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Strategies & Market Trends : Systems, Strategies and Resources for Trading Futures

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To: Tom Trader who wrote (7056)	10/22/1998 7:59:00 PM
From: Patrick Slevin	Read Replies (3) of 44573

<Not sure that I fully understand what you mean when you say this. > and <I agree with you about the correct inverting of variables -- but my point is why do that at all. Just buy when the system says to sell and sell when it says to buy--then the inverting of variables would not be a factor. > Obviously difficult to explain my rationale in this media. Let me give it a hypothetical shot. You and I develop roughly the same system but I have a variable that makes mine profitable. Even now, I doubt that this will get my thoughts across but what the hell... Skip that. You have a system that loses money right and left. You decide to trade it inverted to the signal. The system says to buy and drops 50 S&P points. The system reverts to short. Now, if you were trading the signals backwards you would have been short for 50 but now? Well per theory you have to go long. Why? After all, the system was designed to make money, and just lost 50 points. So it goes short. Should you go long? A well designed system may still be short. But, per the reverse theory you would go long. Perhaps your system is just late catching up with the proper direction. Perhaps if it were designed correctly it would still be short. But, the tactic you are looking at is to go long the short signal. The system may never make money on it's own merits. It just may be lagging the "proper" signal. Trading against it though, has no basis in reasonable thought. Just because it lost money in error does not mean it won't make money the same way. If it does not work the way it was designed it can't be expected to lose money either. The system, like it or not, just does not work. Trusting it to do something the exact opposite of what it's designed to do could be just as fatal as the other way around. It's broke, to put it simply. We designed it to do one thing and it does the opposite. Imagine if you had a car that was designed to stop when you stepped on the brake. But it stopped when you stepped on the gas. Would you drive it, presuming everything was just hooked up backwards?

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