How did it originally come about?
In May 04 I was contacted by a guy called TJ who said he had a software Company and had developed back-testing software such that he could feed trading strategy details into it and accurately test it to see how successful it was. He went on to explain that he had tested every strategy he had come across on the market and in over a year of testing, only two or three strategies had proved to be consistently profitable - and of these, Short Swing Trading was the best! I listened!

The first thing I did was check to make sure he had bought my book, Short Swing Trading! He had! I then met with him to discuss a way forward.

We have worked on a partnership basis to ensure that the SST strategy was faithfully reproduced in his programming. Not an easy task because computers are totally black and white where traders always include an element of judgment, but we eventually got there.

Is it a "Black box" system?
I have always been very skeptical about any form of "black box" trading system because I have never come across one that lives up to expectations. But after all, this is my trading strategy which I believe in and if the rules are sound it should work - shouldn't it? Also, the removal of emotional decisions should be a good thing.

I hesitated initially because this felt like the ultimate test of the SST strategy. Faithfully taking every trade without any emotion. Faithfully using the stop system and closing trades without second guessing market sentiment. In that sense yes, it is a "black box" system. But after many weeks of testing during mid '04, we could prove that it would work -brilliantly!!

Of course it isn't in a box and it isn't black. It is the SST strategy built into a plug-in. A small computer program file that runs within the charting software package called eSignal.

Tell me more about back testing and optimization.

The SST strategy has a set of rules but within those rules are some adjustable strategy settings. The Plug-in will run a program to test each combination of settings until it finds the best combination for net profit over the back test period. It then saves those settings for you to use. This is auto-optimization. Then, every time that chart is displayed the plug-in retrieves your saved settings for that symbol and displays that particular strategy variation on the chart and at the same time runs an instant and up to date back test to tell you how well the settings are performing.

The Advanced User Section of the manual also tells you how to further fine tune the optimized settings in order to for example, operate a slightly tighter stop if that better suits your trading style. It also tells you how to do an additional back test using the precise optimized strategy in order to get graphs and more detailed back test results if you need extra detail.

This is the ultimate in tailoring SST to match the individual "personality" of each share, Index or symbol being traded. This is a degree of sophistication that would be impossible to achieve manually through trial and error and something that I only dreamed would be possible a few years ago.

How do you know if an optimized setting will work in the future?
Well, of course there are no guarantees in trading but we can greatly improve our chances of being right because the optimization is done over a reasonable time period (say 1 to 2 years or more) and we can optimize to get a smooth equity growth line not just for maximum profit. What this tells us is that the gains are consistent throughout the test period. If gains have been consistent throughout the ups and downs and different market conditions of the last two years then we can be reasonably certain that the same settings will perform well into similar ups and downs in the future. Isn't that the essence of trading - we just want to improve our chances of being right by as much as possible. All trading decisions for chartists (technical analysts) are based on history repeating itself whether it be based on an indicator, moving average, chart pattern, support & resistance levels or anything else.

If a back test tells you, for example, that 65% of the trades over the last two years were winners and the average win was more than twice the average loss, then believe me, the odds are in your favor that you will make money in the future unless something changes fairly drastically. And if something does change to that extent in the future, no strategy on earth can cope with that. None of us can change how we trade based on something we don't yet know.

Will the SST ProPlus scan for trades?
I have been asked this by a few people and there is a very important point to be made here. A fundamental element of the SST strategy is the fact that each stock or index has a "Personality". If you study charts you will notice that some look different. If you want an example, compare the FSTE 100 Index to the FTSE 250 Index. The charts look completely different in almost every way - they have totally different "personalities".

You must only trade stocks or instruments with the right "personality" for the SST strategy. In other words I fundamentally believe that you cannot use the same trading strategy for everything if you are trading short swings in price. In fact you can easily prove it with the plug-in by back testing two different stocks over the same time period with the same strategy settings. One will make very good profit and the other will make a loss.

A method of scanning the market can look for SST trades but they are useless if they are trades on stocks that have the wrong "personality". I have not yet found ANY scanning system that can determine a stock personality. In my experience (something that I firmly believe in) the ONLY way to test a stock personality against the strategy is to use absolutely accurate back testing. A very long and inaccurate process if done manually. The SST ProPlus does it perfectly in seconds.

So how DO I scan for trades?
You back-test and optimize stocks, indices or whatever you wish to trade in order to build your watch list with the right "personality" and the best individual settings for each. This is a bit like finding a car you like then taking it to be customized to be perfect for your individual taste and requirements - no expense spared. Then keep your watch list in a folder called "favorites" in eSignal. Then all you need to do it quickly bring each of those charts up on screen in turn and the Plug-in will run an instant back test and at the same time tell you if there are any potential trades for tomorrow or stops to move or prospective trades that have triggered today. You can then print this list out if you wish. You can probably do all your chart work in a few minutes a day depending on the size of your watch list.

How does it compare with other "Trading systems"?
TJ and I have done a lot of research on similar, though mostly far less profitable systems on the market and the SST Plug-in is far better value (makes more money and/or costs less) than all other monthly installment systems we have seen so far. There are also trading systems that charge an up front payment to buy. These are typically between $5000 and $9000 (£3000 - £5000). If anyone would prefer that method please let me know but personally I would not pay that sum of money for any trading system without first proving to myself that it works. And don't forget the other point, most "Black Box" systems do NOT reveal the underlying strategy in the way that SST does.

How do I switch from the higher subscription to the lower amount with a six month minimum period?
When you go to the Gold Members web site you will see a link that gives full details. You can make the switch at any time, even before the first higher subscription is taken at the end of the 14 day free period.

Can I ask a question?
If you have a question that remains unanswered please email me, David Graeme-Smith by clicking here. Please put "ProPlus enquiry" in the subject line.