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EP57: Should I Change The Rules?
In this episode of Truth About FX, Walter talks about why you should — or should not — change your rules based on strategy. Is the market or are you just evolving as a trader? Walter advices against adding too many filters and over-complicating your systems.
You will also learn here a unique method called the “Acapulco Trade” — and, no, you are not actually going to trade in Acapulco — and how this can help you in finding breakouts.
Download (Duration: 05:09 / 5.89 MB)
In This Episode:
00:40 – assumptions
02:00 – complexity
03:19 – temptation
04:51 – jumbled junk
Tweetables:
Avoid adding too many filters and over complicating your systems. [Click To Tweet].
Break it out and do a different test. [Click To Tweet].
Ask yourself: If I do this, how would my results change? [Click To Tweet].
Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.
Hugh: Hi, Walter. This is a question I had earlier on and I am sure a lot of people have also right now: how long should I test one strategy before changing or refining the rules?
Walter: What a great question. This is what I would say. First of all, there is an assumption that you are going to change the rules and I would say why. If you have more moving parts, like if you’ve got a MACD moving average, the Stochastics and you’ve got these different indicators and settings like that then maybe, over time, you might have to change them.
If you’ve got a really simple system, maybe you do not have to. Probably, what’s going on here is it’s not really that the market is changing and that you need to change the rules. It is probably you are evolving and you are changing as a trader.
What that means is you’ve got new beliefs that are starting to crop up given your experience trading the markets which is absolutely fine. You want those to manifest in your trading system.
That is probably the more likely thing. In my estimation, what’s going on here is that you are thinking “Okay, I’ve noticed that the market often does this and how do I incorporate that into my system?”
I would say, at a minimum, if you are trading a system successfully — I mean profitably, consistently and you are comfortable with it — I wouldn’t change anything for, at least one year at the very least.
I would ask myself this question, if I am thinking about changing it, ask yourself this question “is it that you say that you are changing it because the market has changed?” If that is the reason and you really believe that, then maybe your system is too complex.
You have too many filters, too many rules, too much going on and that is being reflected in the result because it does not seem to really capture like it once did. That is one thing. The other thing is what if you are saying “I want to change the rules of this system or modify them because I believe this is what often happens in the market”.
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By Walter Peters (FXJake) and Hugh Kimura (Trading Heroes)In this episode of Truth About FX, Walter talks about why you should — or should not — change your rules based on strategy. Is the market or are you just evolving as a trader? Walter advices against adding too many filters and over-complicating your systems.
You will also learn here a unique method called the “Acapulco Trade” — and, no, you are not actually going to trade in Acapulco — and how this can help you in finding breakouts.
Download (Duration: 05:09 / 5.89 MB)
In This Episode:
00:40 – assumptions
02:00 – complexity
03:19 – temptation
04:51 – jumbled junk
Tweetables:
Avoid adding too many filters and over complicating your systems. [Click To Tweet].
Break it out and do a different test. [Click To Tweet].
Ask yourself: If I do this, how would my results change? [Click To Tweet].
Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.
Hugh: Hi, Walter. This is a question I had earlier on and I am sure a lot of people have also right now: how long should I test one strategy before changing or refining the rules?
Walter: What a great question. This is what I would say. First of all, there is an assumption that you are going to change the rules and I would say why. If you have more moving parts, like if you’ve got a MACD moving average, the Stochastics and you’ve got these different indicators and settings like that then maybe, over time, you might have to change them.
If you’ve got a really simple system, maybe you do not have to. Probably, what’s going on here is it’s not really that the market is changing and that you need to change the rules. It is probably you are evolving and you are changing as a trader.
What that means is you’ve got new beliefs that are starting to crop up given your experience trading the markets which is absolutely fine. You want those to manifest in your trading system.
That is probably the more likely thing. In my estimation, what’s going on here is that you are thinking “Okay, I’ve noticed that the market often does this and how do I incorporate that into my system?”
I would say, at a minimum, if you are trading a system successfully — I mean profitably, consistently and you are comfortable with it — I wouldn’t change anything for, at least one year at the very least.
I would ask myself this question, if I am thinking about changing it, ask yourself this question “is it that you say that you are changing it because the market has changed?” If that is the reason and you really believe that, then maybe your system is too complex.
You have too many filters, too many rules, too much going on and that is being reflected in the result because it does not seem to really capture like it once did. That is one thing. The other thing is what if you are saying “I want to change the rules of this system or modify them because I believe this is what often happens in the market”.