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Originally posted by waxwing Do you have a fixed percentage of equity (or a fixed dollar amount) loss after which you would abandon this neural net system?
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It's a very good and completely reasonable question, and it's what I would ask anyone else under similar circumstances; this makes it all the more embarrassing for me that I do not have an adequate answer for it!
I came across these "signals" because a relative has a long history of using this company for asset management, i.e. they invest his money on his behalf (Forex trades) and pay him the profits, less their commission. He's always done very well, and so when the "signals" became available I just signed up for them, thinking "at last a way to trade profitably" or something like this, and I've been telling myself ever since that I really ought to have a good answer to this question. My only "working answer" really is that I've decided to allow them two consecutive losing months before I start to worry or to re-assess the situation. So far they haven't had one at all, so this seems reasonable.
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Originally posted by waxwing e.g. suppose you lost 15% of equity in the first 15 days of the month - would you wait until month's end or just give up?
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It's not possible for that to happen even if all their trades at the start of the month are losing. I don't do enormous stakes, though I'm gradually building them up a bit now. If I ever lose 15% of all my trading capital I would certainly be in a major panic, but there is no sign of it yet. The drawdowns are not large and the progress is pretty steady. They do have some losing trades, of course, but they always send an email to close out before their safety stop-loss is hit. Their stop losses are a lot bigger than anything I would ever use for my own trading, but then their trades are a lot longer as well (I am only an intraday trader from 10-minute and 15-minute charts really). So far, a stop-loss has not been hit, though I have taken many small losses. But always well in profit by the end of the month.
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Originally posted by waxwing And if you had a losing month (even only a few percent) would you stop using it?
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No, I would allow them a losing month without changing anything or reducing my stake. I would re-assess after 2 losing months, though.
Without knowing how the trading signals are derived (apart from the fact that it includes something called "adaptive neural net software" as well as other things) it's very difficult to know what to do if things go wrong, and I agree that this is one of the worries of not knowing what you're doing. But that's why I continue to develop my own trading separately, and manage it separately, so that if the worst happens I will not be left without a source of income and will be able to continue to make a living from trading. To be honest, I earn less from my own trading than from following the signals, but even my own trading has now been producing some income for nearly 2 years, so I must be learning something!