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Change a losing system into a Winning system

  • #1
  • First Post: Aug 15, 2007 4:18am Aug 15, 2007 4:18am
If we have a losing system why dont we just do a reverse trade ?
Or if we have a losing EA, why don't we just edit the EA so when the EA give a BUY signal then change it into SELL signal. And do same for SELL signal.

Has anyone ever consider this?

Sorry for this stupid question
  • #2
  • Aug 15, 2007 4:32am Aug 15, 2007 4:32am
I think it comes down to money management and trading psychology. A winning system will ultimately fail if you don't manage your money effectively and keep your cool during the bad trades.

So if you do a reverse trade you're still in the same boat. Got to get the MM and psychology right first.
  • #3
  • Aug 15, 2007 8:28am Aug 15, 2007 8:28am
Your question is not a stupid question after all in theory when a system has an EV of - 0.5% per trade and you reverse the signals you should be able to make 0.5% per trade.
problem just is, the spread comes into this so it actually is possible to have a system that just cant beat the spread or another way the system looses in both directions is just too tight SLs( so you get stopped out by the noise always no matter of the direction you trade in) or a bad r:r ratio.

A good example for all this is the 50/50 flip system,each day at open flip a coin and buy or sell according to the coin a specific pair (whateever you choose). If you choose SL=TP then your system will loose (obv).

Now, if you reverse the signals the system will obv still loose (since the entry is random and sell/buy ratio is 50/50).


And besides, since most systems are in some way trendfollowingsystems reversing sell and buy signals kinda is a bad idea anyways


btw: MM and psychology obv are an even bigger problem when it comes to practical matters but i considered the question to be of theoretical nature.
  • #4
  • Aug 15, 2007 8:55am Aug 15, 2007 8:55am
No offense to the creator of the thread, but WOW, I can't count the number of people that have come up with this idea (including me) over the two years I've been learning to trade. I even know where this urge to reverse the rules of a system comes from. Usually when you open a trade it doesn't go in our direction at once. Most often it retraces a little and that initial move scares a lot of newbies out, forcing them to take a loss, then seeing the price move in the right direction. The other instance is when new traders base their trades on various trendline crosses, macd crosses, RSI, CCI, etc. crosses, and take trades against the trend. Again, I know I did - I still remember the day when I was constantly buying cable on the 15 min chart when it moved down over 200 pips
All in all, the idea is nothing new, and we all come up with it at some point.
  • #5
  • Aug 15, 2007 10:05am Aug 15, 2007 10:05am
Hi Sindutzz

My thoughts, for whatever they are worth, are here:
http://www.forexfactory.com/showthre...76#post1533576

Your question is also addressed by other contributors in the same thread.

David
  • #6
  • Aug 24, 2007 2:03pm Aug 24, 2007 2:03pm
i got the same idea...
you can try with strategy tester...
regards,
"Live is for living not for working"
  • #7
  • Aug 25, 2007 10:02pm Aug 25, 2007 10:02pm
This reminds me of the Seinfeld episode where George decides to do everything opposite....because his life has been a failure. Then everything happens his way....freaking hilarious.

Good idea!
  • #8
  • Aug 26, 2007 4:30am Aug 26, 2007 4:30am
Quoting sindutzz
If we have a losing system why dont we just do a reverse trade ?
Or if we have a losing EA, why don't we just edit the EA so when the EA give a BUY signal then change it into SELL signal. And do same for SELL signal.

Has anyone ever consider this?

Sorry for this stupid question

Try it and see, eh. You're going to take someone else's word for it?
  • #9
  • Aug 26, 2007 7:04am Aug 26, 2007 7:04am
hahaha I have this idea too... but then i think, instead of doing what our system says no.. why not get a system that we can agree with......
  • #10
  • Aug 29, 2007 8:03pm Aug 29, 2007 8:03pm
This really reminds me of my experience as of late. Every time the market moves against me, I wait until I just can't take any more unrealized loss, then reverse the position hoping that the momentum will help me recover some of the loss, get me to BE, or even profit. Soon after I do this, the market reverses its direction and instead of putting me back in the green, exacerbates the situation. Worse yet, I come to realize that had I kept the original position, I would not lose or even gain from it. Effectively, the initial bad decision soon snowballs into a serious loss.

This problem keeps haunting me time and time again with AU, and I just can't seem to make any money other than from pip-scalping. So, how does one go about staying positive in the face of a bad move, and how can you know for sure that the opposite of your initial conclusion is still valid and a reversal is a good idea?
  • #11
  • Aug 29, 2007 8:13pm Aug 29, 2007 8:13pm
The only way you can win at this game is by adapting to the market and being able to recognize current market state.
There is no "one" system that can do it. If you have only one system you will be right probably 30% of the time, and lossing 70% of the time.You just need to know you technicals, be aware of what is going on in the financial world and be able to understand that you can't trade 1 standard lot when you have only 2K in your account. You probably heard this before, but until it sinks in your mind and your body, you are not going to move ahead. Unfortunately this is the only way to get ahead.
  • #12
  • Aug 29, 2007 10:42pm Aug 29, 2007 10:42pm
Quoting Subdude
This really reminds me of my experience as of late. Every time the market moves against me, I wait until I just can't take any more unrealized loss, then reverse the position hoping that the momentum will help me recover some of the loss, get me to BE, or even profit. Soon after I do this, the market reverses its direction and instead of putting me back in the green, exacerbates the situation. Worse yet, I come to realize that had I kept the original position, I would not lose or even gain from it. Effectively, the initial bad decision soon snowballs into a serious loss.

This problem keeps haunting me time and time again with AU, and I just can't seem to make any money other than from pip-scalping. So, how does one go about staying positive in the face of a bad move, and how can you know for sure that the opposite of your initial conclusion is still valid and a reversal is a good idea?
From a booklet I read recently:
"observe the market from the perspective as if you were not in a position, even if you are."

In other words, seperate your emotions of "unitl I can't stand it anymore" from your system that says go long, short or stay out of the market. You may be putting too much risk in your trades too. When I started my second live account I only risked 0.4% of my capital when I was stopped out. I've since increased this as my confidence grew and now trade what my strategy allows.
One way of allowing this is to reduce your broker leverage down, this will allow you to have a lot of pips in your stop loss without a lot of $$$ risk.
Another thing as recomended to my by my mentor is to pick only one day to trade per week. This sounds counter intuitive to some extent but what it does is takes some of urgency out of trading. I believe one of the two biggest reasons I lost my first live acocunt is because I NEEDED TO BE IN THE MARKET AT ALL TIMES... I absolutly had too, it was like being addicted to poker (slot) machines.
  • #13
  • Sep 11, 2007 2:16am Sep 11, 2007 2:16am
Guys trust me .. it is worth to reverse your trade

Since last week just finished reverse trade all of my created EA's and one become profitable which give me a completely different idea about my trading approach.

Now forex trading more clearer in my head.

Trust me, it is worth Just try it..
  • #14
  • Sep 11, 2007 3:16am Sep 11, 2007 3:16am
"Guys I just lost my whole account this week when I reversed my trade "

I can't wait to see that post.

Quoting sindutzz
Guys trust me .. it is worth to reverse your trade
  • #15
  • Sep 11, 2007 4:17am Sep 11, 2007 4:17am
Quoting tdion
"Guys I just lost my whole account this week when I reversed my trade "

I can't wait to see that post.
That guy using a real account ??

I'm sorry I don't mean to ask people to reverse their trade using a real account. At least try it using demo account.

I created about 10 EA's and only one which become profitable when I reverse it. Not much but at least it give me more ideas how to develope a winning system.

My point is try to reverse your trade and learn from that. Maybe it is difficult for someone to know the result fast, but since I'm familiar with EA programming so it is easy for me to know the result when I test it using strategy tester (metetrader platform).

I'm sorry if i mislead people here


Btw, sorry for my bad english
  • #16
  • Sep 11, 2007 5:34am Sep 11, 2007 5:34am
Think I'll dig deeper into MM. The chart spiked down and my blood pressure spiked up. There's so much to learn.
  • #17
  • Sep 28, 2007 6:52pm Sep 28, 2007 6:52pm
Let me share what I've learned in the past few weeks of trading here about losing trades, reversals and risk tolerance. Basically, in the majority of cases, barring some catastrophic liquidity depleting event (similar to what happened with USD in August), chances good are that the market will come back close to your position entry relatively quickly, or even make it profitable. This may sound pretty controversial (hey, eur/usd has been in the uptrend for many years now), but we are all trying to buy low and sell high, so there's a pretty good chance you went long when you thought a bottom had been reached. And if you were wrong about that, setting a stop loss well after that happens only guarantees one thing - that you will lose money. But if you buckle down and wait for the market to reverse its direction to your benefit, you may often find that patience pays off very well, as long as you are able to detach yourself from the situation emotionally and avoid margin calls - the latter is a function of proper position size management.

To give you an example, yesterday I made the mistake of shorting AU at 0.8799, then freaked out observing a subsequent runup and put in a reversal stop @ 0.8820, which got triggered very quickly. Then I started playing the scalping game trying to milk a few pips from the volatility, and of course lost even more money. Later, last night the pair dropped back to 0.8790 or so, which indicates that the proper course of actions would have been patience and composure.

Then again, the limit of your patience is always closely tied to the amount of money at risk, so just like with gambling - don't play with more money than you can afford to lose.
  • #18
  • Sep 28, 2007 11:39pm Sep 28, 2007 11:39pm
Quoting Subdude
Let me share what I've learned in the past few weeks of trading here about losing trades, reversals and risk tolerance. Basically, in the majority of cases, barring some catastrophic liquidity depleting event (similar to what happened with USD in August), chances good are that the market will come back close to your position entry relatively quickly, or even make it profitable. This may sound pretty controversial (hey, eur/usd has been in the uptrend for many years now), but we are all trying to buy low and sell high, so there's a pretty good chance you went long when you thought a bottom had been reached. And if you were wrong about that, setting a stop loss well after that happens only guarantees one thing - that you will lose money. But if you buckle down and wait for the market to reverse its direction to your benefit, you may often find that patience pays off very well, as long as you are able to detach yourself from the situation emotionally and avoid margin calls - the latter is a function of proper position size management.

To give you an example, yesterday I made the mistake of shorting AU at 0.8799, then freaked out observing a subsequent runup and put in a reversal stop @ 0.8820, which got triggered very quickly. Then I started playing the scalping game trying to milk a few pips from the volatility, and of course lost even more money. Later, last night the pair dropped back to 0.8790 or so, which indicates that the proper course of actions would have been patience and composure.

Then again, the limit of your patience is always closely tied to the amount of money at risk, so just like with gambling - don't play with more money than you can afford to lose.
In my opinion, I think it may be best that you go back to some demo trading to prevent yourself from losing more money and to find something that works for you first. There is no rush to be in the market, it will always be here. When trading, it's a good idea to give trades some breathing room. When your stops are too tight, you will be taken out of the market quite often on the little retraces before it gets a chance to continue in it's original anticipated direction. Practice a lot of money and risk management, you will notice that it makes a huge difference.
  • #19
  • Sep 29, 2007 10:02pm Sep 29, 2007 10:02pm
I like to place trades late in the evening and see how they develop when I wake up (after about 9 hours). Youd be suprised how often an entry left alone can be up 100 pips when you wake up.
  • #20
  • Oct 1, 2007 10:47pm Oct 1, 2007 10:47pm
Quoting Deadly Avenger
Youd be suprised how often an entry left alone can be up 100 pips when you wake up.
... or down 150. I couldn't sleep too well having that in the back of my mind.
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