If somebody has an experience of copying losing strategy with reverse, please post your opinion in this thread.
If somebody has an experience of copying losing strategy with reverse?
- Thread starter HENRYFOSTER
- Start date
I do it all the time w my option positions. I would zero in on a spread ex. ATM condor, and I would backtest and see it win 35% all the time- then I get to work- taking filters in/out, adding,etc. THEN. I am like .. what am i doing! just go with the initial bad filter and shift strikes to find the sweet spot of this bad strategy and turn it into a good one.
EDIT.. sorry I did not look that this was a forex thread. However same logic holds... i've done backtests on volatility band trading where I try to buy up breakouts and it produced dismal results on the main fx pairs. Then a seasoned Fx trader tells me these main fx crosses revert all the time so I am like ok, sound like i just gotta reverse the signals..
EDIT.. sorry I did not look that this was a forex thread. However same logic holds... i've done backtests on volatility band trading where I try to buy up breakouts and it produced dismal results on the main fx pairs. Then a seasoned Fx trader tells me these main fx crosses revert all the time so I am like ok, sound like i just gotta reverse the signals..
What you really want is retail flow. You can buy the average position of clients from retail brokers and trade the opposite, that works quite well but only in FX.
I have tested many strategies that perform fairly consistently poorly with both regular and reversed signals.
Sure henry... so let's say I want to model a strategy of a butterfly that pays best when it settles in 2 weeks at the entry price. Ex SPY=$200, I wanna model expected return on 190/200/210 fly BUT the backtests indicates that 55% of the time it settles a tad higher ie $205-207 . I would then adjust flies at the $205 peak. "Stock market wizards" book by Jack Schwager (John Bender chapter) illustrates it better. something to do with modelling out the prob distribution of the stock and using options to maximize it.
Yep - during oil's big bull run and collapse between 2004-2009 a trader with $100K account could've become a millionaire by buying Donchian breakouts to 25,50,75,etc day high/lows and using an xx day exit.....however, if they would've continued to follow that strategy between 2010-2016 they would've lost every penny they made, plus their initial $100K.
I think the lesson here is that if you want to trade Donchian breakouts on the daily chart, you better make damn sure that there is a big bull market coupled with hysteria (think Bitcoin) in the market you are applying it to. Understanding what type of strategies work in the market you are currently in is key.
