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Interesting Question

A reader sent in the following question: Any idea of who was the seller of the first mechanical trading system? I heard that it included a whole bunch of phony information.

I have more than a few candidates for that honor. But rather than name names, because I'm not 100% positive which rascal came first, I will just call him Bob Burnem. Burnem was the vendor of "URUN Estupido" (fictitious name for the trading system), which included a false "real time" track record. Trades represented as profitable in his track record actually lost money.

The trader finally admitted he subjectively "ducked losing trades," when my friend Kent Calhoun confronted him with independent testing results of his system. This fraudulently advertised $500,000 "unreal time" track record, never showing his actual trades, was as phony as his money-back guarantee. "If this vendor's video tapes were ever bottled, Sominex would be out of business," says Kent. This scam artist now solicits $50,000 trading accounts in some of the forums, with permission from the forum moderator. If you feel you have to purchase a system, buy independently tested ones, or ones that tell you up front that they may stop working at any time. An honest vendor will offer you a money-back guarantee if the system stops working right after you purchase it. Talk to traders who have traded or are trading the system before considering purchase. Calhoun says, "Of over 200 systems I purchased, fewer than 10 of the track records were substantiated by my testing. Some systems tested well for a limited time, and were sold after their track records fell apart. A five-year track record is the minimum necessary for any valid trading system."

I don't necessarily agree with the requirement for a five-year track record. I want to know if the system or method has been working recently – for the past 2-3 months is all I really need to know. Why? Because I anticipate that any mechanical trading system will automatically have a short lifetime. During that lifetime, a lot of money can be made. But don't expect it to be the "good fairy" or the "holy grail" of trading. "The promoters" know this, but there are few who will tell you the truth.



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Monday, 04 July 2022

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.