This article on ‘system hopping’ has been re-purposed as a ‘guide’ from Global Prime’s academy courses.
There is a very fine line that separates a gradual fine-tuning of one’s strategy without altering its core edge, and the risk of over-refinement, which sooner or later, leads to the dreadful path we’ve probably all faced. I am referring to completely moving away from the strategy we were using in the first place also known as system hopping.
Whenever that happens, what’s important is not as much that you changed your strategy, but why you keep repeating this cycle? Getting to the bottom of this question yields the best revelations. What led you to decide the former system is no longer valid assuming you back tested it and it proved profitable? Were your expectations to get positive results unrealistic? Did you lose faith after experiencing a bad losing streak? Did you feel you couldn’t adapt to the strategy based on your personality as a trader?
Coming up with a congruent answer to these questions will reveal what’s the actual driving force leading to make these decisions. Let me tell you, for the most part, it has to do with understanding first and foremost how you enjoy trading. What ticks for you that resonates with who you are as a trader, your true identity.
There is nothing wrong with changing the way you trade the markets a few times during your journey as a trader, just realise that sooner or later, you cannot be stuck in this vicious cycle of constantly jumping around how you approach your game plan. That’s why understanding yourself and why you make certain decisions is the number 1 question you must always ask yourself.
If the strategy was performing alright but you are the type of trader who doesn’t like to sit on your butt waiting for hours the right setup to pop up but rather you are more the kind of active ‘scalper-like’ trader in and out, sooner or later, that’s going to manifest in how you perform by making an unnecessary amount of mistakes or simply getting dead bored.
The opposite can also be true. If you are very methodical and really like to be very patient, only waiting for the right setups to occur in higher timeframes, an intraday strategy that gets you in and out of the market for quick profits will probably not sit well with you.
Perhaps you are the type of trader who likes to specialise on one single setup on multiple markets. Do you like to focus in just one market? Do you have the capacity to be actively engaged in multiple markets while also deploying multiple setups with an edge? Be aware, if that’s the case, a huge amount of concentration is going to be required.
‘Know thyself’ must always come first before you choose the strategy. The moment you get to really know the type of trader you envision you’d like to be, that’s when the search for the holy grail is over, as you start to look from inside out as opposed to be stimulated from outside factors from which to adapt.