Example Subjective Trading System

I sometimes get suckered into paying the $69 for an e-book detailing a "fantastic" trading system. Each guarantees to tell me why 90% of traders (or 95%, depending on the website) fail, and promises to show me how I can become part of the 10% (or 5%) that succeed.

And there's always a $20 discount if I act within the next 10 minutes, or before midnight, or whatever.

And there's always free extras "worth hundreds of dollars", but only for the next 17 people, or 47 people, or whatever relatively smallish-largish prime number they've decided upon.

Anyway, when I do purchase these books, I do it with the hope that they'll introduce something new to me - a new idea I can play around with. I don't hope beyond hope that the system they describe will do me any good without change. As I said before, I think trading systems have to be individualised for them to work. In my case at least.

Here are the rules for the most recent one. I won't go in to explaining everything. Buy the book. Anyway, this system uses points to determine if a trade is allowed or not. You don't need each item to be true - if you can get 36 points it means you can enter the trade. My theory is, that actually the below describes a whole bunch of different systems - one for each way the rules can add together to equal 36 or more.

Entering on the long side (buying)

• 8 points - Increasing positive Volume

  This could be made to be objective. You can obviously give a True/False answer as to whether today's volume is more or less than yesterday's. But, you would need to specify for how many days the volume should be increasing. Also, what if the volume is increasing, but is still less than the "average" volume? Is that a buy? To answer yes or no, it needs backtesting.
   

• 8 points - Price bouncing off the support level or moving through the resistance level

  Ah my old friend, the Support and Resistance lines. I also like the words "bouncing off" and "moving through". What, exactly, do these mean? Oh sure, these are very easy to work out looking at a chart of historical data. But in real-time? Tell me how to program this into a computer and it becomes objective, otherwise, this rule is very very subjective.
   

• 8 points - Price bouncing off trendline after declining or moving through the trendline if rising

  Trendlines are just as bad as Support and Resistance lines. If you look at a chart, any chart, you'll see that sometimes there does seem to be very clearly defined places that you can put these lines. You'll also see that the price completely ignores these lines whenever it feels like.

  Again we have the words "bouncing off" and "moving through". Look at your chart again. The candles aren't always exactly above or below your lines, right? So how do you decide when a candle has "broken through"? Hindsight allowed you to put that line where you put it, and to ignore the times when the candle moved below the line. The rules change when you're doing it real-time. You don't know if it's breaking through, or if it's another of those candles that doesn't fit neatly with the line.
   

• 8 points - 12 hour EMA about to cross 4 hour EMA from above to below

  Wait... does it say *about* to cross?? Oh my god. This rule relies on future knowledge.
   

• 6 points - Price is above 20D Moving Average

  Hooray! An objective rule.
   

• 8 points - Easily recognizable bullish chart pattern is being formed

  Dude. Seriously. "Easily recognizable"??
   

• 6 points - Price approaching upper Bollinger Band

  Price *approaching* the upper Bollinger Band. What the hell does "approaching" mean?

  You could make this rule objective though, by using the %b indicator. It gives a value of 0 if the price is at the lower bollinger line, less than 0 if below it, 1 if the price is at the upper bollinger line, more than 1 if above. 0.5 should therefore be right in the middle of the two bollinger lines. So you could say if the %b value is 0.8, then give your 6 points. Or is it 0.9? Who knows? Backtest.
   

• 6 points - RSI is 70 or above

  Hooray! Another objective rule.
   

• 4 points - Bullish candlestick pattern

  Most of the candlestick patterns can be programmed into a computer, and are therefore objective.

So there you have it. I guess there are people that can use this system effectively, but I guess my $49 investment is the cost of the preparation to write this article.