Douglas Adams

Flying is learning how to throw yourself at the ground and miss - Douglas Adams

A thought came to me when I read that quote by Douglas Adams. Is successful trading an attempt to find losing trades and then put on a trade in the opposite direction? In other words, instead of looking for winning trades look for losing trades.

If you find a strategy that loses a fantastic amount of money would it be a killer system if you reversed the trade directions?

Good topics……. I'm glad somebody raise this question, often I end the day saying " I could do anything right today" then I look at the trades and thinking if I was playing the opposite way what would I have done?

When looking at it this way you need to ignore commissions in your initial back-test just to see if the "reverse signal" system would have performed better. If that is the case, then add in commissions to see if the new counter-strategy would be viable.

Theoretically every system could be a winner if you ignore commissions. If a fixed set of rules produce a loss then doing exactly the opposite should produce a profit. This is a simplistic look at a system that has been back tested using an optimistic entry approach.

A good back testing system will only recognize a fill on a limit order if the market traded through the price. This makes the results show the worst case scenario and is more realistic. The real system should outperform the side-by-side back tested system.

What I mean by this is that if you trade a rule-base system for a week and then run your back tester across that week's worth of data there will be some weeks where your live system gives better results than the back tested system.

I noticed this when I ran the Single Print forward testing side-by-side with real money. There were times when I got a fill and the "testing system" didn't which put me ahead of the tested system.

It should always be the case that there will be some trades that you get a fill on that the back testing system does not get a fill on. These are always trades that work to the tick for you. i.e. You get filled at the bottom/top of the move and the back testing system does not because the price does not trade through.

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Originally posted by inventor

Good topics……. I'm glad somebody raise this question, often I end the day saying " I could do anything right today" then I look at the trades and thinking if I was playing the opposite way what would I have done?

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Do you mean "I could NOT do anything right today"?

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Originally posted by George Soros

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Originally posted by inventor

Good topics……. I'm glad somebody raise this question, often I end the day saying " I could do anything right today" then I look at the trades and thinking if I was playing the opposite way what would I have done?

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Do you mean "I could NOT do anything right today"?

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Your absolutely correct George, what I wanted to say is "I could NOT do anything right" Grammar always throws me off my meaning.

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Originally posted by inventor

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Originally posted by George Soros

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Originally posted by inventor

Good topics��. I'm glad somebody raise this question, often I end the day saying " I could do anything right today" then I look at the trades and thinking if I was playing the opposite way what would I have done?

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Do you mean "I could NOT do anything right today"?

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Your absolutely correct George, what I wanted to say is "I could NOT do anything right" Grammar always throws me off my meaning.

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Especially when the grammar turns the meaning of the sentence around 180 degrees!!

Talking about 180 degrees and not doing anything right: Have you ever flipped a chart 180 degrees through the horizontal and then asked yourself what sort of trades you would have done?

Let me try and use a simple character chart as an example. Say this is a chart of today:
/\/
(The market goes up, down, up)
Now flip it over:
\/\
(Now it goes down, up, down)

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Originally posted by George Soros

Let me try and use a simple character chart as an example. Say this is a chart of today:
/\/
(The market goes up, down, up)
Now flip it over:
\/\
(Now it goes down, up, down)

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I don't really understand what you are trying to say?