Fading a system....

Discussion in 'Strategy Development' started by amigasearch, Nov 17, 2003.

  1. Ok. A burning question thats been on my mind. Please help!
    I have been creating and designing "systems". Just simple rules, over three months data. Looking at different results, I will decide which one to trade.

    Some systems preform better then others - positive equity curve, and such (passes all by the book rules).

    But, there are some systems, which look absolutely horrible. They produce an equity curve that would wipe Bill Gates out in a month or two.

    So, you all know where I am going (if you read the header of the thread) why not reverse the signals of this system, and trade it from the other way?

    I am in the precept that there are strategy traders out there who pour over data and methods until they find the right one - is there a time that they just decide on the opposite of the worst one they have ever seen?

    This makes logical sense, and I am wondering if this is valid in any way, and worth persuing.

    Please help out. Thanks.
  2. tell me more about your system ..we are always looking for talent...
  3. Hi. My systems vary. I have many.
    Do you develop systems? If so, then could you tell me - if you create a system on a "hunch" or a theory, and it turns out from the offset to be completely not what you intended (for profitability) would you consider reversing the buy / sell signals and trade against it?
    This will help me understand this better. Thanks.
  4. Im with a very succesful futures firm...we work with a number of successful system developers , and are always looking for new talent. We can assist with financial backing and programming expertise. The key factor we also have..is a top notch sales and marketing force that is selling close to 100 new systems per month..obviously we want our client base to diversify...if you would like to sell/ market your system , we can provide a solution...provided that you have a high quality product.

    let me know what your goals are ., and perhaps we can talk more.
    I would prefer to see a proven track record of the suystem
    ( statements ) so we can tell its validity. hypothetical backtested
    figures do not do much for me ...

    thanks, Curtis
  5. Thanks for that. I am not in this to sell anything to you.

    It sounds like you know about systems development (based on your posting).
    Any thoughts on my question? I would rather have that answered.
    Again, have you ever come across a system that preformed so poor that you reversed the signals, and then went on to trade it with success?
  6. all of the time !!!

    its the old 20/20 hindsite theory

  7. I don't think you can just fade a losing system in order to make money. If you could, then you would be rich because there are so many losing systems out there. One reason I don't think you can do it is simple. If the method has poor entry timing and/or stop placement, then you will potentially be taken out by noise regardless of the direction you enter at the time of the signal. Among other reasons, I think it is the noise that will be the fly in the ointment of your fading idea.
  8. funky


    very well said. a 'good' trading system puts positions on in the most efficient place there is. by efficient i mean the price which contains the highest signal-to-noise ratio. that's why the system is good: it minimizes its own 'confusion' in determining trends.

    a 'losing' system tells you that it is not accomplishing this. thus, reversing it will do no good. make sense?
  9. Thanks - your post makes sense, and will help me to improve what I have now.
    By efficient entry and exits, are you referring to the efficientcy of my entry / exits as calculated by efficiency formula (this is explained in a book I have by Stridsman)? This will lead me to understand this point better? please excuse my lack of knowledge - testing systems is new to me (and very complex, I might add!).
    #10     Nov 17, 2003