Long and short signals overlap - What to do?

[SomeYoungGuy]

I have a strategy that uses a stoploss and profit target. It calls both longs and shorts, and sometimes these overlap. Example:

Let's say I get a long signal at 100, my plan says price has a 50-50 chance of going to 80 or to 140; I either make 40 or lose 20, I like those odds, so I enter long.

Price moves to 120, then I get a short signal, again a 50-50 chance, but this time my plan says price will move to 110 or 125; I either make 10 or lose 5.

The dilemma; do I take this short signal? If I take the short and it wins, then price is at 110. Do I reenter my original long? Then my risk/reward is down to make 30 or lose 30 still on a 50-50, that's not so good. If the short loses, do I reenter? Price would be at 125, I missed 5 winning points of my original bet, and my risk reward went down to make 15 or lose 45, and that's terrible for a 50-50.

If I get flat each time I have conflicting signal I run the risk of being whipsawed and severely cutting my winners short. Is this made up for be sometimes being right on my reversal signal? Also, every time I reverse, I eat a bid-ask spread and a round trip of commissions.

I'm considering opening two accounts, one for longs only, one for shorts only. This sounds smart and retarded at the same time.

This smells like a problem that has a perfect game theory answer, but I can't figure it.

 

[trade4ever2day]

The trend is your friend.

 

[clambill]

I had two methods that did contradict themselves at one point. I had temporarily developed a strategy to flip from long to short depending on the circumstance. Eventually, I ended up modifying one of the methods and realized it was better than the other so I dropped the other one.

I've also had various opinions on whether I should follow the trend or not. Overall, over time I ended up choosing to go with the trend.

I do have two accounts though but partly to trade different time frames or even varying amounts of money.

 

[NoDoji]

Quote from clambill:

I do have two accounts though but partly to trade different time frames or even varying amounts of money.

This is intriguing. Every trend contains pullbacks. By siding with the long-term trend in one account, and then counter-trend trading the pullbacks short term in another account, it seems you significantly reduce overall risk and profit short term while still allowing a winner to run.