"Stupid" system for ES

sunnyskies:

Exactly your point. I forgot to mention that I also tried the "system" with flipped stop/cap (cap =1 pt and stop=2 pts) as well as stop=cap. In all cases the end results were similar, basically confirming your conclusions.
Where do we go from here - same place
:D No Signal, No Edge!
The rest (money management, stops, caps, executions, operational, etc) is window dressing (necessary but not sufficient).
 
Quote from MAESTRO:

What, you did not believe me? :cool: :)
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do i sense split personalities here? or just mixing up aliases (happened to me the other day. tried to respond to my own post with another alias and wrote from the wrong handle ...)?
 
just for the record. the 50:50 argument with 2:1 ratio is flawed. 50:50 accounts for same magnitude in each direction. you cannot assume afterwards the 2:1 ratio and still belive chance is 50:50. got me?
other words: sp going up or down by 1 figure today is roughly 50:50. the sp going up by 2 figures or down by 1 figure is n o t 50:50. meaning the two statements are interrelated.

(i must admit that i love the clarity of this post.)
 
Thank you Einstein. That's what the whole thread tried to test out. Moreever the probably in 2:1 scenario is 33% to 66%.



Quote from man:

just for the record. the 50:50 argument with 2:1 ratio is flawed. 50:50 accounts for same magnitude in each direction. you cannot assume afterwards the 2:1 ratio and still belive chance is 50:50. got me?
other words: sp going up or down by 1 figure today is roughly 50:50. the sp going up by 2 figures or down by 1 figure is n o t 50:50. meaning the two statements are interrelated.

(i must admit that i love the clarity of this post.)
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emm, ok, you have nice shoes, man.. just kidding.

ok lets talk. soooo you know those people who say that your reward should be X times (2 or preferrably 3) times your stop? So we just proved that it doesn't work with a random entry. So what's the conclusion? That it's possible to obtain these outsized rewards only in certain siutations which are non-random? Some setups in which entry gives you an edge which overpowers the "Edge Elimination Tendency"?
 
what about changing the market to the mini russell. Or changing the time to the same as the simple system for beginners?
 
Quote from sunnyskies:

thanks for the back test. it proved my hypothesis, or my grand theory of "edge elimination tendency". Yes? Where do we go from here though?
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very good....
 
I agree that the "stupid" system has no edge. That does not prove anything about finding an edge in the ES market.
The system below has a 1:1 risk vs reward factor. The back test is from 1997 to present. It has a stoploss of $200 and a profit target of $200. You can see that it produced winners at 52.58% of all trades. The edge elimination theory would predict winners at exactly 50% of all trades. Therefore, the example provided proves the edge elimination theory is false as a general concept applied to the ES market historically.

<img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=805283">
 

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