Just a stupid question! What happens if I do the opposite? | Forex Factory

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Just a stupid question! What happens if I do the opposite?

  • #1
  • First Post: Jun 21, 2014 2:37pm Jun 21, 2014 2:37pm
hi traders !
in this period i'm trying to explore and understand better all the world around the expert advisors.
So i'm testing a lot of ea and i'm noticing that the most i'm testing are with a losing equity line, so i wondering what if i do the opposite?
I know maybe it's a really stupid question, but if i open a buy order with a 20 pips take profit and 10 stop loss and this order go to stop loss (-10) it mean that if i sold (and not bought) with 20 pips stop loss and 10 take profit i was in profit ( +10).

So look this photo:
http://gyazo.com/68d2d206e6592f8ce0b5d847aaa8fe8e

this is a perfect losing strategy , but what if i made the perfect opposite in every single trade??
What if, in this strategy,it was selling but i will buy and vice versa?
I dont know, by the way it was just an idea, and for sure there is something in my idea who doesn't work,
so sorry for this stupid question i'm just trying to have a answers..
thank you in advance
  • #2
  • Jun 21, 2014 4:04pm Jun 21, 2014 4:04pm
http://lmgtfy.com/?q=site%3Aforexfac...osing+strategy
No greed. No fear. Just maths.
  • #3
  • Jun 21, 2014 5:15pm Jun 21, 2014 5:15pm
Thank you PipMeUp for your answer.
By the way in all the previous thread i didn't find the answer i need.
Unlukly for now i'm not able to test a complete reverse on a trade.

i'm trying with a easy strategy, buy when rsi is < 5, and tryng the opposite.
Unluckly it doesn't execute the same orders and i dont know way, in the normal way it give 20 order , in the opposite it give 33...it 's not right , it' an error
And it's not because the idea doesn't work, but there 's an error in the back test.
  • #4
  • Jun 21, 2014 5:36pm Jun 21, 2014 5:36pm
i will try to explain better what i wanna say.
look this report, the strategy is to buy when rsi is < 5
stop loss 5 pip
take profit 5 pip

http://gyazo.com/ffba507e7126438aaf81ebe5fde9a159
as you can see we have 220 total operation

ok let's reverse everything, now the ea should make the same operation but this time sell when rsi <5
same interval of time, same timeframe ,same tp e sl, i should see same operation(220)
but :
http://gyazo.com/6349b4884d1ad4302a930d109c3961f9

total operation : 188 ( ?!?!?!?)
why? i think is not because the idea is wrong but just the ea return same error.

i should see the same operation because rsi is < 5 in the same report, but why in first 220 and in the secon 188?i only wanted to turn buy into sell, not modify the total operations or something more.
if there's someone who can help me to understand it i will be very grateful
  • #5
  • Jun 21, 2014 6:55pm Jun 21, 2014 6:55pm
Quoting Nepul
hi traders ! in this period i'm trying to explore and understand better all the world around the expert advisors. So i'm testing a lot of ea and i'm noticing that the most i'm testing are with a losing equity line, so i wondering what if i do the opposite? I know maybe it's a really stupid question, but if i open a buy order with a 20 pips take profit and 10 stop loss and this order go to stop loss (-10) it mean that if i sold (and not bought) with 20 pips stop loss and 10 take profit i was in profit ( +10). So look this photo: http://gyazo.com/68d2d206e6592f8ce0b5d847aaa8fe8e...
A losing strategy will never make a winning one by taking the opposite trades. That's one of the most asked question since forex exist ...

You can find here on FF plenty of threads started with this same question ... They have all the same answer ... and they were all moved in the rookie section!
MT4/MT5 EAs/Indicators/Alerts coder
  • #6
  • Jun 21, 2014 7:16pm Jun 21, 2014 7:16pm
Agreed it may sound counterintuitive, but i know why it doesnt work.

Lets say you have a MACD strategy, with 12,26,9 parameters, buy above 0 sell below 0.

And it is losing of course, now if you reverse that and sell above 0 buy below 0, then this wont be the opposite of the previous method.It may sound silly but it isnt.

You know why, its because if you put a trade at 5:00 PM and close it at 6:00 the reverse of it, may not be closed at 6:00, it may close after 15 min or after 3 hours.

So the reverse of a good or bad strategy is actually a neutral strategy, with random outcome

Which we know wont hold since the naked winrate at 1:1 is about 40-45% depending on your spread.
"There's a sucker born every minute" - P.T. Barnum
  • #7
  • Edited 3:15am Jun 22, 2014 2:54am | Edited 3:15am
Suppose I play roulette, and I bet continuously on black for a session. At the end my net P/L is a loss of $500.
Does that mean if I bet on red continuously, I have a winning roulette strategy?

If you can see the fallacy in that logic, then you'll also understand why inverting a 'losing' forex strategy doesn't work, either.

If you don't understand, read Fooled By Randomness by Taleb.

Like FerruFX says, this question gets asked on this forum at least once every few months.
  • #8
  • Jun 22, 2014 3:13am Jun 22, 2014 3:13am
Quoting Nepul
Thank you PipMeUp for your answer. By the way in all the previous thread i didn't find the answer i need. Unlukly for now i'm not able to test a complete reverse on a trade. i'm trying with a easy strategy, buy when rsi is < 5, and tryng the opposite. Unluckly it doesn't execute the same orders and i dont know way, in the normal way it give 20 order , in the opposite it give 33...it 's not right , it' an error And it's not because the idea doesn't work, but there 's an error in the back test.
Yes all the answers are in those threads.

Look at the equity curve you posted. The scaling is quite weird and makes it hard to read the values but I more or less could read that you started with $1000 and the account dropped to 150. There are more or less 680 trades. So let's make the maths: loss=1000-150=850. loss per trade = 850/680=1.25.
Let me guess the value of the spread. 1.2 pips? :-)

This strategy is perfectly edgless and bleeds the trading costs. This means that it is no better than flipping a coin. The opposite of a random signal is a random signal. The resulting strategy will also be edgeless.

To have a losing strategy becoming a winner when reversed, you must start from a strategy with a negative edge. Finding it and prooving the negative edge is as complex as finding a winner and proving its edge. Additionally it is not a sufficient condition because the negative edge may not cover the spread after reversing.
No greed. No fear. Just maths.
  • #9
  • Jun 22, 2014 3:14am Jun 22, 2014 3:14am
Quoting hanover
Suppose I play roulette, and I bet continuously on black for a session. At the end my net P/L is a loss of $500. Does that mean if I bet on red continuously, I have a winning roulette strategy? If you can see the fallacy in that logic, then you'll also understand why inverting a losing forex strategy doesn't work, either. If you don't understand, read Fooled By Randomness by Taleb. Like FerruFX says, this question gets asked on this forum at least once every...
The example is no good as the is no apprehensible system to roulette's reds and blacks. With a trading system one may have one.

At least in theory, one should be able to extract profit doing reverse. Unless it is the situation described by PipMeUp above, why not?

Likely traders do not treat positions the same following the flip. This leads to losses either way.
  • #10
  • Jun 22, 2014 3:23am Jun 22, 2014 3:23am
The guy who invented the postit notes once said that the literature was packed with reasons why it shouldn't work. Yet he had a finished product. My advice: when something doesn't work try to do the opposite. And when the opposite doesn't work try to do different variations of the opposite. Most of the results will be crap but somewhere in there you may find gold. If you think your EA is a complete loser try to backtest it in reverse. If it doesn't work try to understand why and try different variations. See where the logic is flawed and try to fix it. You will learn more by experimenting on you own than by reading theories.

BTW if you are playing with 10 and 20 pips it will probably end as loser in real trading environments anyway because of the spread and slipage.
  • #11
  • Jun 22, 2014 3:26am Jun 22, 2014 3:26am
Quoting grin
{quote} The example is no good as the is no apprehensible system to roulette's reds and blacks. With a trading system one may have one. At least in theory, one should be able to extract profit doing reverse. Unless it is the situation described by PipMeUp above, why not? Likely traders do not treat positions the same following the flip. This leads to losses either way.
Example is perfectly valid in the sense that the $500 loss is nothing more than a random outcome, as is the case with every losing forex system.

Why can I say 'every'? Because if a trader has a system with a genuinely negative edge (as opposed to no edge), then it must be grounded in some objectively provable market inefficiency. And if he's knowledgeable enough to find inefficiencies, he would already be using the system profitably, of course.

PipMeUp explained it better than I did.
  • #12
  • Jun 22, 2014 3:27am Jun 22, 2014 3:27am
the entry is rarely the answer, why not look at the exit and the stop.
tradewith60
  • #13
  • Edited 4:18am Jun 22, 2014 4:08am | Edited 4:18am
Quoting 60minuteman
the entry is rarely the answer, why not look at the exit and the stop.
Good point. But I assume that completely reversing a strategy means switching the TP and SL levels as well as reversing the direction of the entry, given that the goal is to achieve the opposite P/L (which can't be perfectly achieved due to slippage, fluctuations in the spread, etc). Of course if the exit strategy is more complex (e.g. trailing SL), then it might not be sensibly feasible to reverse the strategy at all.

However, none of this invalidates PipMeUp’s truism that the opposite of a random signal is a random signal, which necessarily applies to both entries and exits.
  • #14
  • Jun 22, 2014 4:25am Jun 22, 2014 4:25am
Quoting hanover
Suppose I play roulette, and I bet continuously on black for a session. At the end my net P/L is a loss of $500. Does that mean if I bet on red continuously, I have a winning roulette strategy? If you can see the fallacy in that logic, then you'll also understand why inverting a 'losing' forex strategy doesn't work, either. If you don't understand, read Fooled By Randomness by Taleb. Like FerruFX says, this question gets asked on this forum at least once every...

Thanks you everybody for your answers, i want say something about the hanover's examples.
we are playing in roulette betting on black , as you said at the end of the session our P/l will be a loss of 500$, so for sure in this session the roulette will show us more red than black. for example 6 red and 4 black with the total of 10 shot....so what is the problem?if i bet on red "in this session" i was for sure winner.
am i right?
  • #15
  • Jun 22, 2014 4:29am Jun 22, 2014 4:29am
Quoting Nepul
{quote} Thanks you everybody for your answers, i want say something about the hanover's examples. we are playing in roulette betting on black , as you said at the end of the session our P/l will be a loss of 500$, so for sure in this session the roulette will show us more red than black. for example 6 red and 4 black with the total of 10 shot....so what is the problem?if i bet on red "in this session" i was for sure winner. am i right?
That was just an example explaining that reversing a random losing strategy will give you a random losing strategy ...
MT4/MT5 EAs/Indicators/Alerts coder
  • #16
  • Jun 22, 2014 4:36am Jun 22, 2014 4:36am
Quoting PipMeUp
{quote} Yes all the answers are in those threads. Look at the equity curve you posted. The scaling is quite weird and makes it hard to read the values but I more or less could read that you started with $1000 and the account dropped to 150. There are more or less 680 trades. So let's make the maths: loss=1000-150=850. loss per trade = 850/680=1.25. Let me guess the value of the spread. 1.2 pips? :-) This strategy is perfectly edgless and bleeds the trading costs. This means that it is no better than flipping a coin. The opposite of a random signal...

ok, PipMeUp, i'm sorry, but i'm still not understanding...spread in this report is 0 .
Please read # Post 4 , i posted 2 link of two report, first one ea only buy , in the second i reversed everything so ea only sell , with the opposite tp and sl .
i want to ask only one thing why i have a different amount of total orders? the signal is the same! so i should have the same order the only difference should be buy and not sell, or sell and not buy. can you understand what i'm saying?
  • #17
  • Jun 22, 2014 4:38am Jun 22, 2014 4:38am
Quoting FerruFx
{quote} That was just an example explaining that reversing a random losing strategy will give you a random losing strategy ...
but i'm not talking about a random losing strategy, i'm talking about a losing strategy, at least in the past , in a backtest
  • #18
  • Jun 22, 2014 4:40am Jun 22, 2014 4:40am
Quoting Nepul
{quote} ok, PipMeUp, i'm sorry, but i'm still not understanding...spread in this report is 0 . Please read # Post 4 , i posted 2 link of two report, first one ea only buy , in the second i reversed everything so ea only sell , with the opposite tp and sl . i want to ask only one thing why i have a different amount of total orders? the signal is the same! so i should have the same order the only difference should be buy and not sell, or sell and not buy. can you understand what i'm saying?
You you took the opposite with the same TP and SL, that's normal to have different result.

Keep in mind that the BUY stopped at SL, in the opposite word the SELL will hit a TP with the value of the BUY SL ...
MT4/MT5 EAs/Indicators/Alerts coder
  • #19
  • Jun 22, 2014 4:41am Jun 22, 2014 4:41am
Quoting Nepul
{quote} but i'm not talking about a random losing strategy, i'm talking about a losing strategy, at least in the past , in a backtest
Your strategy is random ...
MT4/MT5 EAs/Indicators/Alerts coder
  • #20
  • Jun 22, 2014 4:58am Jun 22, 2014 4:58am
Quoting FerruFx
{quote} You you took the opposite with the same TP and SL, that's normal to have different result. Keep in mind that the BUY stopped at SL, in the opposite word the SELL will hit a TP with the value of the BUY SL ...

in the normal ea i should have for example a buy with 20 TP and 30 SL , if a reverse i will sell with a 30 TP and 20 SL , price reach SL or TP in the same way of the normale ea, but why i have different amount of total operation?
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