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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.
quote:
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?

Do you mean "I could NOT do anything right today"?
quote:
Originally posted by George Soros

quote:
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?

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



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

quote:
Originally posted by George Soros

quote:
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?

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



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


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)
quote:
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)

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