A or B

Dear Trader, in the last days i found out something VERY interessting i would like to discuss and get some other opinions about it...

If you set a trade with 1:1 ratio for example
TP: 30
SL: 30

and enter trades randomly just... after 1000 trades you will have won about 50% and lost about 50%. (Maybe 49% 51%)

I backtested that as good as possible.


Now what if you set a strategy.
For example engulfing patter...
Everytime you find an bullish engulfing patter you go buy with 30 pipps tp and 30 pipps sl.
You do this a 1000 times for example in 4h chart.
Now lets image the result... for example its 45 % win and 55 % losses.
Now you would only have reversed the strategy to profitable?

If you got what im writing, we should find all possible strategies, and set a r:r ratio of 1:1 tp/sl to them.
It has only 2 outcomes from the A or B (win or loss) if you do it a lot of times statistic will prove if its a rentable pattern before you enter a trade or its not!

All trade that end up not to be approximatle 50% 50% (or 49% 51%) must be profitable cause you can reverse them!! If you backtest it long enough and get for example 45% to 55% or 40% 60% and you continue to trade like that and statistic was done on 1000 trades it should continue to be profitable.

Before you enter a trade, you have to set up a pattern, and then trade with risk reward 1:1 you will ether get 50:50% or you will be profitable, the idea is to force the trades to get a decision! If you try out 1000 different patterns you should find one that is more spreading then 49% to 51% so you will be profitable in long run.

If you agree with my idea which should be logic to you and you would like to join this discussion and add your thinking on it lets try this together here to write ideas of patterns and backtest them with time.

I would love people to join who have experience with precise backtesting so we can see further. Please comment if you can relate.

Kr


Facts for new people maybe:

If you have risk reward ratio of 1:1 and you win more then 50 percent of your trade you make profit.

If you have 55% to 45 % win rate with 1:1 ratio - means out of 100 trades you won 55 and lost 45 trades. Lets say sl and tp was 10 pipps (spread not consider) lot size was 1.00 you would have won 55 ×lot 1.00× 10pipps tp = 5500$ - loss 45 x lot 1.00 x 10 pipps sl 4500$ = 1000 win

So you can play with that numbers.

basically:

You set a pattern -> after the pattern appers -> you trade with 1:1 risk reward (tp/sl = 1:1) -> you only get A or B !

More winner then loser
Or
More loser then winner
Or 50% 50%

If 50%50% you try an other patter

If winner > loser = profitable
If loser > winner = reverse the trading direction -> profitable again


So you can only win or market is always 50%50%

If not (50% 50%) you HAVE to be profitable
Cause only A or B poasible!!!

Crazy

Reversing a losing strategy never make it profitable for many obvious reasons. This has been discussed and proved in many threads here on FF over the years.

If that was the case, we would be all rich since a while ...

Wrong for obvious reasons......think about it

Funny
Think about it...




Tomcat98

We can ditch the idea of "reversing". It already starts to create confusion.
I think OP is basically saying that if we find some patterns where trade outcome is systematically skewed from 50/50, then we can trade it profitably.

it depends on the losing amount. If you lose a backtest and it's simply the spread that is substracted, then yes, reversing the strategy won't make it profitable
but if you got a strategy that is losing a lot, then reversing it might be the solution.
also if you got a spread problem, use a higher timeframe, it will trade less often but with bigger reward, so the spread will be "diminished" in relationship to the profits, also you'll need a lesser edge

@ dr brain @ ionene
You understand me,

If its only because of the spread we can widen the tp and sl for example. 10 pipps sl and tp arent same effected by spread as 30 pipps sl and tp , cause the spread gets less significant if you widen tp and sl -----> and if you then find a big gap instead of 50 % to 50 % for example 60 % 40 % you should be profitable in any case.

So basically we should set up patterns and figure out if they lose a lot of trades after set up patter appeared with R : R 1:1 and try to reverse them. (or stay 50 % 50 %)

I believe it can be found, cause you can do 200 set ups and more before you trade 1:1 RR. So there can apear simply a idea that is worth backtesting and and try further.

You have the basics we can try, like morninng star or three black c. . Or engulfing and so on and so on.

Ather these pattern apear maybe in a 4 h chart u can take 30pipp sl and 30 pipp tp with a spread filter of 2 pipps for example.
Then if its not 50% 50% (the outcome of winning and losing trades)
you ether are positive after for example 300 tries or you loose
and try to reverse the strategy in the same time frame (backtest) which should/could be positive for the result.

The cool thing is you can set limits to spread and do all set ups you have in mind before you trade 1:1 RR

Sorry for my english if its difficult to read. Kr

Most losing strategies lose, not because they have a large negative edge, but because they have no edge at all.

Transaction costs eat the system or its reverse to shreds. Both the system and its opposite typically lose over the long run due to transaction costs.

edge come and go ...


data above was taken from EURUSD (2010-2019) show market cycle . Some cycle do work very well under certain hours .


above result backtesting according the cycle has been found inside the data