Many of us traders have tried to find their own very best unique trading system hoping that it’s authentic enough to help us win most of the trades. When trying to find our “holy grail” we are thinking that other trader’s won’t be able to do as good as we can. However, only an understanding of underlying market drivers, or at least the chart patterns they produce, can provide any kind of edge. Whether that is ‘conventional’ or ‘unconventional’ is moot. TA provides a window into HOW price has behaved, but it doesn’t explain WHY, and to whatever extent it fails to measure either ‘fair value’ or current sentiment, its…

Any strategy that fails to exploit a real market inefficiency is effectively generating random signals. Inverting a random signal generator will only create yet another random signal generator, which will, therefore, be equally ineffective. Why is it? Transaction costs (spread, commission, slippage, swap, etc). These accumulate over time, making both win smaller and losses bigger. Like Jen says, the shorter your trading horizon, and the more frequently you trade, the greater the relative impact that these have. Many traders greatly underestimate their effect. Slippage never operates in your favor, but can have a severely destructive effect during market crashes or ‘black swans’. Statistical fluctuation. If your strategy doesn’t exploit a…