Here's a million dollar idea

[ChrisPage]

Anyone ever hear of or create a mechanism by which, whatever signal you’re subscribed strat sends, you execute the opposite order?

Strat goes long and stops out, you go short and take profit! And vice-versa!

There seem to be WAY more strats here (or anywhere else) that lose money pretty consistently, with the the occasional short profitable streak. And as many have pointed out, VERY few strats make money over the long haul.

And after dumping -$30K auto-trading that flaming turd ES NQ Day Trades for a month, as it continues to sh!t the bed (fortunately NOT still auto-trading, as it’s now about -$40K, and just now -$3300 more in the time it takes me to write this!), I thought man, I’d be killing it if I was placing the opposite trades!

I’m sure there’s a flaw in my (slightly tongue-in-cheek) idea… Why not follow a losing strat (there’s certainly enough of those, and VERY easy to create) and place the opposite trades?

[SeanKelly11]

Funny you mention this—it actually takes me back! Way back in the late 90s, I was working at a brokerage in Chicago, and we had this one unforgettable client, a wealthy guy from Seattle named Dave. Hard to believe how vividly I remember this! Dave had a knack (if you can call it that) for losing about a million dollars every few months day-trading the Big S&P futures contract, which was $500 a point back then.

What’s wild is I’ve known a couple of people who did exactly what you’re describing. They’d take the opposite side, almost as if the market itself was setting them up. Honestly, it’s kind of what the market seems to do to all of us at some point, right? Fading our moves just when we think we’ve got it figured out!

[SeriousTrading]

@ChrisPage

’m sure there’s a flaw in my (slightly tongue-in-cheek) idea… Why not follow a losing strat (there’s certainly enough of those, and VERY easy to create) and place the opposite trades?

This idea (go long when the trade leader goes short and vice versa) is not new here, on C2.

Unfortunately, it is very hard to implement, because you may still incur substantial financial damages if the system manager makes a killing before going bankrupt.

[SeriousTrading]

@SeanKelly11

They’d take the opposite side, almost as if the market itself was setting them up.

Legendary trader Jesse Livermore used to do that a lot.
In fact he was an expert in that field, fading whatever stock market (or commodity market) tip or rumor he heard.

[ETFTIMER]

Hey Chris,

Your idea takes me back 14 years on Collective2 when ETF Timer was in a drawdown and I received a critical review back then that proposed doing exactly what you mentioned here.

Here’s the review I copied from 12/21/2010:

“12/21/2010 a subscriber
Sorry to say, but this system does not work anymore. If you take the signals as contrarian and do the opposite of what he recommends, then you make money, otherwise, you lose.
Too bad, another system gone bust.”

Since that review, ETF Timer has gained about 230%! I hope the reviewer didn’t actually short it back then! LOL

Here’s the chart for ETF Timer:

ETF Timer

[SeriousTrading]

@ETFTIMER

Since that review, ETF Timer has gained about 230%! I hope the reviewer didn’t actually short it back then! LOL

That’s precisely the point, the subscriber does not know where the take profit point is located, especially if that exit point is dynamic.

That fact alone exposes him to unlimited risk if he tries to fade every buy/sell signal.

Keep up the good work.

[Fabi]

If someone trades through Interactive Brokers, you could program a small tool. You get the autotrade signal from C2, the trade is entered into IB, then the little tool recognizes that it is a trade from C2 and reverses the trade. Of course, the tool must always run together with the TWS (works via a VPS). Additionally, it would cost double fees and the trade from Trade Leader would also be open for a short period of time.

Alternatively, C2 would have to offer web sockets in their API. There you can join as a subscriber and the web socket always delivers something when a trade is entered into.

I have also developed a few systems that had poor performance. If I wanted to take the trades in exactly the opposite way, I would have a problem.
A take profit limit order becomes a stop order. With a limit order I get 100% “my” price. With a stop order I get the “next” price, wherever that is.

[BlackOpzFX2]

This guy does trade battles vs gurus. He signs up for their signals and reverses the trades. It can be profitable but at a reduced gain. Check his channel for more videos.

I tried SWAGGY C’s Forex Signals ($10,000 on the line) - YouTube

[SeriousTrading]

Thanks for the video.

[marcos_gonzalez]

this could be really interesting.

i have read that it is nicely profitable to open short positions (fade) on symbols that have been made to gap higher. i think there are some statistical studies out there if one looks for them.

i have also seen proof that it is nicely profitable to sell iron condors and especially so when volatility is high.

however, from my own backtests and evaluations i have extensive proof that every single widely used indicator out there will lose money endlessly (sma, ema, macd, stochastics, keltner channel, bollinger bands, everything). i also thought of reversing these signals and making a fortune but the reverse signals lose money as well.

it is still an interesting proposition that could merit further study.

[marcos_gonzalez]

Blockquote

Where on earth did you get those “proofs”?

Markets trend, so any simple moving average system should be able to profit from these trends, or at least keep you out of bear markets, if you are long only.

Blockquote

it is easy to backtest strategies on a platform like ninjatrader.

creating a strategy for every indicator and backtesting it should take something like 15 minutes each.

and simple moving averages have some marginal value but definitely will not constitute a profitable system all by themselves.

[MichaelConnor]

I can’t believe I am getting involved in this. I respectfully disagree with your opinion. John Connor, Intermarket Outlook

The Timeless Truth of Technical Indicators: Decoding the Language of the Markets

For over a century, technical indicators have served as the Rosetta Stone for market interpreters, unlocking the secrets hidden within the ebb and flow of price action. While skeptics may scoff, the enduring relevance of these tools speaks volumes about their ability to illuminate the path to trading success. This definitive analysis explores the bedrock principles that underpin their longevity, assesses their efficacy across diverse asset classes, and showcases real-time examples to solidify their status as indispensable trading companions.

The Pillars of Technical Analysis: Unmasking the Human Element

The enduring power of technical indicators rests upon their ability to tap into the very essence of market behavior – the human psyche:

• The Psychology of the Trade: Markets are not driven by cold, hard logic, but by the pulsating rhythm of human emotion. Fear, greed, hope, and despair weave a tapestry of sentiment that manifests in discernible patterns on price charts. Technical indicators, like the astute psychoanalyst, decode these patterns, revealing the underlying emotional drivers of market movements. A sudden surge in volume coupled with a sharp price spike, for instance, might betray widespread euphoria and a potential continuation of the uptrend, a phenomenon readily captured by indicators like the On-Balance Volume (OBV).

• Echoes of the Past: History may not repeat itself verbatim, but it certainly has a penchant for rhyming. Technical analysis operates on the premise that certain price patterns, like the ominous head and shoulders or the deceptive double top, have historically foreshadowed impending trend reversals. By recognizing these recurring motifs, traders gain the foresight to anticipate future price movements and position themselves accordingly, effectively transforming historical echoes into profitable opportunities.

• The Prophecy of the Charts: The widespread adoption of technical indicators can, in itself, become a self-fulfilling prophecy. When a critical mass of traders believes a specific indicator heralds a buying opportunity, their collective actions can propel the price upward, validating the indicator’s signal. This phenomenon is frequently observed with support and resistance levels, where traders anticipate predictable price reactions at these pivotal junctures.

A Universal Language? Assessing Indicator Robustness Across Markets

While the fundamental tenets of technical analysis transcend asset classes, the efficacy of specific indicators can vary depending on the unique characteristics of each market:

• Stocks: The Proving Ground: The high liquidity and volatility of the stock market provide the perfect proving ground for technical analysis. Indicators like moving averages, the Relative Strength Index (RSI), and the MACD are widely deployed to identify trends, momentum shifts, and opportune entry/exit points. Witness the recent “golden cross” in the S&P 500 index, where the 50-day moving average ascended above the 200-day moving average, signaling a potential bull market in the making.

• Bonds: A Subtler Symphony: Though less volatile than their equity counterparts, bonds also exhibit trends and patterns discernible to the trained eye. Indicators like the Moving Average Convergence Divergence (MACD) and Bollinger Bands can be instrumental in identifying overbought/oversold conditions and potential trend reversals. Currently, the US 10-year Treasury yield breaching below its 200-day moving average whispers a bearish sentiment for bonds.

• Commodities: Riding the Waves of Supply and Demand: Technical indicators can be particularly insightful for navigating the turbulent waters of highly liquid and volatile commodities like crude oil and gold. A breakout above a key resistance level in the gold futures market, corroborated by surging volume, could herald a nascent bull market. Conversely, WTI crude oil prices flirting with the upper Bollinger Band may suggest an overbought condition and a looming pullback.

• Forex: The 24/7 Arena: The forex market, with its ceaseless activity and unparalleled liquidity, is a haven for technical traders. Indicators like the Average Directional Index (ADX) and the Stochastic Oscillator are frequently employed to identify trending markets and anticipate crucial turning points. The EUR/USD pair currently etching a head and shoulders pattern on the daily chart could foreshadow a bearish reversal.

• Precious Metals: Safe Havens with a Technical Twist: While often sought as safe havens, precious metals like gold and silver are not immune to price fluctuations. These fluctuations can be effectively analyzed using technical indicators. A bearish divergence between the price of gold and the RSI, for instance, might betray waning momentum and a potential price correction.

• Crypto: Deciphering the Wild West: The nascent and volatile cryptocurrency market presents unique challenges for technical analysis. While traditional indicators can be applied, their efficacy is often debated due to the susceptibility to manipulation and the outsized influence of news and social media sentiment. However, observing patterns like a “death cross” (50-day MA crossing below the 200-day MA) in Bitcoin can still offer valuable clues to astute traders.

Real-Time Examples: Putting Theory into Practice

• Stocks: Apple (AAPL) stock breaking out of a symmetrical triangle pattern with burgeoning volume on the daily chart hints at a potential upward trajectory.

• Bonds: A bearish divergence between the price of the iShares 20+ Year Treasury Bond ETF (TLT) and the RSI suggests a possible pullback in long-term treasury bonds.

• Commodities: A “golden cross” formation in the SPDR Gold Shares ETF (GLD) could mark a bullish trend reversal in gold prices.

• Forex: The GBP/JPY pair rebounding from a key support level with a bullish engulfing candlestick pattern signals a potential upward swing.

• Precious Metals: A breakout above a long-term resistance level in silver futures, accompanied by robust trading volume, indicates strong bullish momentum.

• Crypto: A high RSI reading in Ethereum (ETH) coupled with dwindling volume could point to an overbought condition and a potential price correction.

The Gospel of Technical Analysis: A Disciple’s Guide

While technical indicators offer invaluable insights, they are not infallible oracles. To truly harness their power, traders must adhere to these key tenets:

• Embrace Probabilities, Not Certainties: Technical indicators are not crystal balls, but rather sophisticated compasses guiding traders toward informed decisions. They offer probabilities, not guarantees. Prudent traders always incorporate risk management techniques and consider fundamental factors alongside technical analysis.

• Adapt to the Market’s Mood: The effectiveness of different indicators can wax and wane depending on the prevailing market conditions. Trend-following indicators like moving averages excel in trending markets, while oscillators like the RSI shine in ranging markets.

• The Art of Indicator Selection: Choosing the right indicators is akin to selecting the right tools for a specific task. Different indicators are suited for different trading styles and market conditions. Traders must experiment and discover the indicators that resonate with their approach.

• Seek Confirmation: Prudent traders seek confirmation from multiple indicators before making decisive moves. A buy signal from the MACD, for instance, could be corroborated by a breakout above a resistance level on the price chart.

The Enduring Legacy:

Technical indicators have withstood the test of time, proving their value as indispensable tools for deciphering the language of the markets. They offer a window into the collective psychology of traders, illuminate recurring patterns, and provide valuable insights into potential future price movements. By integrating technical analysis with fundamental analysis, risk management, and a disciplined approach, traders can confidently navigate the complexities of the market and increase their odds of success.

John Michael Connor, " Decoding The Markets," and Intermarket Outlook

[marcos_gonzalez]

the 200 period sma strategy on the spy and the petroleum xop etf. 2019 to date on both cases.

exactly as i stated, smas or emas have some marginal value but will not constitute a profitable system all by themselves.

[marcos_gonzalez]

and this is the code for that strategy on ninjatrader. read the books but backtest and evaluate any hypothesis as well.

#region Using declarations
using System;
using System.Collections.Generic;
using System.ComponentModel;
using System.ComponentModel.DataAnnotations;
using System.Linq;
using System.Text;
using System.Threading.Tasks;
using System.Windows;
using System.Windows.Input;
using System.Windows.Media;
using System.Xml.Serialization;
using NinjaTrader.Cbi;
using NinjaTrader.Gui;
using NinjaTrader.Gui.Chart;
using NinjaTrader.Gui.SuperDom;
using NinjaTrader.Data;
using NinjaTrader.NinjaScript;
using NinjaTrader.Core.FloatingPoint;
using NinjaTrader.NinjaScript.Indicators;
using NinjaTrader.NinjaScript.DrawingTools;
#endregion

//This namespace holds strategies in this folder and is required. Do not change it.
namespace NinjaTrader.NinjaScript.Strategies
{
public class tesmaclosecrossover : Strategy
{
private SMA sma01;

	protected override void OnStateChange()
	{
		if (State == State.SetDefaults)
		{
			Description			= @"te sma close crossover.";				
			Name				= "tesmaclosecrossover";
			Period				= 200;
			Positionsize		= 100;
            // This strategy has been designed to take advantage of performance gains in Strategy Analyzer optimizations
            // See the Help Guide for additional information
            IsInstantiatedOnEachOptimizationIteration = false;
        }
		else if (State == State.DataLoaded)
		{
			sma01 	= SMA(Period);
			
		}
	}

	protected override void OnBarUpdate()
	{
		if (CurrentBar < BarsRequiredToTrade)
			return;
		
		
		if (Close[0] < sma01[0])
		{
			EnterShort(Convert.ToInt32(Positionsize), @"po01");
		}
		
		if (Close[0] > sma01[0])
		{
			EnterLong(Convert.ToInt32(Positionsize), @"po01");
		}

	
	}

	#region Properties
	
	[NinjaScriptProperty]
	[Range(1, int.MaxValue)]
	[Display(Name="Period", Description="period.", Order=1, GroupName="parameters.")]
	public int Period
	{ get; set; }
	
	[NinjaScriptProperty]
	[Range(1, int.MaxValue)]
	[Display(Name="Positionsize", Description="positionsize.", Order=2, GroupName="parameters.")]
	public int Positionsize
	{ get; set; }
	
	#endregion
}

}

[ProfitWeekly]

Start your backtest from 1960 and calculate the average annual return of this system.
As a reminder the S&P 500 started in 1957.

[marcos_gonzalez]

these are the results for the 200 period sma strategy on the cme es contract on 5 minute bars (the spy results are even more horrendous). just as i stated, the losses are endless, and reversing the signals will also lose money.

[GSPTrader]

This is an interesting discussion. The reason that reversing a losing system also produces a losing system is the effect of compounding. Both TQQQ and SQQQ decay even though both are based on the QQQ index.

A system that produces an expected profit >.5 needs to have an expected gain >.6 to have a chance of showing a positive compounded return. An expected gain of 60% vs an expected loss of 40%shows returns of:

arithmetic (1.60+(1-.40))/2=1.10
compounded 1.60x(1-.40)=.96

How many systems have an expected gain (edge) greater than .6?

[ProfitWeekly]

@GSPTrader

The reason that reversing a losing system also produces a losing system

Not necessarily.

Say a trading system generates 12 trades a year (on average) in the Futures market but produces a $100 000 per year (average) loss, who is earning that $100K/year money, then?

[GSPTrader]

The person gaining the $100K may have other losses. The point is that it is difficult to produce compound gains for any individual trading system.

[ProfitWeekly]

@GSPTrader

The person gaining the $100K may have other losses.

So a trader (or group of traders) did earn $100K per year - on average - betting against the losing trader (system), yes?

@GSPTrader

The point is that it is difficult to produce compound gains for any individual trading system.

Care to elaborate please?