Nearly Random Entry vs a High Probability Entry
- Thread starter damir00
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How is once per day over 300 days different from 10 times per day over 30? What could make the first frequency profitable but not the second?
For arguments sake, let's assume there are 20 possible outcomes in choosing a random time and direction on a given day. Since any one of those twenty could be the random choice, why would not all of these yield the same positive expectancy as any one?
Each market does dictate a lot about how much profit can be taken. It cannot give what it has not got. It is feasibly impossible to make 6 billion trades in one day on the ES, let alone hope to make profits on those 6 billion trades. This inability isn't in a trader's mind, it is a physical inability in the market - there are not 6 billion profit opportunities in the ES. There are practical limits that are dictated by every market about how much profit can be taken from it, as well as practical limits to how many transactions a certain market can take without upsetting the liquidity picture.
There are limits on how many trades can actually make $$$ in a certain market based on things like minimum tick, # of transactions in a day (liquidity), range traversed. Those are limits that are dictated by the market and its participants. There are also limits that are imposed by the trader such as account size, risk profile.
Remember that the method damir is using enters with a random type entry, but it exits based on rules. These rules must have a certain expectation about profit size. There are only so many range moves of size "X" in a given day in a given market. That's why limiting the # of trades to fit that number is important not only for someone employing a random entry, but anyone employing any method. If you put trades on when there are no opportunities, those trades have no way of making a profit.
I did not give any requirements for anyone to do anything. I only entered into this interesting discussion with the intention of putting some logical thoughts on the table.
It's not hard to understand that if someone can be profitable using completely random entries with money management principles (or exit strategies) alone, then he should be able to compound this into more trades, more markets, more products (I assume he meant any product). Of course 21,000 times a day is unrealistic. But with far far less than this you would soon be the best trader that ever lived. Who else could close their eyes, hit a keystroke when he felt like it, and trade out profitably?
As stated before, and as you seem to state above, there are practical limits to the # of trades that can be placed. And there are also practical limits to the amount of profit that can be made from each market by using random entries and money management rules to make his exits. If you look over damir's results you will see that virtually all of his trade profits are relatively small (no big winners), but that his losses, though fewer are also larger in size than the winners. This is the natural result of a high win% system.
So he is exploiting the natural tendency of the index futures to retrace, even if the trade is against the trend. IMO this is why his system works, but also IMO if he selected his entries to maximize potential profits rather than maximizing %winning trades, he could make more total $$$, even if his win % came down to 50/50. Though his drawdown would be greater with the latter system. Tradeoffs.
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