometimes like launching a plane. A plane will not fly when the speed is too slow. Actually, it will not even take off.

Most people believe that the one thing that makes traders profitable is to know the right entry signal.

Actually, I have never seen any entry signal that would not produce false buy and sell signals from time to time.

It took me a while to figure out, but my first profitable system was indeed a bollinger band system.

Because an automated system can do the trading, it is no longer relevant if I have a good or a bad day.

If you need surgery, you want the best possible doctor because you want to avoid problems. You wouldn’t ask somebody with a sword. For trading the law of the worst outcome means that we need to design our trading system in a way that the probability to survive the worst possible outcome is above average. Most of the time I do the same thing with slightly different settings.

That is how I got my systems to be profitable.