To The Moon

If you've been around the block for more than a week, you would know many people use technical and fundamental analysis to form strategies to buy their stocks. Like for example, buying when the RSI value is less than 30. So I decided to try that too.

This is the strategy I backtested using AI on AAPL with 2 years of historical data, on 1 hour candlesticks. And here are the results.

X axis = Total BP, starting at 5k.

Y axis = total number of closed trades made.

Conditions: RSI strategy, $20 stop loss and take profit

Regular Graph A:

Ouch, a steady decline. Well, the strategy is clearly not working. But what if we flip it? Instead of going long when the RSI value is less than 30, how about we go short? This might sound absolutely ridiculous, and in theory it is, but according to data, we should get an upside down graph right? Maybe something that looks like this?

Upside down graph B:

Well, kinda. Instead, however, we get this.

Flipped strategy Graph C:

So what caused this? There is clearly a noticeable match with upside down graph B and this one, but what caused the drops to be so massive? Looking back at what happened during those times, the losses have seemed to be amplified, thus negating any profits made. And while the profits have also amplified, it couldn't beat the losses. For now, I can't come up with a definitive explanation on why this happens, so i'll just have to keep backtesting this and see what else I can find. If you might know why this happens, do comment here!

For now, all I can conclude is that flipping strategies upside down may not have the intended effect, and make sure you backtest custom strategies and do some research before going live on a strategy that might bust your account overnight.

@TigerStars@TigerEvents