Please let me set the stage with Martin Armstrong's own trading track record.
Based on his own claims, he created Socrates in the 1980s. He used it himself before his 11 years jail term, trading currencies. These currency trades were bad trades resulting in losses of US$700 million.
Backtesting with 3 Years of Socrates Data
Everybody with a Socrates subscription can verify that the system can only create losses. However, nobody needs to buy a subscription because the work has already been done.
The chart below visualizes 10 hypothetical trades that were executed over 3 years in accordance with the monthly buy / sell signals printed in the reports available to Martin Armstrong's Socrates subscribers between 2016-06-06 and 2019-07-12. The instrument is NYSE:GDX, the "GLD Miners" Exchange Traded Fund (ETF).
The buy / sell signals are available as weekly and monthly signals. They are printed in the daily text reports as "We have generated a (buy|sell) signal[,]? so some caution is required\.".
Trades are initiated one day after the signals appear, at daily close market values. Trades are closed on the trading day after the signals disappear, again at daily close market value.
On average one can see that Socrates advised to buy highs and to sell lows. This is in line with the Reversal System.The numerical results can be seen in the table below:
| Date | Monthly Buy | Monthly Sell | Close Price | P/L [%] | Trade # | Direction |
| 2016-06-06 | 1 | 0 | 25.45 | |||
| 2016-06-07 | 1 | 0 | 25.11 | |||
| 2016-08-31 | 0 | 0 | 25.49 | |||
| 2016-09-01 | 0 | 0 | 26.42 | 5.22% | 1 | long |
| 2016-09-30 | 1 | 0 | 26.43 | |||
| 2016-10-03 | 1 | 0 | 25.96 | |||
| 2016-11-30 | 0 | 0 | 20.83 | |||
| 2016-12-01 | 0 | 0 | 20.66 | -20.42% | 2 | long |
| 2017-02-28 | 1 | 0 | 22.85 | |||
| 2017-03-01 | 1 | 0 | 22.98 | |||
| 2017-03-31 | 0 | 0 | 22.81 | |||
| 2017-04-03 | 0 | 0 | 23.2 | -0.74% | 3 | long |
| 2017-05-01 | 0 | 1 | 21.69 | |||
| 2017-05-02 | 0 | 1 | 21.74 | |||
| 2017-07-31 | 0 | 0 | 22.86 | |||
| 2017-08-01 | 0 | 0 | 22.83 | -5.01% | 4 | short |
| 2018-01-31 | 1 | 0 | 23.75 | |||
| 2018-02-01 | 1 | 0 | 23.7 | |||
| 2018-02-28 | 0 | 0 | 21.35 | |||
| 2018-03-01 | 0 | 0 | 21.57 | -8.99% | 5 | long |
| 2018-05-01 | 1 | 0 | 22.31 | |||
| 2018-05-02 | 1 | 0 | 22.38 | |||
| 2018-05-31 | 0 | 0 | 22.34 | |||
| 2018-06-01 | 0 | 0 | 22.31 | -0.31% | 6 | long |
| 2018-08-31 | 0 | 1 | 18.55 | |||
| 2018-09-04 | 0 | 1 | 18.02 | |||
| 2019-02-26 | 0 | 0 | 22.73 | |||
| 2019-02-27 | 0 | 0 | 22.35 | -24.03% | 7 | short |
| 2019-02-28 | 0 | 1 | 22.24 | |||
| 2019-03-01 | 0 | 1 | 21.7 | |||
| 2019-03-29 | 1 | 0 | 22.42 | |||
| 2019-04-01 | 1 | 0 | 21.96 | -1.20% | 8 | short |
| 2019-04-30 | 0 | 0 | 20.89 | |||
| 2019-05-01 | 0 | 0 | 20.52 | -6.56% | 9 | long |
| 2019-06-28 | 1 | 0 | 25.56 | |||
| 2019-07-01 | 1 | 0 | 24.58 | |||
| 2019-07-12 | 1 | 0 | 26.21 | 6.63% | 10 | long |
| Simple Total: | -55.41% |
That is a 55% loss!
This back test demonstrates the complete failure of the Reversal System. It demonstrates that the system creates trades that are called "whipsaw trades". It proves that Socrates does not contain a functioning trend reversal prediction mechanism that avoids this problem. To me, this is not surprising because to my knowledge, such a (functioning) trend reversal prediction system is not available anywhere. If such a trend reversal prediction system was indeed available, then trend following systems would be obsolete because one would simply trade between turning points, reversing on each turning point.
My burning question would be:
Who is the unfortunate Socrates subscriber trading against, that trader who makes 55% profit? This is not a hypothetical question. For a shocking answer, please refer to: Socrates The Market Manipulator
See also:
Monthly Reversal Failures December 2018
Weekly Superposition Event in the DOW October 2018
Quarterly Superposition Event in Gold 2015
Socrates Subscriber Testimonials
Socrates Forecast Array Nonsense
