Just something I’ve been wondering here. Isn’t it possible for a retail trader to find an unprofitable strategy via an EA, get a trade copier to execute the reverse trade for every order and in the end, become a profitable strategy?
Essentially, when a trade is stopped out, it means your stop loss was hit and your take profit wasn’t reached during that period of time. So if you flip it around, it means your take profit would have been hit and your stop loss wouldn’t have been hit during that period of time.
Does that make sense? Just been wondering about this.
probably not. papertrade Past failed trades to know for sure. It might depend on your trading plan. Only one way to know for sure and that is to test it yourself. Again I highly doubt it. please come back and post your results. I think you are the only one who can answer this question because it depends on your trading plan which is unique. Your looking for an easy yes or no to a complicated question.
That is just my two cents .
Ah what an idea. Seems so logical and simple. Except that thing called spread reverses everything and puts the ball fairly back in the markets favor. Then you go about re-engining things and the result is the same. So you kick the cat out of frustration.
Well, kinda yes… This is actually what some brokers are claimed to do, the so called A and B books. Where the winners go to A books and broker either hedges their trades or lets them thro to market and with the B book traders they take the opposite side of the trade.
On the retail side, I would imagine it to be more difficult. Mainly because of the spread, but all so because most of the time it’s not the systems that looses, but the traders, by trading the system recklessly, using too much leverage, letting loosers run and cutting winners short etc…
Its not as simple as reversing every long signal to a short signal or vice versa. Just because one strategy has no edge it doesn’t automatically mean the opposite does, both could be successful on a random basis - which means bankruptcy in the long term.
Also, if your wins depend on price following a trend, and the uptrend is not sufficiently strong, that doesn’t mean there is a downtrend in place. If your wins depend on an upward break-out from a range, the failure of the bullish break-out doesn’t mean there is a bearish break-out now in progress or even imminent.
However, there are elements of converse thinking that could be helpful. If you are buying after prices rise or at a new high or at the high close of a bar, it might be better to buy after prices fall, or after a new low or at the low close of a bar - whatever your entry pattern might indicate. You’re still going in the same direction of course, but you might have shifted the probability of continuation in your favour, while also getting a discounted entry price.
Majority of EA’s with wise Money management (i.e. risking 1% from deposit per trade, etc.) will keep you at Breakeven level on long enough distance. Its not about EAs that make you losing but improper money management, i.e. you got a killing shot by a row of losing trades, or one trade that you didn’t set your stop loss to.
By making reverse trades it’ll simply bring you same results on distance - breakeven level minus spreads (other costs)
You can try an experiment launching EA on one platform and opening exactly reverse trades on second platform. On medium-term distance you can be profitable with EA (or with reverse trades) but on long distance they will converge to their mathematical expectation - zero profit, minus trading costs.
Thanks for the reply guys. Alright spread is usually the most sensitive when trading on shorter term. For larger trades that have a stop loss of 100 pips and a take profit of 100 pips, the spread difference accounts for a really smart part of that your average win and average loss. Assuming a risk : reward of 1 : 1, it turns out to be roughly the same.
I’m thinking of a concept here : if a person creates an EA that trades everytime stochastic turns up (buy) when it is below 20 or turns down (sell) when it is above 80. Risk to reward is 1:1. You know, simple stuff. If he realizes he has loss over the past year on a consistent basis, that means that his stop loss is being reached but not his take profit more often than not, right?
If we just reverse this, wouldn’t it mean his take profit will be reached more often than his stop loss?
No MEX, that kind of crude entry is going to give random rewards, and a 1:1 r:r only reinforces this. It would be possible for such a poor entry signal to be made profitable but only if the winners that reach +100 are allowed to run on further so that you end up with a positively weighted total gain against a fixed total loss.
e.g. In 100 trades you get 50 losers that hit the SL before they hit the TP. But if you push the TP to +150 you might get 20 that get there. You might get a few runners that go all the way back to -100 but a trailing 100 pip stop would limit that. But better than a fixed +100 or +150 TP would be a TA-based TP - so basically you stay in the trade for ever until the TA says your chances of further significant gain arenegative. So you could even get 1 trade in 100 that goes to +1,000: at least you would have the possibility of that, if you use a fixed TP that possibility definitely reduces to zero.
Slightly unique concept but it really won’t work, as ultimately it’s about your mind and your priority, if you reverse it then you still will have similar mindset and that’s where things work. It’s funny that many traders continuously lose trades with certain strategy, but if they try opposite they still lose. So, I am not sure if these things can really work!
Imagine you buy at 1.0010. Stop loss is 1.0000. Take profit is 1.0020.
If you get stopped out, it means your stop loss of 1.0000 was reached and not your take profit of 1.0020 right?
Imagine this simple approach caused you to have a losing strategy that loss 1,000 pips over 100 trades.
If you simply traded the reverse (take profit swapped with stop loss target and sell instead of buying), you would have made 1,000 pips over 100 trades?
I’d say that it is possible to find an EA which you can always do the reversal of and win. However, the issue with these EA’s is that they are built on the premise of winning not losing. Why do I mentioned that? Well because an EA can many losses but the primary loss an EA has is lack of understanding and respect of price action. Most people trade “support/resistance” but fail to realize that neither name can be given to a price unless the price has “reacted” at that level in the past.
One of the best Ideas which I have taken from sites like this over the years is the use of variations while trading. Variations are important because it means you have factored in the majority of the outcomes of a “formation” and now you are ready to take what ever side of the trade if need be with 0 bias. Variations has really made a difference in my trading.
Yes it does make a lot of sense. These guys don’t know what they are talking about. I have been doing these for last 4 months. Very profitable. Only thing you need to make sure is the losing EA avg losers greater than 14 to 17 pip. That should take care of the spread. Just find really bad EA with largest avg loser. If you got one I can test it for you.