Coin Flips

I can sure say the trading strat she had on the slide is a dead bang loser on ES. As a matter of fact, it's got a nice performance curve over time, goes straight down with no slippage.

Over 2 years on an ES 5 min with no commish/no slips:

Percent Profitable: 30.39%
Average trade gross: -$2.74

So at about 430 trades/month plus say $4.80 in commish, you'll lose over 3 grand a month.

Admittedly she's trading currencies. But if anybody has currency charts in TradeStation, here's the code to run:

vars: Shorted(false);
.....if marketposition = 0 then
..........begin;
..........if time < 1500 then
...............begin;
...............if shorted then
....................begin;
....................buy next bar at open;
....................shorted = false;
....................end
...............else
....................begin;
....................sell short next bar at open;
....................shorted = true;
....................end;
...............end;
..........end
.....else if marketposition > 0 and close < close[1] then sell this bar at close
.....else if marketposition < 0 and close > close[1] then buy to cover this bar at close;

Note that it's not a random entry, it alternates longs and shorts. And it doesn't enter trades after 3pm, to make sure we get out before the end of the day.

EDIT: Nana Trader helped me with the code formatting (thanks Nana) by pointing out that I needed spaces around my conditional signs.
 
Whoops, I looked again, and see it's YM. I saw that PP text on the screen and my mind just stayed in pips mode.

Anyway, it's slightly better, but you'll still lose money over the long run, plus commisions and slippage.

Percent Profitable: 32.98%
Ave Trade Gross: -$0.85

That's with absolutely zero slippage and commisions. The performance curve's not as nice as the ES one, looks like this was a very good fade for the first of the two years I tried it, and been hit or miss over the past 12 months.

The strat is very simple. In this case it alternates longs and shorts, enters at the open of a bar, and exits at the close when the close is lower than the previous close (longs) or higher than the previous close (shorts).

That's on two years of trading every day the market is open starting at 9:30 ET, no entries after 3PM ET. 10,748 trades.
 
Quote from cmk:

What is this garbage? Is that a man or a woman talking? Whatever it is, not too sure what the hell he/she is doing huh?
More...

Has anyone ever automated woodie method? I think the
main obstacle is that patterns like ghost, samu, vegas
make various shape that identifiable to eye, but can't be
quantified
 
Quote from TGregg:



Note that it's not a random entry, it alternates longs and shorts. And it doesn't enter trades after 3pm, to make sure we get out before the end of the day.

EDIT: Nana Trader helped me with the code formatting (thanks Nana) by pointing out that I needed spaces around my conditional signs.
More...


Coin flip is a random strategy with a 50% win probability over the long run. As long as you cut your losses and let your profits run, with a 50% system you come out ahead.

Alternating entry/exits is different than a wholly random entry. You're comparing apples to oranges.
 
Quote from mhashe:

Coin flip is a random strategy with a 50% win probability over the long run. As long as you cut your losses and let your profits run, with a 50% system you come out ahead.

Alternating entry/exits is different than a wholly random entry. You're comparing apples to oranges.
More...

Alternating is much closer to 50% heads/tails than flipping a coin in the short run. In the very long run, it has at least the same percentage - randomness being what it is, we could easily have 49.something awful tails and 50.something else heads. And letting the profits run and cutting losses is just as is described in the strat.

Do you mean to imply that somehow a magic coin can predict with better than 50% chance the future direction of the markets? If not, then you must be suggesting that alternating predicts with less than 50%.

Turns out EL has a random function. Obviously, the results will vary depending on how magic the random function is. But I bet after a dozen tries, the average will be right near what I found with alternating. Care to disagree before I prove it? :)
 
Quote from mhashe:

Coin flip is a random strategy with a 50% win probability over the long run. As long as you cut your losses and let your profits run, with a 50% system you come out ahead.


.
More...

If this is the case why are there not thousands of computers running a random entry program? It has the same problem that all trading has. WHERE do you place your stop and WHERE and WHEN do you take profits?
 
Here's the new code if anybody is interested. You'll have to reply with quote to read it, I'm not formatting this thing again. Basically all I did was add

shorted=random(2);

and changed the long entry conditional to:

if shorted < 1 then

I also changed the initialization of shorted to zero from false, and doc-ed out the code that set shorted to false and true.

Here's the entire code:

vars: Shorted(0);

if marketposition=0 then
begin;
shorted=random(2);
// print(" <<< ",shorted," >>> ");
if time<1500 then
begin;

if shorted<1 then
begin;
buy next bar at open;
// shorted=false;
end
else
begin;
sell short next bar at open;
// shorted=true;
end;
end;
end
else if marketposition>0 then
begin;
if close<close[1] then sell this bar at close;
end
else if marketposition<0 then
begin;
if close>close[1] then buy to cover this bar at close;
end;



Trial from 4/5/2002 to 7/15/2005 on YM 5 minute chart that opens at 9:30 ET and closes at 4pm ET. No commisions, no slippage

Run #1
17800 trades
-$20,445.00 gross results
33.47% net profitable
-$1.15 average/trade
8871 long trades
8929 short trades

Run #2
17652 trades
-11,435.00 gross results
34.28% profitable
-$0.65 average/trade
8950 long trades
8702 short trades

Run #3
17696 trades
-$25,375.00 gross results
33.81% profitable
-$1.43 average/trade
8774 long trades
8922 short trades

Must be a lucky coin around here someplace. Let's try some more.

Run #4
17742 trades
-$28,505.00 gross results
33.56% profitable
-$1.61 average/trade
8806 long trades
8936 short trades

Run #5
17804 trades
-$26,085.00 gross results
33.27% profitable
-$1.47 average/trade
8796 long trades
9008 short trades

Run #6
17754 trades
-$16,285.00 gross results (woah! This could be the best one)
34.02% profitable
-$.92 average/trade (or maybe not, we should get one that's at least in the low -.70s if we try enough times)
8950 long trades
8804 short trades

Run #7
17767 trades
-$20230.00 gross results
33.74% profitable
-$1.14 average/trade
8863 long trades
8904 short trades

Not looking good there, champ. We're into the home stretch now.

Run #8
17786 trades
-$17,990.00 gross results
33.46% profitable
-$1.01 average/trade
8831 long trades
8955 short trades

Run #9
17854 trades
-$34,100.00 gross results (ouch!)
32.91% profitable
-$1.91 average/trade
8925 long trades
8929 short trades

Well, we're up to the last run (my drink is nearly empty and I gotta refill). So far, we've made a lot of applesauce.

Run #10
17731 trades
-$18810.00 gross results
34.18% profitable
-$1.06 average/trade
8915 long trades
8816 short trades

There ya go, 10 runs with the "new and improved" random method. And what a surprise, it's still a loser.
 
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