As you rightly point out, it will depend on "how good" the trader is. However, the "how good" can be no more than an illusion that we conjure up in our minds to make sense of randomness. The whole point of the exercise is to see what the different approaches yield, and then discuss. Stop placement and Profit target are trader dependent, and will be determined by the type of illusion that the trader has dreamed up in his mind. The smaller the time frame the smaller the illusion, the greater the timeframe the greater the illusion. There will be a "sweet spot" that the trader has to identify by sound judgement based on some basic principles of finance, that are common to all financial markets. For this exercise, it is up to @A2x2 to decide what stop and profit target to use for the coin toss, but I would not go higher than the 5 min chart if I was him, and not as low as the 5 sec chart.I quite like this idea.
But using stops and targets based on market activity, although sound, will muddy the stats results, no? If he wants to go long for example at 4840 which he thinks is support, but the coin tells him to short, then he might want to play it very tight, and place the stop right at 4842, just 2 points higher, cause he "knows" its gonna stop out. But if he does in fact get a long from the coin "signal", then he might stick with his standard 5 point stop, hence the stop will be at 4835, 5 points below the long, because he will believe in the long, even if support is broken. Using what the market tells you first assumes you can read the market properly, but then it also assumes that the market will follow what you think each time you make this prediction. There is an inherent randomness in all of this, and this is what I assume you're getting at with this experiment.
I would imagine what would be better is to use the same stop and target for each trade, and if it so happens that the coin tells you to go in the opposite direction of what you want, just let it play out. Hopefully you're better at guessing direction better than the coin, but this certainly won't be 80% of the time I don't imagine. Sometimes, maybe even 30-40% of the time, I bet going in the opposite direction of what you think will be the winning trade.
Of course I have no idea where you are going with this, and so perhaps what you're trying to illustrate is different than what I have in mind, in which case, forget what I just said.
NQ Paper Trade Journal
- Thread starter A2x2
- Start date
2016-11-21 Summary
Daily P&L: +5.25 (1 trade, 1 winner)
Trade Summary
Trade 1: Positive market sentiment today so went long after the morning sell-off. [+5.25]
Took some time off from posting as I was adjusting my trading plan / strategy. Will look to post consistently going forward.
Daily P&L: +5.25 (1 trade, 1 winner)
Trade Summary
Trade 1: Positive market sentiment today so went long after the morning sell-off. [+5.25]
Took some time off from posting as I was adjusting my trading plan / strategy. Will look to post consistently going forward.
Attachments
2016-11-22 Summary
Daily P&L: -$40.00 (5 trades, 1 winner, 1 loser, 3 break-evens)
Trade Summary
Trade 1: Started noticing the market shift downwards in the morning as it slowly broke out of the morning range. Decent entry however wasn't too certain about the trend so moved the profit-take to break-even, could have hit original profit-take for +$101 [+$6.00]
Trade 2: Chased the entry.. almost got stopped out however the negative market sentiment saved me as the sold off and I broke-even. More patience on the entry and this could have been a very profitable trade. [+$6.00]
Trade 3: Once again, very impatient with the entry during the lunch hour reversal, entered too soon. [-$160.00]
Trade 4: Continued my short position at a much better entry once I got stopped out. This should have been the entry price for trade 3. Kept the stop-loss tight once I hit my mental profit-take, however had a wider than normal profit-take in case the market dropped rapidly. Got stopped out for profit of 5.25. [+$100.00]
Trade 5: Market looks to be trending flat.. no clear signs of direction towards either side so I exited my short position at break-even. [+$6.00]
Will be posting the dollar profit / loss going forward instead of the points as it's just easier.
Daily P&L: -$40.00 (5 trades, 1 winner, 1 loser, 3 break-evens)
Trade Summary
Trade 1: Started noticing the market shift downwards in the morning as it slowly broke out of the morning range. Decent entry however wasn't too certain about the trend so moved the profit-take to break-even, could have hit original profit-take for +$101 [+$6.00]
Trade 2: Chased the entry.. almost got stopped out however the negative market sentiment saved me as the sold off and I broke-even. More patience on the entry and this could have been a very profitable trade. [+$6.00]
Trade 3: Once again, very impatient with the entry during the lunch hour reversal, entered too soon. [-$160.00]
Trade 4: Continued my short position at a much better entry once I got stopped out. This should have been the entry price for trade 3. Kept the stop-loss tight once I hit my mental profit-take, however had a wider than normal profit-take in case the market dropped rapidly. Got stopped out for profit of 5.25. [+$100.00]
Trade 5: Market looks to be trending flat.. no clear signs of direction towards either side so I exited my short position at break-even. [+$6.00]
Will be posting the dollar profit / loss going forward instead of the points as it's just easier.
Attachments
Hi there ..shorts must be getting clobbered..better to buy pullbacks me thinks . A lot safer to be on the side of chaser
treasury rallies ..short them on inflation upticks
can I post some intraday calls ?
I tend to stay on one side throughout the trading unless a strong signal shows a reversal.
Even though the market was up today the large morning sell off was strong indication I would get opportunities on the short side today. Just poor execution on my part. I did factor in that there was a good chance the market wouldn't turn negative today, so my profit targets were more conservative.
Basically I watch how the market plays out for the first half hr to an hr to dictate signals on whether I will go long or short throughout the day.
Yes, please post as much as you'd like! The more the merrier!