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Even if a broker or vendor shows an average of several of his accounts, this can still be a meager view and offer less than the needed amount of information. Theoretically, he could still cherry pick the starting dates of all 3 or 4 accounts, using each to show as much profit as possible. Alternately, he could have so few accounts to average from that the data suffers from what statisticians call a small sample size―not enough data to draw any valid conclusions.
Now, if a trader were using position sizing he might trade 2 or 3, or even more, of these, but here’s the thing: had they started a week or even a day after this trade was first made, they would have missed it entirely! Two investors trading the same system with the same investment size and the same money management rules could show a difference in their accounts of $25,000, $50,000, $75,000, or an even greater, more preposterous amount! They may have only started one day apart!
A trading systems Start Trade Report
But what if trading had started on a different date? What if that trader had even started on a date that was right before a series of losers? He might have needed 2, 3, or even 4 times the starting capital than would be needed had he started on a different date. His returns on the invested capital would be much less. In the worst-case scenario, he might have lost his entire investment before earning the profits shown.
This can create tremendous confusion. One broker’s real time accounts can inexplicably appear to be far different from the real-time accounts of another broker, even when using the same trading systems.
I know what traders are thinking. I can hear it now. “Wait a minute, how can real-time performance be argued with?” Well, let me give an example that clearly illustrates this point, using one of my systems: Synergy.
This phenomenon can also be used for dishonest or disingenuous purposes. It is possible for a trading systems vendor to simply cherry pick the best historical starting date to suit his purposes. He can choose a date right before a huge winner, or a series of winners. This can cause it to look as though the system needed little original starting capital and the return on invested funds was enormous. Choosing this date would mean that the first wins financed the rest of the trading.
In May of 2003, Synergy started a trade in London Copper. This trade became the most successful trade of the year. As of this writing (March 7th, 2004), this one trade has made profits of over $25,000 a contract.
Misleading Trading Systems Reporting
In my opinion, a Start Trade Report can give the most robust, three-dimensional view possible of a trading system. It cuts through many pitfalls that come with traditional analysis and gets right down to the genuine heart of the matter. It even cuts through all the nonsense that comes up when looking at real-time performance.
Somebody once asked me, “If you had to decide about a trading system by only looking at one performance report, which report would you choose?” My first reaction was that this was a silly question. There are many factors that must be considered when choosing a trading system. Besides many performance indicators and ratios, there are things such as the average annual return, maximum drawdown, the Sharpe ratio, margin requirements and robustness.
An even worse offense would be if a disingenuous brokerage or vendor were to push some day trading systems because of the high frequency of trades and commissions they have the ability to generate, and then use some of his cherry picked “real t
However, despite this wide array of information that must be considered, there is indeed one report that I have come to rely on more than any other report. This report has given me more comfort and confidence as a system trader than any other report. If I know that a system is properly created, I can almost use this report alone to decide about trading it! So what is this report? It is a “Start Trade Report”.