I recently received an e-mail from a relatively new trader. He was trading a system he purchased, based on its alleged stellar performance. “I’ve been using this system for a few weeks, and sometimes I just KNOW the signals it gives will be wrong. What do you think if I’d take the signals, and combine them with work of my own, to get modified signals?”
Here is what I told him…
Obviously, since you bought the system, you can do whatever you like with the signals, since the final decision to trade or not rests with you. The signals are only a recommendation – you control what happens in your trading account. Don’t underestimate the magnitude of this fact.
I can tell you that in systems I develop, I use the signals AS IS, with zero modifications. I trade most of my systems fully automated, where it is almost impossible for me to interfere. I’m not smart enough to know when the automated signals will be good or bad, so I’ve taken myself out of the equation. It is funny, but the days I think “why did the system go short/long TODAY?” usually turn out the best – the system is typically right, and my “hunch” is usually wrong.
But that’s me. I make sure I have the confidence in the system BEFORE I start trading it. It sounds like you need to develop that confidence, too. Here is how to get it:
1. Only buy systems or follow signals from trading system developers you trust. Ask a lot of questions before you buy. Establish a general comfort level.
2. Evaluate the historical…