failed setups, failed tests -- do you trade based on them?

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richard
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failed setups, failed tests -- do you trade based on them?

Post by richard » Fri Jul 30, 2004 12:48 pm

My overall question is whether or not you have traded a system based upon failures of setups? It seems often that a setup that fails, or a test that fails, turns into a wonderful stop-and-reverse, and can be a real money-maker.

Some background...

I have been trying out various methods of trading. Lately I am using a system based upon reversion to the mean to identify setups. It seems to test very well. It is discretionary when it comes to exits but the entry signals are objective.

I have noticed that when a setup fails to work, a stop-and-reverse can be quite profitable. I have observed this with other systems and approaches I've tested in the last few months, too...that when something behaves differently than the way it "should", it can be a high probability setup in the other direction.

Have you ever traded based upon this?

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