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Old 12-18-2010, 09:43 PM   #1

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SST Money Management Warning & Backtesting

I thought I would give a warning based on my trading experience using SST

I have blown 50% + of my account following a profitable system, heres how.

I used a 2% risk money management system. (2% of the average back tested Loss)
I appear to have over traded in that I traded every entry signal, so if ten different pairs/time frames had entrys at the same time I got into all 10 plus. (my partner looked after half the pairs on the laptop) I was so strick with my rules that I took every entry even when I could see that the market was very choppy. I had back tested for 2 months prior to trading so knew that I had an edge.

After my account was down by 40%+ I changed to 1% risk money management system and my account continued to go down.


Please Note: my shorter term backtesting has been narrowed down to suit Australian 5pm-midnight as I work the other 11hrs of the day.
Recomendation:[LIST]
Only trade small number of pairs(As suggested during netpick owners annual webinar)
Get back into winning trades that were stopped out early
Use Risk management based on entry stop lose, not average.
Stop trading at pre determined level eg 5% or 10% max loss per day

I have taken a break from SST for obvious reasons(confidence shattered). Don't let this happen to your account!

I have included my backtesting spreadsheet (a bit messy) hope it helps someone. I would be happy to forward the SST settings used for each pair/timefame
Note all back testing was using mt4 measuring pips with curser for speed so not 100% accurate as doing the math

Brent
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File Type: xls Pips per account dollarfor Forum.xls (914.5 KB, 141 views)
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Old 12-18-2010, 09:55 PM   #2



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Re: SST Money Management Warning & Backtesting

Clearly this is a case of not the system that got you in trouble but way, way, way overdoing it. And, you really don't need a spreadsheet to tell you that.

It's a lesson learned. Consider it tuition. No matter what trading approach you follow you will get yourself into a world of hurt if you think trading forex at 2% risk x 10 pairs is just 2% risk. You could have a system that wins 90% of the time - and none do - and I guarantee you'd end up with a 40% - 60% drawdown in the first 30 days.

Forex pairs do correlate and if you catch in a choppy period you basically are not risking 2% you are risking 20% per trade -- probably not quite to that extreme because it's not really that correlated but for dramatic impact you get the idea.

Don't give up on your system but you have to give it a chance to work. Have to have staying power to last a while -- and you need to cut your pairs way, way, way down. Trade 1 -3 pairs max. 1% - 2% risk max.

Good luck!

MMS
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Old 12-19-2010, 01:48 AM   #3

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Re: SST Money Management Warning & Backtesting

Totaly agree,
just thought others should know this example as not one mentor/coach has never explained it to me untill the netpicks owners yearly webinar
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Old 12-19-2010, 05:50 PM   #4
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Re: SST Money Management Warning & Backtesting

There are a lot of systems that focus only on % winners etc......all well and good when trading only one instrument
This is very very different from looking at things from the point of view of a portfolio.

Ten different trades may in fact be the same trade from a risk point of view. You need to take the thought process to the next level, and a lot of systems/ideas/seminars dont do that.
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Old 12-19-2010, 06:43 PM   #5

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Re: SST Money Management Warning & Backtesting

Quote:
Originally Posted by bharding22 »
I thought I would give a warning based on my trading experience using SST

I have blown 50% + of my account following a profitable system, heres how.

I used a 2% risk money management system. (2% of the average back tested Loss)
I appear to have over traded in that I traded every entry signal, so if ten different pairs/time frames had entrys at the same time I got into all 10 plus. (my partner looked after half the pairs on the laptop) I was so strick with my rules that I took every entry even when I could see that the market was very choppy. I had back tested for 2 months prior to trading so knew that I had an edge.

After my account was down by 40%+ I changed to 1% risk money management system and my account continued to go down.


Please Note: my shorter term backtesting has been narrowed down to suit Australian 5pm-midnight as I work the other 11hrs of the day.
Recomendation:[LIST]
Only trade small number of pairs(As suggested during netpick owners annual webinar)
Get back into winning trades that were stopped out early
Use Risk management based on entry stop lose, not average.
Stop trading at pre determined level eg 5% or 10% max loss per day

I have taken a break from SST for obvious reasons(confidence shattered). Don't let this happen to your account!

I have included my backtesting spreadsheet (a bit messy) hope it helps someone. I would be happy to forward the SST settings used for each pair/timefame
Note all back testing was using mt4 measuring pips with curser for speed so not 100% accurate as doing the math

Brent
Forgive my ignorance, but what is SST?

Also, what was the draw down during your back test period and how many different 2 month periods did you look at?
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Old 12-19-2010, 07:14 PM   #6

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Re: SST Money Management Warning & Backtesting

Quote:
Originally Posted by MightyMouse »
Forgive my ignorance, but what is SST?

Also, what was the draw down during your back test period and how many different 2 month periods did you look at?
SST Seven Summits Trading is a Trading system which can be adapted to suit any market or timeframe developed by Netpicks.

Check out the excel spreadsheet for my backtesting results (Shows a definite profitable trading edge)
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Old 12-19-2010, 09:32 PM   #7

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Re: SST Money Management Warning & Backtesting

Quote:
Originally Posted by bharding22 »
SST Seven Summits Trading is a Trading system which can be adapted to suit any market or timeframe developed by Netpicks.

Check out the excel spreadsheet for my backtesting results (Shows a definite profitable trading edge)
I'll pass and trade it vicariously through you. Good luck

Curious, though. You lost half your account with it. Why do you think it has an edge?
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Old 12-20-2010, 09:49 AM   #8



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Re: SST Money Management Warning & Backtesting

I feel the point he was trying to make was his win/loss was fine with the system, just when he hit a short losing streak he was way over-leveraged - not necessarily on an individual trade basis but by trading a large group of currency pairs all at once that tend to follow the same pattern/direction. It would be like daytrading the Nasdaq, S&P, Russell and Dow e-Mini futures all at the same time with perhaps modest risk per trade, but in sum you will likely see them all move in same direction - increasing risk substantially.
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