# If a system is profitable why would they need to sell it?



## stockGURU (20 July 2009)

I see this quote a lot, particularly in regard to those flogging black box systems for many thousands of dollars.

Is this essentially a truism? 

If a black box system could generate consistent profits, why *would* it need to be sold? Why wouldn't the developers make their fortunes by simply trading the system themselves? 

Selling something to a lot of people takes a lot of energy and money. Seminars need to be arranged. Venues need to be booked. Salesmen need to be employed. The essential infrastructure of a business needs to be set up: office, P.O. Box, phone, website, and so on, and so on...

Has anyone here actually made consistent profits from following entry/exit signals from a black box system or are they all basically rubbish? If they are, why hasn't ASIC cracked down on the spruikers selling these black box systems to ordinary Aussies from anywhere from $5,000 to $10,000+?

Would be very interested in hearing people's opinions.


----------



## >Apocalypto< (21 July 2009)

stockGURU said:


> I see this quote a lot, particularly in regard to those flogging black box systems for many thousands of dollars.
> 
> Is this essentially a truism?
> 
> ...




My friend, I think this one explains its self...........


----------



## wayneL (21 July 2009)

>Apocalypto< said:


> My friend, I think this one explains its self...........




Agree....

...and there's a sucker born every minute.


----------



## tech/a (21 July 2009)

Often tell the story about going to a seminar on a Black Box System back many years ago. Friend asked me to have a look at it as it was $12-15K from memory and he wanted to know if he should buy it.

He had my answer before we left but I went anyway.

From what I could see it was a Stochastic M/A based entry with a parabolic SAR exit. Very basic simple stuff.
Each chart shown went straight up with the appropriate buy and sell signals.
After taking notes for an Hr In general question time I went to town.

(1) The buy and sell signals are the Stochastic/M/A and Parabolic---silence then they are proprietary.
(2) Why is every chart you show going vertical with no losing trades?
---Thats what the system finds.
(3) Has the method been proven in a bear market.--No why would you trade a bear market---exactly!
(4) Can you guarentee your system will return profit year in year out.---No there is a risk to trading.---whats the risk?---that it may not be profitable.

Buy now I was being heckled by the crowd-- I remember one guy yelling out---sit down its not compulsory to buy it!.
Bought laughter to the crowd.

My mate reluctantly kept his money.
I had a round 6 people come up and thank me for getting up and having a go.
But as I walked out I saw 8 or so people lined up behind 2 sales desks writing contracts as fast as they could be written.
Ive never heard of these guys again.

*Why are they sold.*
16 x $12,000 in a few hrs = $192,000 10 or so years ago.
Good trading in anyones language.


----------



## shulink (24 July 2009)

Most of them are useless. If it is really that profitable, they would make more money trading themselves rather than selling it.


----------



## Mr J (24 July 2009)

stockGURU said:


> Would be very interested in hearing people's opinions.




There are always exceptions, but yes, generally these systems are worth about as much as soiled toilet paper on the floor of a public dunny.


----------



## Krusty the Klown (24 July 2009)

tech/a said:


> *Why are they sold.*
> 16 x $12,000 in a few hrs = $192,000 10 or so years ago.
> Good trading in anyones language.




And good profit with *no risk*.


----------



## Smurf1976 (24 July 2009)

These systems are indeed very profitable and low risk - *for those selling them*.

If it sounds too good to be true then it usually is. There are exceptions of course, like distressed sales of assets / products or where someone is handing out a subsidy to get some idea or product off the ground (eg the recent offer of effectively free solar panels). But neither of those are likely to apply to a "black box" stock trading system.

With anything in life, it's worth applying the "is it reasonable" test. If a fund manager shows a return that's modestly above the market (after their fees) over 20 years then that's plausible. But selling the secret to riches isn't likely - if it was true then a bank or fund manager would just pay whatever they needed to buy out the company and use the system for their own benefit.


----------



## Nick Radge (24 July 2009)

Here is a scenario:

You read Market Wizards and like the way the Turtles do their stuff. You have read up on the likes of John Henry and Bill Dunn. You've read Trend Following by Michael Covel and you realize that a systematic approach is the way to go because it suits your personality. You buy Howard Bandy's book and Amibroker in order to develop one yourself but it dawns on you that you simply don't have the time or knowledge to build such a system.

Would it prudent you approach someone and pay them to do it for you?


----------



## tech/a (25 July 2009)

Nick Radge said:


> Here is a scenario:
> 
> You read Market Wizards and like the way the Turtles do their stuff. You have read up on the likes of John Henry and Bill Dunn. You've read Trend Following by Michael Covel and you realize that a systematic approach is the way to go because it suits your personality. You buy Howard Bandy's book and Amibroker in order to develop one yourself but it dawns on you that you simply don't have the time or knowledge to build such a system.
> 
> Would it prudent you approach someone and pay them to do it for you?




*Indeed it would.*

I'm sure a few here have done very similar.
I know I have.
But the vast difference is that you can and should take a role in understanding the construction of your trading method.
It should be far from a black box.
Importantly you should also understand its resultant blue print.So you can gauge if your actual trading mirrors testing results.
Its testing procedure/markets and look back periods for personal confidence in trading the method.

I doubt that purchasing a "black Box" even from a trusted source---*without* the above knowledge could quite possibly see failure in trading even a tested proven profitable method.


----------



## Tukker (25 July 2009)

Been trading my own systems for a few years now, (hometrader). I have found it very valuable and has provided me results.  I run on average 3 systems simultaneously, based on the trend at the time (bull,bear,sideways). Ive been to a couple seminars where they try to sell you their own systems and i have to be honest, i think they are perfect for the right kind of person.

If you:
Dot no have the time to learn trading well enough that you feel confident
Know the charting but not come up with a good system yourself 
Really can't understand fundamental analysis or don't have the time/effort.
Trust neither your broker/adviser or your own trading skills.

But like most things knowing a bit about what your getting yourself into is more important, $15,000 for a system is ridiculous IMO regardless the returns promised.


----------



## tech/a (25 July 2009)

> But like most things knowing a bit about what your getting yourself into is more important, $15,000 for a system is ridiculous IMO regardless the returns promised




*But the question is.*

Would you invest that ($15,000 or whatever) with people who worked on your behalf to build *YOU** YOUR* trading system?


----------



## Tukker (25 July 2009)

tech/a said:


> *But the question is.*
> 
> Would you invest that ($15,000 or whatever) with people who worked on your behalf to build *YOU** YOUR* trading system?




If they built it to fit my risk profile, or if i felt comfortable with its designed profile I think i would.  

Depends on the fees and what not. Then again you pay 2-10% management fees to the professionals to do the same thing at the bank so its not that strange an idea. 

*And getting back on topic.*   If you can make money by trading the system, and make money off of selling/leasing it, whats wrong with that?  Sounds like good business to me.

My 

Disclosure: I trade my systems on a small portion of my portfolio and have a professional manager handle the rest. Personal portfolio up 20%, managed down 20%, guess where my faith rests.


----------



## tech/a (25 July 2009)

> Disclosure: I trade my systems on a small portion of my portfolio and have a professional manager handle the rest. Personal portfolio up 20%, managed down 20%, guess where my faith rests




What are you doing!!!

80/20 rule.
80% of your profit coming from 20% of your portfolio.

Guess where your money SHOULD be?


----------



## NeuromanceR (25 July 2009)

tech/a said:


> *Why are they sold.*
> 16 x $12,000 in a few hrs = $192,000 10 or so years ago.
> Good trading in anyones language.




Apart from the sales, there is another reason....and that is:

To attract more/fresh money into the market.


----------



## kam75 (18 November 2009)

Even if it is profitable now, it does not mean it will stay profitable next week.  Markets change all the time.


----------



## BennoBrisbane (18 November 2009)

Do a google on Lifestyle Trader together with Affiliate. There is a 20% commission for signing someone up to the Aussie Rob System. As it is $10,000 to sign up you can see just one sign up a week and you make $100K a year. No wonder these guys will pay to set up a stall at all the Investment Expos.


----------



## cornnfedd (18 November 2009)

Why do they sell the system rather then use it themselves?

answer: Well most systems are not guaranteed to make money AND have risk associated with them. I would ask how much risk is involved in selling a system to some unknown punter? = None, if they are not successfull using your system 99% of the time they think its themselves, and you already have their money then anyway. Plus once you have sold them one 'system' you can sell them more - bombard them with crap and sell sell sell, they take people for 1000's and 1000's of $$. Why would you bother risking trading when you can have no risk, pay a saleman commission only to sell your product?


----------



## Ruby (20 November 2009)

The reason people buy black box systems is that they are seduced by the dream of easy riches fed to them by unscrupulous, greedy, lying sales people who don't care what happens to the client once they have their commission.  Or they go to seminars where someone with the gift of the gab whips the crowd into a frenzy of excitement and tells them they need to act now before they miss out...... group psychology.

The reason people sell black box systems is obvious!

Aussie Rob's black box system (I was told by an insider) is just a moving average crossover.  I have seen other 'proprietry' indicators and they are just combinations of indicators available to all of us - usually lagging!

The reason ASIC does not catch these people is that the clients who have been ripped off don't lodge complaints.  I think they are often too embarrassed to admit how much money they have lost and how easily deceived they were, which is unfortunate.

This comes with apologies to those people who DO sell good systems - I know there are some.

Ruby


----------



## Temjin (20 November 2009)

You probably answer the question yourself. 

However, I read from someone I considered reputable (ok, forgot where, but he made a convincing case), that certain systems sold actually do have an edge but it is that the creator could not exploit them. This is probably due to bad position sizing or the psychological makeup of the creator does not fit what his system may need to have. (i.e. long periods of drawdown, not enough wins, etc)

Another case is that the creator has created a system with a statistically significant edge but decide to sell a "lesser" version for thousand of dollars as a "hedge" against drawdown. It's not a bad strategy at all if you consider the amount of capital employed by the buyers of those system may not be enough to diminish the edge of his original system. 

At the end of the day, I believe these systems are still rare and being sold as a black box, it is impossible to validate its edge statistically. 

It does not hurt though to still sell some "lesser" ones for hundred of thousand of dollars and keep those with a high reward/risk performance to yourself.


----------



## deedeeramone (1 December 2009)

Cannot resist a Simpson's quote here. The one when Homer attends a "Million$ for Nothing" seminar and the dodgy presenter confides:

"First, let me assure you that this is not one of those shady pyramid schemes you've been hearing about. No sir. Our model is the trapezoid!"


----------



## BennoBrisbane (3 December 2009)

Also I would point out that to some people risking $10K on a black box is not a lot and so long as they get nice binders and someone to talk to and a regular meeting to attend they are happy. Even with Aussie Robs System you have to paper trade for a few months first and this is to just prove to you that it can work. Needless to say if you have any sales inclination then you end up becoming a sales affiliate.


----------



## kam75 (8 January 2010)

There's no such thing as a profitable system.  That's a myth perpetrated by the spruikers, charlatans and outright predatory deceivers that sell them to the uneducated and unwary.  Rules have to be changed, systems adapted to changing market conditions.  Sometimes this works, sometimes that.  And sometimes both, or neither.  It's the trader that makes the money.


----------



## James_w (11 February 2010)

stockGURU said:


> I see this quote a lot, particularly in regard to those flogging black box systems for many thousands of dollars.
> 
> Is this essentially a truism?
> 
> ...




Youtube has alot of learning materials free of charge never have bought any systems always traded using my own stragety most signal services plans etc are rubbish some work okay but you need to twist them to suit your own needs


----------



## weird (11 February 2010)

Forgot about this thread, and also kam75 clenched 2 testicle post, which I believe near that post, his domain name was available for sale.

They are not all bogus I believe when it comes to sellers, you do need to ask questions ... a few but this is not an exhaustive list,

1. What universe and time frame has the system been backtested on ?
2. Does parameter values of the system, have different fixed values (i.e. optimised) for different members of the constituent list ? THEY SHOULD ALL BE THE SAME. (Sorry for being loud).
3. Does the system have any hardcoded avoid this date, based on flimsy reasons ?
4. Related to the above, has any optimisation been performed ? What were they ?
5. Code should be fully disclosed ... I know of one system reseller , i.e. www.sharefinder.com.au , Gary Stone, where the code is hidden except description of the system, but have respect for and believe he uses solid principles.
6. add to the list.

But as I mentioned earlier , I don't think they are all dodgy (actually I wane on only a couple out of a hundred or more) , but buyer beware, and ask alot of questions.  

I think for most reading this post, look for those that get good reviews on this forum, avoid those that are offering courses but don't have any reviews or positive reviews, and be prepared to spend time, alot of time developing skills and learning to ask the right questions in your new endeavour.

After that said, I would exploit the internet, for newbies, to find those which are respected ...


----------



## gav (11 February 2010)

weird said:


> 2. Does parameter values of the system, have different fixed values (i.e. optimised) for different members of the constituent list ? THEY SHOULD ALL BE THE SAME. (Sorry for being loud).




Hi Weird,

Just trying to clarify what you mean by this.  I assume you mean the rules for the system remain the same no matter what is traded? (eg. BHP is not traded with a different set of rules to RIO)

Cheers Gav.


----------



## weird (11 February 2010)

yup, if selling a system which is sold to work across different instruments without individual optimisation.

While the past may not work in the future ... you are chewing at one extreme end of that argument by optimising for individual instruments.

I was going to make an additional comment to that, regards to a MR system I know of, which really is not an exception, but can't really compare it to a BHP/RIO example.


----------



## Trend Hunter (13 February 2010)

What an interesting thread.

Over the years I have spent thousands of dollars educating myself through various courses and education programs, to improve my trading. 
Its fair to say some of programs I have completed didn't meet their promises or my expectations, but on the other hand some were true to their word and far exceeded my expectations.

Believe it or not there are good people out there, who do want to help other traders, and are selling good products/programs that do work. It is Ok to be skeptical of some products but dont be cynical.

It is important to realize that as a trader your education should be view as being continuous, as I like to say "its better to be green and growing than ripe and rotting". You can either pay to gain that knowledge upfront, or eventually pay for it in the markets through not having a complete Trading Plan and proven Entry and Exit system.   

So my advice to people wanting to buy a product or program: 
1. Know what it is you actually what to learn. (Some programs/products specialize in different areas, building trading plans, options strategies, directional trading, reading the overall markets, trader psychology, money management, candlesticks etc).
2. Ask & understand what you will learn in the product/program. 
3. Do they stand behind their product (some kind of money back guarantee, 30 days???). 
4. Find yourself a mentor/s who is already successful in their own right, who you respect and will teach you how to be successful.

Anyways hope this helps,
Cade


----------



## Aleksey (28 October 2010)

Great post Trend Hunter, well done. I believe software should HELP you trade but not make trading decisions for you.


----------



## adobee (28 October 2010)

If someone wanted to be come a broker etc.. Is there not a course which can be completed for education which is not a system but rather a course at tafe or uni or a college ?


----------



## WaveSurfer (28 October 2010)

deedeeramone said:


> Cannot resist a Simpson's quote here. The one when Homer attends a "Million$ for Nothing" seminar and the dodgy presenter confides:
> 
> "First, let me assure you that this is not one of those shady pyramid schemes you've been hearing about. No sir. Our model is the trapezoid!"




lol

http://www.youtube.com/watch?v=StmZtViuJXg


----------



## tech/a (28 October 2010)

kam75 said:


> There's no such thing as a profitable system.  That's a myth perpetrated by the spruikers, charlatans and outright predatory deceivers that sell them to the uneducated and unwary.  Rules have to be changed, systems adapted to changing market conditions.  Sometimes this works, sometimes that.  And sometimes both, or neither.  It's the trader that makes the money.




This is classic and should be immortalized in stone.


----------



## TulipFX (7 March 2012)

The quote from Kam above is very true. Most system aren't traded by the marketeers themselves either, that's always a telling one.

The 'worst' for it is the forex market. An almost infinite amount of commercial systems are for sale and very few (perhaps one or two) actually work in the long term. They prey on the Homer quote (also above).

The checklist for any system is:

1. Historical testing
2. Long term independently verified live forward trading
3. Vendor uses system on their own money

Without a tick in all those categories it is not even worthwhile investigating.

As for 'why sell it'? Well, as a commercial forex system seller maybe I can answer that. Honestly - it is money.

Not only money, but in forex the volume in the market is so vast that having many users trade a system does not influence or move the market. This allows the product to remain profitable for us, while also allowing a second stream of income.

For many others, it is simply marketing a dream - unlikely to become a reality. So be very careful and do a lot of checking before stumping out for a system, and even more investigation before putting your hard earnt at risk trading it.


----------



## tech/a (7 March 2012)

TulipFX said:


> The quote from Kam above is very true. Most system aren't traded by the marketeers themselves either, that's always a telling one.
> 
> The 'worst' for it is the forex market. An almost infinite amount of commercial systems are for sale and very few (perhaps one or two) actually work in the long term. They prey on the Homer quote (also above).
> 
> ...




Mine ticks all the boxes (although its a Stock system) Forward traded it live for 7 yrs.
The complete history is still available to read on the nett.

I gave it away and still do!!

I actually pulled funds to cash in 2007 which is also documented on line (Here on ASF and on the forum with the live record of Techtrader) as I saw the Crash coming and didn want to risk open profit---job done!

Had I ridden out the drawdown I would have made new equity highs---even so happy with my decision ---others who use it still trade it. I will again as well----


----------



## TulipFX (7 March 2012)

See there are good blokes out there!


----------



## tech/a (7 March 2012)

TulipFX said:


> See there are good blokes out there!




Truth is that at the time of developing it I had no idea that it was or would be "That" good!
I only traded 6 of the 7 yrs.
Best of all it was a great learning experience and dissected by more people than I see in a week!
That gave me confidence a lot of curley questions and a wealth of knowledge Id not have experienced had I not made it public.

The university of hard knocks educated me well in this instance.
Its part of Radges Latest book.


----------



## pavilion103 (8 March 2012)

tech/a said:


> Truth is that at the time of developing it I had no idea that it was or would be "That" good!
> I only traded 6 of the 7 yrs.
> Best of all it was a great learning experience and dissected by more people than I see in a week!
> That gave me confidence a lot of curley questions and a wealth of knowledge Id not have experienced had I not made it public.
> ...




I've been waiting excitedly for this...

Just ordered my copy this morning. Looking forward to reading it!


----------



## cudderbean (8 April 2012)

Old news but it looks like Aussie Rob's system is in trouble after investigation by ASIC

http://www.goldcoast.com.au/article/2012/01/06/379661_gold-coast-business.html

Buyers of the scheme may be entitled to refunds.


----------

