Opposite

if I write a strategy that loses money using historical data, can I reverse it and make a profitable system?

 

yeah, if you dont reverse the costs in the profit calculations (slippage, commissions etc).

 

wow, this is so cool, automated trading and backtesting is the way to go haha... anyone could offer me some Tips for starters?

 

send crgarcia a PM, his rectal nerve is attacted to his optic nerve and does reverse engineering.

 

this is exactly what some "trader/quant/professor" I used to work with said. i thought the guy was kidding at first. he said "just change the buy(sell) limits to sell(buy) stops and we'll use it as a breakout system".

 

Not necessarily. You'd need to try it in reverse. And even then you wouldn't know for sure -- need to take into account that you're just curve-fitting ("lucky"), especially for this type of case.

 

Unfortunately, unless you analyze the trades to see what part of the strategy did not work, you will not know exactly what did not work.

For instance, if your Stop Loss or Trailing Stop Loss was too small, you may have just gotten stopped out too quickly and then when the stock went back up, you just could not participate in the gain.

Ed

 

So why is it that you did not think of the reverse in the first place?

The market will reverse your reverse and you will end up with the original making money walking forward.