Yes, but irrelevant to the discussion.
Simple math. See above example.
We are not talking about compounding anything.
The question is : Can we make money reversing the entire logic of a losing system?
The answer is yes, in most cases.
You are correct if you are not compounding the arithmetic results of a losing system. But, your investment size will diminish as the losing system decays. As soon as you try to compound your profits, you will experience the same failure.
Decays=loses value. A $100,000 system with a $10,000 loss is now a $90,000 account.
Trading system XYZ loses $100k a year on average (12 trades a year), so betting against this losing system will produce a $100k per year profit on average, yes or no?
Your hypothetical does not apply. It could be a $ million account. It could be ahead $300,000 before losing $400,000 for a net loss of $100,000.
Or it could earn $700 000 or much more in 2025 and beyond (instead of the “usual” $100k), betting against that same losing system, you failed to mention that other possible scenario.
Anyway, have a good weekend, we can continue that interesting discussion next week if you like.
To sum it up, this is the same con being used by mutual funds and brokerage firms forever: confusing arithmetic returns with compound returns.
You guys are beating a dead horse. “Trade or travel.”JMC
the first post on this thread posed that reversing or fading a losing strategy could be a massively profitable strategy in and of itself.
there are some anecdotes and comments around such an idea.
however, i will clarify the statements i have made and the supporting evidence i have provided.
i first stated that some " fading " strategies are definitely profitable, and even tradeable.
however, i cannot assert whether the losing strategies here in c2 can be reversed profitably or not without doing the due diligence.
and then i stated that all the most widely used indicators will lose money, and “fading” those indicators will also lose fortunes.
the 200 day sma strategy loses money on most symbols on daily charts and it loses fortunes on smaller time frames on all symbols. i have provided the backtests to prove this. all the other indicators generate returns just as bad or worse.
now, the comments that were posted after my backtests went significantly off topic and fail to understand what constitutes a winning strategy and a losing strategy. i won’t rectify those misunderstandings. i will just point out that pretending to apply bayesian, cross sectional analysis to financial data is a fatal failure that can be easily understood by anyone who bothers to check how does cross sectional statistical analysis work.
A column for Correlations to the S&P500 maybe could be added to the Grid for each system. The greatest negative correlation systems could be ripe for implementing an opposite trading regime. Good luck. 
The S&P 500 is negatively correlated to Bonds for instance, so how is that going to help you implement a reverse system ? Keep in mind that we are only talking about reversing the trading rules of a losing system.
Correlations can change over a specific time periods. For example, 2022 BOTH stocks and bonds went down.
I was referring to an equity trading system that had a HIGH negative correlation to the general stock market in a bull market.
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Absolutely, that’s why the trader should never rely on them, at least in the short term.
I hear you, but how can implement such a strategy then, in real time trading?
I would not try it. Not my cup of tea. I was just pointing out ONE of perhaps several criteria.
The idea still has some merit : You wait until two negatively correlated assets become positively correlated beyond a certain point (historically speaking) and then you bet that they will become negatively correlated again.
I build algorithms unfortunately that’s not the way it works have tried it many times on failing strategies reversing them fails just the same…
Could you give us some examples please?
Thanks.
