How To Lose

[DionysusToast]

I was thinking it would be interesting to discuss methods of losing at trading.

There's a theory that says if you lose consistently, then all you have to do is fade yourself and you'll then win consistently.

I'd like people to put forward ways of losing consistently that cannot be reversed. Partly it's a mental exercise but also it's to look at losing behaviours, which would benefit noobs.

Someone else want to go first?

 

[asiangambler]

thats equivalent of asking how to win consistently

 

[VielGeld]

Flip a coin for direction. Set stop at 5:1 ratio to take profit.

It doesn't take much to lose.

 

[asiangambler]

Flip a coin for direction. Set stop at 5:1 ratio to take profit.

It doesn't take much to lose.

if thats the case, flip a coin, but bet the opposite, set stop at 5:1 ratio to takeprofit. so it would be it doesnt take much to win?

 

[DionysusToast]

thats equivalent of asking how to win consistently

Not at all.

You can lose consistently by:
- moving your stops back out of the way to stop them from being hit
- setting unrealistic targets, ensuring the market comes back before you hit your targets
- doubling up to recoup losses on prior trades

A system that had these as components would lose yet it could not be 'reversed' to turn it into a winning system.

 

[brewski1984]

I have a feeling a lot of people lose money just because they don't realise the cost of trading regardless what system they use.

The thing I noticed early on was that a loss would always be the full 2% or whatever I risked but a win would reach say an equal 2% profit then pullback to say 1% profit and I'd take the 1% because I didn't want to lose the profit. I'd need 2 winners for every loser just to breakeven.

 

[tomorton]

Trying to pick tops and going short, trying to pick bottoms and going long - BEFORE confirmation of the reversal.

 

[DionysusToast]

I have a feeling a lot of people lose money just because they don't realise the cost of trading regardless what system they use.

The thing I noticed early on was that a loss would always be the full 2% or whatever I risked but a win would reach say an equal 2% profit then pullback to say 1% profit and I'd take the 1% because I didn't want to lose the profit. I'd need 2 winners for every loser just to breakeven.

Indeed - and the 'obvious' answer would be to let the trades run - but what happens when you make 1.99999% profit and it comes back and hits your stop?

The skill in that case would be to recognise when a trade is no longer going your way. That may mean cutting it when it's slightly profitable, slightly unprofitable. It might mean cutting trades before you reach your stop or target.

It's a tough nut to crack. Of course, you could always just let the trades run to the stop or target without interference...

 

[DionysusToast]

Trying to pick tops and going short, trying to pick bottoms and going long - BEFORE confirmation of the reversal.

But why is that?

 

[tomorton]

Well, before a reversal in a trend is confirmed, it's still a trend. Getting short into an uptrend is like driving south on the north-bound carriageway - a dangerous shortcut.

 

[avano]

thats equivalent of asking how to win consistently

You would think that a guy with 4,000 posts who is also a vendor would understand that. Apparently, he doesn't. That should ring a bell as to what kind of people assemble in here. This is very basic and who knows to how many newbies this particular individual has possed as an expert and has misguided them. More important is the fact that these people do not feel any shame at all. There is another one here by the name alphadude. A serious nutcase who pretends to be knowledgeable.

 

[DionysusToast]

You would think that a guy with 4,000 posts who is also a vendor would understand that. Apparently, he doesn't. That should ring a bell as to what kind of people assemble in here. This is very basic and who knows to how many newbies this particular individual has possed as an expert and has misguided them. More important is the fact that these people do not feel any shame at all. There is another one here by the name alphadude. A serious nutcase who pretends to be knowledgeable.

Sigh....

I will explain one more time - let's se if we can discuss this in a civil manner like adults, shall we?

There is a common misconception that a losing system can be reversed and turned into a winning system. This is perhaps true of some 'mechanical' systems but it is not by any means a hard and fast law.

The idea is that if you can consistently lose, then you should be able to fade yourself and consistently win. The problem is that some things are not reversible.

Some activities will cause you to lose money even if you flip your buys to sells and vice-versa.

The example I gave earlier was one of sloppy trade management. This will cause losses but isn't something that can be reversed.

Of course, I would love to hear alternate opinions.

 

[alphadude]

I have a feeling a lot of people lose money just because they don't realise the cost of trading regardless what system they use.

The thing I noticed early on was that a loss would always be the full 2% or whatever I risked but a win would reach say an equal 2% profit then pullback to say 1% profit and I'd take the 1% because I didn't want to lose the profit. I'd need 2 winners for every loser just to breakeven.

quite true.

Reversing a losing system's signals works only if you assume no transaction cost (spread, slippage and commission; listed in order of importance)

To address this issue; you need to trade a long term time frame; such as 4H, 8H, daily and above; this way transaction cost get smaller and neglegted when compared to PNL.

Also; it depends on the type of trading system. i.e.; in Mean Reversion; the slippage is always positive; because you are fading the momentum. If you reverse a losing mena reversion strategy; there will be large proportional slippage that you may overlook in your backtests.

Vice versa for Momentum strategy. Reversing it will get you some positive slippage.

 

[tar]

very simple , keep buying at the the ask then selling at the bid over and over again you will lose , reversed strategy : buy at the bid then sell at the ask ( market making ) .

 

[DionysusToast]

very simple , keep buying at the the ask then selling at the bid over and over again you will lose , reversed strategy : buy at the bid then sell at the ask ( market making ) .

lol!

Very good indeed! :clap: :clap: :clap:

Irreversible...

 

[tar]

lol!

Very good indeed! :clap: :clap: :clap:

Irreversible...

hmmm frankly there is many retail traders managed to reverse that losing strategy successfully ...

 

[Hoggums]

If we assume that the market is random (contentious point I know) then ALL strategies would break even eventually if there was no spread to pay and you traded it indefinitely. Therefore ALL strategies lose money when you add spread. So if you reverse a losing strategy (after spreads) then you are in fact reversing a break even strat. But you can’t reverse the spread so you end up losing on the reverse also.

 

[tar]

Trying to pick tops and going short, trying to pick bottoms and going long - BEFORE confirmation of the reversal.

That particular strategy paid off nicely last decade or so

 

[alphadude]

very simple , keep buying at the the ask then selling at the bid over and over again you will lose , reversed strategy : buy at the bid then sell at the ask ( market making ) .

lol; i got a better one:

buy high and sell low.

reverse the strategy

 

[DionysusToast]

we appear to be entering the sm@rt@rse zone...