The Simple Daily System : Profitable or Deadly Trap ?

Recently several people have asked me about the simple daily system and the testing that has been going on with this expert advisor. As you may know, the simple daily system has been tested for almost 10 months now and has, up until now, made a profit of more than 100% on the EUR/USD on a demo account. Now, most people believe this amount of information would be enough to call the simple daily system profitable and start testing it on live accounts but I have a different opinion.

During the past two years of testing, evaluating, reviewing and programming expert advisors, I have developed a whole new evaluation and testing concept which really puts back and forward testing into perspective and shows you what a profitable trading system really performs like. Most people intuitively overestimate the potential of back, forward and live testing to evaluate a trading strategy and in doing so most of them end up wiping their accounts with strategies like the simple daily system.

While I was writing the latest version of my automated trading ebook, I decided that I needed to come up with a criteria to evaluate which strategy was profitable and which one was not, a criteria that would easily discard unprofitable strategies and leave only the long term, reliable trading strategies. In doing so, I totally reevaluated the simple daily system trading strategy. I finally was able to condense all the requirements a profitable trading system should fulfill into a checklist and I saw if the simple daily system could fit into it. The fact is that the system failed some key points on the list.

Why is the simple daily system NOT long term profitable even if there is almost a year long forward test that is in fact very profitable ? Well, the thing is that the simple daily system is the kind of system that can perform extremely well for even a year or two, then wipe your account. you can see this when you take a look at the logic and backtest the system from 1999 (bear in mind that forward testing has shown us that this expert trades almost the same in forward and backtesting). When you backtest the system you get about 7 account wipeouts using the same risk parameters as those used on the forward testing trading account. That said, if you started to test the expert at the right time, you could get even a 200% profit.

This type of systems are deadly traps ! There are many EA sellers out there who will take the system, live test it for a few months, even a year, and get incredible results. Then they get an account wipeout so they just restart the process. Interesting ! This means that you can get systems that perform very good in live testing that will wipe your account ? Yes ! This is all a consequence of market exposure and the experts logic which is inherentely flawd. So yes, the simple daily system is a deadly trap, not a profitable system and should not be traded on any live accounts unless you realize that you are taking an astronomical risk with it.

If you would like to learn more how I evaluate expert advisors and how you can design and trade with long term profitable trading systems please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed this article !

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