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Beware of system results based on market replay

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Trading Experience: Advanced
Platform: Ninja
Broker/Data: Optimus Futures- Rithmic
Favorite Futures: CL, 6E
Posts: 236 since Nov 2009
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Beware of system results based on market replay

There are a lot of chart pics and videos about system performance results floating around all over many vendor websites. Many of the reported replay results are phenomenal. It seems every video you see is a winner. For some magical reason the sensitivity setting was just perfect for that day, the money management was perfect for that day, and the results were just perfect for that day.

Funny though, the day before the results in replay were just as phenomenal, the money management perfect. even the chart time or bar size was perfect.

The most amazing thing is that on each day the settings for sensitivity were different. The range chart size was different. The target and stops were different but it was still the same instrument. did the system know which sensitivity to use for each day, and how did it know to adjust the targets, and how did it know to change the range bar size? Intriguing questions. Simple honest answer is that the system did not make these decisions, the user (vendor) did. So, how did the user know? Simple honest answer is the user did not know. But Market Replay is a wonderful thing. With it you already know what kind of day is was, so all you need to do is adjust the sensitivity, adjust the targets, adjust the range bar chart size and viola! you have another perfect day.

Do not be so naive and gullible to believe that a system that has $1500 to $2000 winning days trading a 2 lot is a consistently real thing. It is a hindsight result, with a lot of adjusting gone into the settings to make it work perfectly. Also, do not ignore the part about the $500 intra day draw down? Remember you are trading a 2 lot. Do you think such a draw down is a realistic amount for the number of contracts you are trading? since that draw down is way over 2% of any reasonable 2 contract trading account. Ask yourself that if at 11am you are up $300, and then at 1:30 you are down $500, would you still be able to continue? Would you trust the market to give it all back to you, and get you back into profit when all you have to go by is hindsight results? So, unless you are a hindsight trader, market replay results are almost completely useless. I say almost, because it is good for study if you just set it to record and do not look at it beforehand.

What you need to know you will never know. You can not know in advance what kind of day it will be. You can guess. Or, you can have a stable consistent sensitivity setting, use a consistent range bar chart size time, use a consistent risk reward plan, and then run the system day in and day out and see how it performs.

Look for real time results posted in real time, the same day before any replay was possible. Or better yet, look for long term consistent results with the same instrument, same sensitivity settings, same range chart size, same risk reward plan. Then you can gauge the realistic potential, the realistic intra day draw down, and the realistic performance over time, in real time.

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