Mechanical forex trading systems and robots are sold heavily online and most lose, despite presenting track records of profits. Why do they fail? There curve fitted and you need to avoid systems that are, or you will lose your equity quickly...
So what is curve fitting?
It's when a systems rules are tested on historical data and then bent (curve fitted) to show a profit in hindsight. Of course, the same data sequence never occurs exactly again and the trader loses as the system collapses in real time.
Ever wonder why the track records on most forex robots look to good to be true?
The reason is there curve fitted in hindsight - if you look at the disclaimer, it will tell you it's a "hypothetical simulation"; Just check any mechanical forex trading system which promises you huge gains for hundred dollars or so and you will see the track record is a back test.
Back testing is easy!
The vendors simply keep bending and curve fitting the rules until they have a profit but this can be done by anyone - let's be clear if you know the price history, you I or anyone else can do it and be rich beyond our wildest dreams.
In the hard, real world of trading, there is no opportunity to curve fit and these systems get mashed.
Curve fitted simulations are easy to spot, JUST look for the following:
- Numerous rules and parameters and complex logic
- Different rules for different trading environments
- Different rules for different currency pairs
Generally a mechanical forex trading system should be simple - just a few rules, these rules should trade every currency pair in the same way and there should be no changes for different trading conditions.
Today, there is a huge industry telling you forex trading is easy, when it's obvious its not - that's why the rewards are so high.
The Good News!
Is that anyone can win with the right forex trading system and you can even get a free one which works. It's called the 4 week rule and we have written about it frequently. It's made countless traders millions over the last 25 years.
It's a simple one rule system, that's trades all markets in the same way; it's simple to understand and has timeless logic so check it out.
Simple and Robust Systems Work Best
Whether you buy a system or use a free one, always make sure the system is not curve fitted and that it's simple and robust. If you do, you will find the right mechanical forex trading system and enjoy currency trading success.
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