I’m building a trading strategy and so far it’s been profitable over longer periods.
While backtesting, I’ve noticed something interesting: the strategy works much better for long positions. Short positions actually end up losing money on average.
Should I just focus on long positions, or does this mean my system has some problems?
I know past performance isn’t everything, but I don’t see the point in forward-testing something that hasn’t worked in backtests.
You’ve done the work, so trust the data. It’s telling you long positions are better, so focus on those while you refine and test more.
It doesn’t sound like there’s anything broken with your system. If you’re unsure, run two separate tests: one for long-only and one for both. Compare the results and you’ll have a clear answer.
Also, keep in mind the trend. If you’re testing EURUSD in a bull market, of course longs will do better. If you flip it to USDEUR, you’d have to short to get the same results. Context matters.
@Koa
Thanks for the advice! I’ll keep digging into it. For what it’s worth, I’ve tested it on six different currency pairs, so I don’t think all of them would be in an uptrend at the same time.
@Koa
I live in the Netherlands and have never seen anyone say USDEUR. Is that even a thing? I’ve only explained to people how shorting flips the base currency, which is probably the same concept.
You’re probably testing in an uptrend. Trading with the trend usually gives better results because price moves further in that direction. Counter-trend trades are trickier.
Vega said:
You’re probably testing in an uptrend. Trading with the trend usually gives better results because price moves further in that direction. Counter-trend trades are trickier.
You might be right, but I’m testing across six forex pairs, so it seems unlikely they’re all trending the same way.
If your strategy loses on shorts but does well on longs, either the market has a natural bias (like trends caused by interest rates or growth) or your short rules need fixing.
Don’t try to force it to work both ways. That’s a common mistake. Stick to refining the long side since that’s where the edge is. Most strategies aren’t meant to handle every scenario—they’re built to exploit specific situations.
Also, backtesting isn’t enough. You need to forward-test in live conditions to see if spreads, slippage, and market conditions mess with your results. If it doesn’t hold up, then it’s not worth pursuing.
Why not just focus on what’s working? Trying to fix something that isn’t broken might waste your time. Long trades are giving you results, so lean into them.
Long vs short depends on the market trend. Check higher time frames and see if they’re affecting your results. Maybe adjust your trades based on the overall trend direction.
Try inverting the pair to see if it’s a market structure issue. When you go live, paper trade the shorts alongside to confirm if it’s really failing there. Not every strategy needs to cover both directions.