Ask Colin

What is your view of the effectiveness of mechanical trading systems in general and the Sharefinder SPA 3 system in particular?

There is already quite a lot of comment on my web site about computerised trading systems. Not only my views, but links to Trevor Sykes' excellent columns on Star Trader (it went under several names) and also ASIC's warning on the Articles page. 

I have a great respect for Gary Stone, but my scepticism that investing can be boiled down to a mechanical computerised system remains. In saying that, I must advise that I have not tested SPA 3. However, I find it difficult to get past the idea that if I had a great trading system, I would not sell it to anyone. I would use it to establish an audited track record and then there would be plenty of people wanting to invest. I would get far richer using the system than selling it.  

My standard suggestion is to request an audited track record of using any trading system's trading signals. This should have been use of the system signals in real time, not a theoretical back testing, which always involves the risk that the system has been optimised on the past data.