Forex Scalping Systems - Beware of Curve Fitting or Lose!

by : Monica Hendrix

Forex scalping systems are more popular than ever and they all come with great track records, which have unbelievable gains and their very tempting for novice traders but what they need to be aware of is - curve fitting which ensures that most scalping systems lose money.

Curve fitting is when a vendor bends his system to fit the data.

When the vendor can't get the system to work, he keeps adding more rules and parameters in until it does, by bending the system to fit the data or curve fitting. He then has a track record he is satisfied with or more to the point gives him a great track record he can sell.

What happens next?

No two periods of data are going to exactly replicate themselves and the system simply collapses and loses in real time trading.


The buyer scratches his head and wonders why - but if he looked for this on the track record he can find out if its curve fitted. Look for the disclaimer below (or similar) on any system you buy - this is standard CFTC one.

"CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown".

If you are looking at buying a forex scalping system from a vendor, beware there all curve fitted.

You will NEVER find one with a real time track record, as forex scalping simply doesn't work by the very nature of the logic its based upon.

The time period is simply to short.

All volatility in daily or hourly time frames is random - support and resistance is meaningless and prices can and do go anywhere in a day. It's impossible to get the odds in your favor and forex day traders always lose long term.

Of course it makes a good story and naÃ?ve and greedy traders buy it and vendors know this.

They simply tell the story add a simulated track record and appeal to their greed - it's a big industry.

If you want to trade forget forex, forget scalping systems or day trading and trade longer time periods, where you can get the odds in your favor.

Leave forex scalping systems to the dreamers and greedy traders, get the right forex education and enjoy currency trading success by using longer time frames and valid data.