Inverting unprofitable systems to generate a profitable one

 

I built a system, very unprofitable. The exit point is based on fixed take profit and stop loss. Then, I decided to invert the system waiting for a profit. But, not like I was thinking, the system still as the same.

If the trade don’t have fixed take profit and stop loss, ok, it’s very understandable that inverting an unprofitable system could not turn to profitable one. But I cannot understand when the take profit and stop loss are fixed.

I would love see any explanation for that. I cannot understand why it happened. To me it has no sense.

Thanks,

rodrigosm

 
rodrigosm:

I built a system, very unprofitable. The exit point is based on fixed take profit and stop loss. Then, I decided to invert the system waiting for a profit. But, not like I was thinking, the system still as the same.

If the trade don’t have fixed take profit and stop loss, ok, it’s very understandable that inverting an unprofitable system could not turn to profitable one. But I cannot understand when the take profit and stop loss are fixed.

I would love see any explanation for that. I cannot understand why it happened. To me it has no sense.

Thanks,

rodrigosm


even TP and SL is fixed .. if there are more Losses then Wins .. still unprofitable!

Try Changing to variable SL/TP for example depends on ATR or StdDev.

And for shure - change your entrys :-)

 

You are losing the spread (and maybe also commission) one every trade. This is the reason why the inverted system is unprofitable also.

Count the number of trades it has made, multiply it with the spread and see what I mean.

 
EADeveloper:


even TP and SL is fixed .. if there are more Losses then Wins .. still unprofitable!

Try Changing to variable SL/TP for example depends on ATR or StdDev.

And for shure - change your entrys :-)


If the entry is all the same, and the trade only exit a position if it reaches the TP or SL. So if I have a system with 77% loss trades, when I invert this system, I should wait for the same data a 77% winning trades. If the trade was hitting the SL, now it is hitting on the TP.

 
7bit:

You are losing the spread (and maybe also commission) one every trade. This is the reason why the inverted system is unprofitable also.

Count the number of trades it has made, multiply it with the spread and see what I mean.


Ok, how can I take out the spread on the simulation?
 
rodrigosm:

If the entry is all the same, and the trade only exit a position if it reaches the TP or SL. So if I have a system with 77% loss trades, when I invert this system, I should wait for the same data a 77% winning trades. If the trade was hitting the SL, now it is hitting on the TP.


When you invert the system your entry is NOT all the same.

On original system you entered a long position at the ASK price, when you inverted the system you now enter the market as a short position at the BID price.

We can do this all day, every one of us here has played with this idea at some point in our past and the conclusion is always the same. The reason "inversion" fails is because its not really an inversion, the entry and exit prices are really changing by an amount equal to the spread and this does make all the difference. (and if you aren't changing the prices for entry and exit to account for Bid vs. Ask price differential then you aren't inverting anyways, you have to be changing the entry and exit times as well)
 

Ok, I understood, and I agree with your point, but suppose that the average movement taken is something big, the spread doesn’t make too much difference in the results. In that case I would wait success inverting the system

Agree?

Thanks for help

 
rodrigosm:

Ok, I understood, and I agree with your point, but suppose that the average movement taken is something big, the spread doesn’t make too much difference in the results.

Start developing systems for H4 and upwards and forget the M1 charts.
 
rodrigosm:

Ok, I understood, and I agree with your point, but suppose that the average movement taken is something big, the spread doesn’t make too much difference in the results. In that case I would wait success inverting the system

Agree?

Thanks for help


True, but you also must consider the asymmetry of the market volatility, you can still get stopped out with your inverted position placement before reaching the takeprofit price.

I recommend you run a backtest in visualize mode with and without order inversion to see what I mean.
 
7bit:
Start developing systems for H4 and upwards and forget the M1 charts.


Yes, I'm using 1 H.

1005phillip:

True, but you also must consider the asymmetry of the market volatility, you can still get stopped out with your inverted position placement before reaching the takeprofit price.

I recommend you run a backtest in visualize mode with and without order inversion to see what I mean.

I already did that, but the result was disappointing. For this reason I started this discussion.

I understood what you mean, but to me it makes no sense – “you can still get stopped out with your inverted position placement before reaching the takeprofit price” – since, if it was true, it would reach the take profit before stop on the original position.

 
rodrigosm:


Yes, I'm using 1 H.


I already did that, but the result was disappointing. For this reason I started this discussion.

I understood what you mean, but to me it makes no sense – “you can still get stopped out with your inverted position placement before reaching the takeprofit price” – since, if it was true, it would reach the take profit before stop on the original position.


did you watch it during backtest with the visual mode enabled?