funny thought...

Lets say I am working on a system, that generate for me buy and sell signals.
After backtest it I see that the system is loosing lots of money.
so... every time its generate a sell signal I will buy and the opposite.

There are many loosing systems out there.

You could also backtest the inverse system and see what the results would be.

backtest the inverse of a loosing system must give me a profitble system??

its makes sense, but nothing in this market obey any hard rules..
Its some times seems like everything will be against you no matter what.

nope it doesnt work.

And I know its a naive question: Why?

because stops and limits do not have reverse effects when reversed.

The reason this strategy won't work is because of the broker's commission (a.k.a. spread). Consider the a strategy in which you flip a coin every 5 minutes, go long if it is heads and short if it's tails, no stops or limits. Clearly, you'll quickly lose all your money. Now try the inverse (long when tails and short when heads), the strategy will still be a loser.

Regards,
Bonete

What exactly are you referring to here? I've used limit orders in place of stops and vice versa with identical results when dealing with a "no slippage" dealer in real time trading. Other than the obvious fact that trading, due to the spread, is not a zero sum game, what is the difference between using stops or limits if there is no slippage?

Also when inverting a system -- the system will never be as big a winner as it is a loser because of the spread but successful systems have been developed by taking gross losers and inverting the signals or by determining what was resposible for the biggest portion of losses and employing the opposite technique to capture them. Often it is unsuccessful but not always. Many systems are based on popular failed signals because the failed signal was a stronger confirmation than a positive signal. Failed breakouts are a channel traders best friend. Backtest a breakout system that fails a very high percentage of the time and filter some of the losers using a failed trend indicator and you have the makings of a channel trading system.

FT