Quote from NoWorries:
Michael B,
I admire your activity on these forums and once enjoyed myself by reading through your entire journal on your grid systems. I actually simulated the whole thing in VB/Excel, using all sorts of different rules, grid sizes etc.
Even before I started these simulations, I concluded that these grid system can only work if the pair somehow reverses to its mean in the long run, or (if this is not the case) you know the direction of the long-term trend in advance.
If you have a consistent long-term trend and no rule in place to sell losing positions at some time, you will go broke--big time. Once you start adding rules to cut off losing positions in an adverse trend, you pretty much lose all the profits.
The scary thing that I saw in my simulations is that the system actually can look really good over a considerable period (e.g. several years), great profits, beautiful equity curves, low dd etc. before it suddenly collapses.
