Are you falling for this chart illusion? Read on and find out..

Successful track records in day trading are normally simulated in back testing over closing data.

The problem is in any form of trading - day trading included, you have to be careful not to "curve fit". n

People selling day trading systems do this on purpose and traders testing their own system do so without realizing it.

They then get a profitable track record.

Now these track records worked in back testing and never work going forward.

Why?

Because, all day trading volatility is random and you cannot predict, or get the odds in your favour - that is why a day trading system NEVER makes profits in the market in real time.

So what is curve fitting?

Curve fitting is bending the data to fit the price history. If the system doesn't work you simply optimize it so it does, by bending the system to fit the data.

This is simply like shooting at a barn door and then going and drawing a chalk circle around everyone to show it's a bulls-eye.

Roulette systems are a bit like day trading, there both games where you cannot predict the future in, but if you look back - there seems to be an order in HINDSIGHT, but of course there is none - its an illusion.

The proof of the above is you will NEVER find a day trading system that makes money in real time; simply ask any vendor to give you one to prove this.

Why Traders curve fit

Vendors curve fit on purpose to catch the mug trader who believes he can get rich day trading.

On the other hand, there are traders who think they can do it and bend the data without realising what their doing - constantly tweaking the system until it works.

Vendors know day trading is a good story and don't care if the system makes money or not as their selling systems and the trader testing his own system does not realize he is curve fitting.

Of course, if you think about day trading vendors, then if they could make as much as they claim, they would shut up and trade themselves and be millionaires, rather than try and sell you a system for a few hundred bucks.

The Illusion

What works in hindsight does not work in real time and the answer is due to curve fitting.

The Reality

If you have no reliable data you cant make money in real time trading.

Day trading has no reliable data, as all short term volatility is random and prices can and do go anywhere.

The proof of this is you never see a real time track record, the simulation of profits in hindsight is simply an illusion, caused by curve fitting.

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