Looking for the Worst Automated Systems

I'm just glad that my real (live) system, not the ES one, got through this last week without losing money. Broke even for the week in other words. This system trades the YM.

IMO the way forward with purely mechanical systems is to see when they do well and when they do badly, and then layer logic on top of the main trading logic to say "take this trade" or "pass on this trade". This can then optimize the returns and minimize the drawdowns. So, you still have a mechanical system, but it's then a much more intelligent one.

More details can be provided if anyone is interested.
 
Quote from nitro:

This is incorrect, since clearly two-valued logics is a limiting case of Fuzzy (infinite valued) logics.
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Since the market is a fuzzy system, the limiting case of two-valued logic cannot describe it, you need multi-valued logic.

Quote from nitro:

Too much hand waving, so I cannot follow what you mean.
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I tried to make it simple so a dummy can understand it. Sorry if I did not succeed.

Quote from nitro:

Markets don't fade anything.
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Read carefully, I said market makers.
 
Quote from intradaybill:

Since the market is a fuzzy system, the limiting case of two-valued logic cannot describe it, you need multi-valued logic.
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I am not suggesting that multi-valued logic are not valuable. I meant your blanket statement that two valued logic is not applicable to markets can't be true if you believe in multi-valued logic. Infinite valued logic gives the same result as two valued logic when the set of membership is true and false.

I tried to make it simple so a dummy can understand it. Sorry if I did not succeed.
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I understood the words. But the generality of the statement made it, incomplete. However, I do not fault you for that. Who has time to go into something deeply as something deserves on a public forum? Not me, not anymore.

Read carefully, I said market makers.
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Sorry, missed that. However, MMing is no longer pure taking down whatever comes your way. Most MMs today are some sort of hybrid, if they weren't always.
 
Basically what happens is in a losing system, the system eventually gets a margin call after enough losers.

Reversing the system will usually just give you a margin call from one of the previous winning trades.

In both cases no proper money management, so neither system wins long term.

For example, in C2, a few times, you see a system make $ 500,000 to $ 1 million or more and then blow up. If you were reversing the system, could you take a $ 1 million draw down before finally making a profit? Probably not.
 
Quote from oraclewizard77:

Basically what happens is in a losing system, the system eventually gets a margin call after enough losers.

Reversing the system will usually just give you a margin call from one of the previous winning trades.

In both cases no proper money management, so neither system wins long term.

For example, in C2, a few times, you see a system make $ 500,000 to $ 1 million or more and then blow up. If you were reversing the system, could you take a $ 1 million draw down before finally making a profit? Probably not.
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It's a real catch, here.
 
Quote from shortie:

the broker uses the inverse of your system to consistently make money. so inverting a losing system is a valid approach. one just needs to know to invert it correctly.

the market maker also uses a reversed version of your system and also makes money.
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The entire concept of "inverting" a losing system...
In order to create a winning system... is a logical fallacy.

Why?

Because if you leave out all transaction costs...
It's just as hard to create a system that consistently loses money...
As one that consistently makes money.

There may be some exceptions to this...
But I guarantee you the exceptions cannot be "inverted".

And Market Makers don't have a "system"...
They simply profit from the bid-ask spread...
As long as they maintain a market neutral Portfolio...
And do a lot of other classic trading on the side.

The people in this thread who believe this "inversion" is possible...
Have a very weak grasp of logic and stats and randomness...
As applied to financial markets.
 
Quote from DeeDeeTwo:

The people in this thread who believe this "inversion" is possible...
Have a very weak grasp of logic and stats and randomness...
As applied to financial markets.
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Inversion is simple. There is not any issue about inversion. As someone else put it brilliantly, it is an issue about consistency.

It is as hard to develop a consistently losing system as it is to develop a consistently winning system.

A consistently losing system becomes a consistent winner when properly inverted.

Anyway, I sent an email to Michael Harris who has developed a program I am using to find patterns in historical data that I was thinking of inverting its output and I am waiting for his response about this since he is considered very knowledgeable about such issues.
 
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