Could this simple formula be profitable?
- Thread starter Risepoint1879
- Start date
You can get free daily data for other futures from Kinetick.
Probably will have better results on something other than equity futures.
The 1R/3R will be a loser, because you cap your winners. The big trendfollowing CTAs (and the Turtles) have a similar strategy, only it's: cap losers at -1R, but don't cap winners. The win rate is ~40% (sometimes less), but, over a LONG (emphasis on LONG) period of time, the overall strategy is profitable, for two reasons: 1) Extreme diversification among 50-100 different contracts with low correlation to each other; and 2) the uncapped winners allow huge winners, like 20R-30R. The P/L distribution has a long, thin tail on the right side. In fact, the top 1-5 trades usually make up the entire profit for a given year. All the other trades cancel each other out.
Add in some trend following, and hold for a profit of 5xs R and then in trending markets if R is enough Pips/Pts say 100 so aiming for +500 then you might have a reasonible chance.
Try adding D1 chart, BB 20sma 2.0 looks like all you'd need to tip the balance, working on H4 and H1 to my eyes if you can't take that large a SL on the DAX!
Try adding D1 chart, BB 20sma 2.0 looks like all you'd need to tip the balance, working on H4 and H1 to my eyes if you can't take that large a SL on the DAX!
It might work sir if the equity you select has an up bias over time.
I am math challenged so won't be able to mathematically prove it but intuitively I think a normally distributed stock with a steep enough up bias could be profitably traded using his strategy?
It wont be profitable.
If its a losing stock, its a losing stock.
An analogy would be playing roulette red/black and exiting with 3 wins in a row and cutting your losses after every 1 loss. Do you think such a plan will make roulette profitable?
Also how do you even define your enter strategy?
After 1R loss, do you enter again? Next day or what?
If its a losing stock, its a losing stock.
An analogy would be playing roulette red/black and exiting with 3 wins in a row and cutting your losses after every 1 loss. Do you think such a plan will make roulette profitable?
Also how do you even define your enter strategy?
After 1R loss, do you enter again? Next day or what?
The point is that he said randomly.
If the stock has an upwards bias then any kind of wi n/loss ratio theoratically should be profitable.
Of course most traders use 2:1 or 3:1 as that is usually the most probable scenario. 100:1 by theory will also work, its just that you will have 99 losses and that 1 win will cover your loss and some profit.
I haven't read the responses so if I repeat something already said I apologize.
First, the best way to find out would be to back test, though how to back test a random entry?
It is highly doubtful. First, you are likely to have a great many -1R losses and relatively few 3R gains, so the losses, especially when transaction costs are figured in, will likely outstrip the gains.
Why "blind folded," i.e. completely random entries? Do something to put the odds on your side - long only when price is above X moving average, for example.
I would suggest any such mechanical program use ATR to size stops and targets, and the stop would be equal to or greater than the target, e.g. 1.5 ATR stop, 1 ATR target, and position size to the risk.
Randomly means on average the stocks he selected have an up bias (historically SPY on average has an up bias) and he could be profitable.
i just finished reading "Trend Following", great book. I personally trade on much smaller time frames(20 minute trades), but the general idea translates.
One question I've had for awhile now is: Is it better to take profit at 3R, or always hold until sign of the trend being over? Because there are many trades of mine that die at 3R, and by waiting for the signal of reversal, I've lost most of the profit on that trade.
My limited backtesting says that I would have more profit by holding until signs of slowing down, and thereby catch the huge moves that happen 3 or 4 times a month out of 80 trades. But I need more confirmation before making such a drastic change to a profitable system.