interesting idea for a trading system . . .

Discussion in 'Strategy Building' started by ehsuhuang, Aug 4, 2002.

  1. Hi everyone,

    This is my first post, so go easy. (about myself: I'm fairly new to trading, been trading the Forex for the last 6 months, and I've been reading these boards for the last couple of weeks, and thanks everyone for the great advice so far!)

    I got this idea while reading an archived post about personal equity curves, and "possibly shorting yourself."

    My idea is: take a very simple mechanical system (i.e.: buy when the price closes above the 10 day moving average, sell when it closes below the 10 day moving average). On back testing with something like tradestation, you find out that this very simplistic system totally sucks! You constantly lose money and get whipsawed.

    Now, what if you took this very same system, but just programmed it to do the exact opposite: like selling when price closed above the moving average, and buying when price closes below the moving average.

    Would this system end up making money???
    Has anyone ever backtested this kind of thing before? (I know that I must not be the first to think of this hairbrained idea.)

    I don't have Tradestation, or Wealth-Lab or anything that can systematically back-test a trading system, so I was wondering if anyone else out there has tried it.

    It doesn't make very much intuitive sense, and it may cause psychological strain trying to do the opposite of what you think you should do. But on second thought, it seems to make so much sense. Instead of spending years tyring to formulate that one consistently winning system, why not just take any number of consistently losing systems, and just program in the opposite?!?

    Could this work?!?
    P.S. If it does work, I'm gonna market it like crazy as the next holy grail on the internet ; )

    But seriously, would it work?
    thanks and good trading to all,
  2. As a possibly way to prevent getting very large losers (when the there is a very strong trend), you might just exit, or stay out whenever the ADX rises above a certain threshold.

    Like I said before, I can't really test this system, but on a quick eyeball of some daily charts, it does show some promise!

    good trading,