I have been taking a look at a trading strategy for FTSE100 & S&P 500 stocks after receiving an email promoting:
"A clear & concise trading strategy, with specific signals that generate profit, removing the most common mistakes traders make when trading."
The trading history is here:
- which shows how they've turned £2k into £124k since the start of 2002 with a mixture of long & short positions via spreadbets.
The tradewin system uses programmed software to spreadbet daily movements in individual stocks from the DOW and FTSE and the whole system is based on mathematical probability.
The strategy behind the tradewin system seems to be driven by the day trading or early scalping for a profit with little or no research into the individual stocks and as such will require constant monitoring of your positions especially if you are using leverage of your investment which can produce high percentage losses as well as high percentage gains.
I have had a quick look at the information and trading records shown on their website...and this is what I have to say:
The returns do look impressive, but it's mainly as a result of using pretty high gearing with the obvious risks that are involved.
There seems to be little in the way of risk or money management to control (reduce) the amount of potential drawdown. Looking through the figures there were draw downs of 45%, 36% & 40% in the space of a few weeks, I wonder how many people could really cope with that psychologically?
I would imagine that this system would stand a very real chance of a complete wipe out especially in the early stages when gearing levels were very high. The level of gearing does seem to have dropped somewhat, but of course so have returns.
As you would reasonably expect, it doesn't tell you too much about the specifics of the strategy other than to state:
"Initially designed on behalf of a full time trader, who has made trading his business for the past 15 years. The TradeWin System is his personal trading tool, the exact same strategy that he employs to make his living.
Although to be fair they do invite you for a demonstration (free of charge) at their offices...
They also state:
"Analysing literally thousands of characteristics from equities within the FTSE and Dow. TradeWin automatically highlights critical trading opportunities that have generated incredible returns for us and our members over the years using financial spread betting."
I say "reasonably" because I guess that is what you're paying for - and the lifetime fee is £4k upfront and £10 a week thereafter.
"In a market where the amount of participants has no bearing on the success of the strategy, there is absolutely no reason not to get others involved! It allows us to develop and invest in future enhancements of the strategy.
Except that isn't true is it? If everybody followed their strategy the only winners would be the market makers and bookmakers. I will accept that a small subscriber base will have no impact on the wider market - but that is not what they say. I do not like those who are economical with the truth to suit their own agenda.
Making this system available to others does not preclude us from making money ...If it did, then it wouldn't be available!"
So they don't take a position before telling their subscribers then? Bet they don't. And if ANY of their tips are small caps where a relatively small number of purchase/sales will move the price then I hope you can see just how making their system available to others will both make them money AND allow them to show stunning returns on their tips for future subscribers.
They are at least willing to show their losers as well as winners which is a plus point, assuming that a few small losers weren't put in to give the data false credibility.
To sum up there are hundreds of these systems being peddled and a lot of them have more going for them than this one in terms of promotional transparency. Some of them make money some of the time, some of them don't have a hope of generating cash for anyone other than the vendors and brokers.
Some obvious problems with the TradeWin system:
1. There is no mention of slippage or commission. Even when using limit orders, commission costs will drastically affect the returns you'd get from a system which trades so often, as this one does.
2. Medium cap companies are most certainly would be affected by a system that was able to trade them successfully. Most of these trading systems operate in the futures markets where they can have an effect in much larger markets than this one uses.
3. You need to spend a hell of a lot of time on a system like this in order to make sure you get your orders in as they meant to be placed.
Lastly their recommended way of trading is spread betting and CFDs, which is not a method for everyone, would you be happy with that?
If you traded the shares rather than used spread betting then the costs would reduce the profit enormously, they show approx 450 trades, dealing on this would cost several thousand pounds as would stamp duty on purchases.
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