Discussion of article "Reversing: Formalizing the entry point and developing a manual trading algorithm"
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New article Reversing: Formalizing the entry point and developing a manual trading algorithm has been published:
This is the last article within the series devoted to the Reversing trading strategy. Here we will try to solve the problem, which caused the testing results instability in previous articles. We will also develop and test our own algorithm for manual trading in any market using the reversing strategy.
For already two articles (Reversing: The holy grail or a dangerous delusion? and Reversing: Reducing maximum drawdown and testing other markets), we have been studying the Reversing trading strategy. We considered the use of the trading strategy in different markets, found the most suitable markets and formalized the basic rules for proper reversing. The subject seems to be fully discussed. What else can be written about the reversing technique? However, there is a problem which we mentioned earlier, but the solution to which we never approached.
The problem is connected with the entry point, which is not formalized in our strategy. It means a deal entry can be performed at any moment. The result of this can be unpredictable. Someone may have a deal closed by Take Profit. Another trader may enter 5 minutes later and get the entire chain of deals closed by Stop Loss.
That is why, all tests performed in previous articles can be considered reliable only for the cases, when you decide to enter exactly on the same historical day, hour and minute, as was done in the Strategy Tester. The same profit growth cannot be guaranteed, if you enter a trade a minute earlier or later.
So, we need some rules to determine "when to enter a deal" and "the entry direction". Such rules should not worsen our profit charts much. Let us try to find such rules.
Author: Roman Klymenko