Build A Winning Trading System With Losing Trading Systems

As a beginner trader, one of the first trading systems I tested was based on moving averages, RSI, and Fibonacci levels.

I eventually found the system to be unprofitable (for me, at least), so I moved on and looked for new systems to test.

To this day, almost 10 years later, I continue to test systems on a regular basis.

The difference is that now, I have a much better understanding of the market than I did when I first started out.

Why is this important?

Because now I can take one look at any trading system and have a pretty good idea of its potential for success.

By testing countless failed systems in the past, I learned to identify the characteristics of winning systems compared to losing systems.

In other words, by figuring out why some systems didn’t work, I was able to design systems that did.

How To Design A Winning System

There’s a slow way, and a fast way.

The slow way is to try to figure everything out from scratch.

The fast way is to learn from the mistakes of unprofitable systems.

This is why I often encourage new traders to experiment with a variety of trading systems, especially those that are offered free on the internet.

Of course, most of them don’t work in the long run, but that’s not the point.

The point is to observe how they fail, in order to understand why they fail.

That’s the first crucial step.

You Learn More From Failure Than Success

If you’re serious about being an independent trader, there’s no way around this. You have to try out all the ways those trading systems don’t work, in order to figure out what does work.

And as you learn more about what works (and what doesn’t work), you’ll begin to understand what you need to build a winning system.

Make It Your Own

So keep on looking for new trading methods and test them out. Take them apart and put them back together in combinations that make sense to you. Have fun with it.

Remember that every time you learn why something doesn’t work, you’re one step closer to finding something that does.

In my experience, winning systems are often born from losing ones, so don’t blindly discard the systems that don’t work… they have much to teach you.

By |2019-03-11T19:19:07+00:00March 11th, 2019|Mindset|4 Comments


  1. Kevin (TDT) Harper June 2, 2014 at 6:10 am - Reply

    Hi Chris
    Agreed looking at losing systems is one way to start and approach developing a system
    A few other very important points that must be taken into account are..

    What type of trader are you
    What returns are you looking for in relation to your trading capital
    Most importantly make sure you are willing and able to trade at the times when the system is in play or is showing it’s best returns
    (No good developing a system that performs best when you are not trading … be very realistic about this)

    good trading all

  2. Frank June 2, 2014 at 1:12 pm - Reply

    Hi Chris,
    I always enjoy your articles as they are always fresh and out of the box. You are yourself and do not try to copy other people and their ideas.
    At the end of the day we must realize that what we see on the charts are only a reflection of emotions of people like us. As news is broadcasted, greed and fear of people take over and that is what we see being reflected on the charts. It is like a cardiac arrhythmia, any excitement/trauma affects the heart muscles which causes heart rhythms to change.
    One thing we all need to learn from loosing systems are that we need to stay calm, focused and disciplined and try to pinpoint the origin of the failure and to make the necessary adjustments where needed, or to discard it, to be a success.

  3. keith June 11, 2014 at 8:53 am - Reply

    Hi Chris
    Just a thought for your Bloggers. When I started out with a demo account, I started with the 200 SMA, 50 SMA and the alligator. I went from $50,000.00 to $134,000.00 in five weeks. I thought this is too easy, something is wrong, so I did everything the experts said that you should not do and blew the entire $134,000.00 and another demo account of $50,000.00. Boy, did I learn things.
    As you say, you learn far more from your mistakes.

  4. Richard August 4, 2014 at 2:52 pm - Reply

    Chris I thank you for the insight. Another bullet for the trading gun.

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