The Flip-A-Coin trading strategy and lessons learned from it

Net, I can't possibly more agree with you and be happy with the road you're following.

When I early in my career did the coin flipping experiments I was ridiculed. That muted when the results showed up.

With this experiment you'll find for instance that money management will not make or break a 50% edge strategy. In fact it will not matter the least. That is IF there are no trends!! If the market shows just the slightest bit of trendiness you will make it big depending on commissions and slippage.

Thanks so much for bringing back these fond memories!!

Cheers,

t4s
 
Quote from bbmat:

Wow, amazing. If only the previous posts represent all different schools of thoughts that lead to financial freedom then please bring the bowl, I need to vomit.
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Bbmat...

Your post helps me understand that communicating an idea is not so easy.

Evidence suggest that the majority of traders wash out. I think I'm just beginning to understand why (really understand why, not just intellectualize it).

I believe this board is psychology, not trading systems. If something works to break a trader out of a tail spin, is it worth sharing? Or shall we withhold to not make the critics sick?

I'm convinced that most traders do not lose money because of bad technical analysis--it's because of psychology.

Early in my post I call the Flip-A-Coin strategy ridiculous. However, when my trading edge was reduced to just flipping a coin to improve my odds, that suggested a trip to the mirror (i.e., self reflection) was in order.

This created a profound change in my trading, because I NOW look to TA to give me an advantage on entry over a coin toss--nothing more. This forces the recognition that entering a trade a gamble on probabilities, and one must be IMMEDIATELY prepared for the wrong probability. Prior to this way of thinking, I was striving to be "right" on every trade, and that effort was not only futile, it was taking me out of the game.
 
Quote from NET:

Bbmat...

Your post helps me understand that communicating an idea is not so easy. ]

Thats got to be one of the biggest understatements Ive seen in awhile. :)
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Quote from bbmat:



Finally, Pabst suggests that many huge funds including Soros follow some esoteric and coin flipping strategy: What a relief to human kind, its not knowledge, not skills, but its pure luck and statistics!!! I cant wait to invest all my funds with such managers. Pabst(=pope in German): You are an old man and do not seem to have learned a single lesson from the market. What we need is not "small dirty secrets" but an honest and critical view of the markets. Could it be you are a seller of those neuronal network or esoteric software?
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Pabst
Elite Member

Registered: Dec 2001
Posts: 1516
12-29-03 12:04 AM

Net: Oldtrader is part of this old school of philosophy that thinks you need to know whats going to happen if you want to make money. Since reading Flipping Your Way to Financial Freedom two years ago I've changed my life. The dirty little secret: Everyone from Soros on down is using coin tossing entries. Some of the more sophisticated funds are working on exit strats with both coins and decks of cards. I don't want to get into some of the more esoteric derivatives trades involving dice throwing but I will say, if you see me roll snake eyes, cover your short options premium! I'm trying to cut down on my trading and the number of signals generated by flipping. I'm now taking an average of 13 flips with a 34 flip crossover. MUCH smoother equity line. GOOD LUCK NET!!

bbmat: IMO only a total idiot like yourself could not recognize my post as 100% sarcastic!!!!
 
why won't you even consider fundamental analysis to identify potentially profitable trades, entry levels, and exit levels? That is all I am sick off: At ET, TA is often presented as the only valid alternative to random picking. Newcomers, reading such posts, jump on the bandwagon and have no idea there are alternatives to TA (I wont argue against TA here).
 
Sorry Pabst,

shame on me. I have not read the last 2-3 lines of your post (although I now admit it was the best part) and therefore apologize. However, there are tons of guys who really belive in what you just wrote about. I should slow down and take back my criticism about your contribution!!!

Quote from Pabst:

Pabst
Elite Member

Registered: Dec 2001
Posts: 1516
12-29-03 12:04 AM

Net: Oldtrader is part of this old school of philosophy that thinks you need to know whats going to happen if you want to make money. Since reading Flipping Your Way to Financial Freedom two years ago I've changed my life. The dirty little secret: Everyone from Soros on down is using coin tossing entries. Some of the more sophisticated funds are working on exit strats with both coins and decks of cards. I don't want to get into some of the more esoteric derivatives trades involving dice throwing but I will say, if you see me roll snake eyes, cover your short options premium! I'm trying to cut down on my trading and the number of signals generated by flipping. I'm now taking an average of 13 flips with a 34 flip crossover. MUCH smoother equity line. GOOD LUCK NET!!

bbmat: IMO only a total idiot like yourself could not recognize my post as 100% sarcastic!!!!
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Quote from bbmat:

Sorry Pabst,

shame on me. I have not read the last 2-3 lines of your post (although I now admit it was the best part) and therefore apologize. However, there are tons of guys who really belive in what you just wrote about. I should slow down and take back my criticism about your contribution!!!
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No prob!! Thanks bbmat.
 
coffee has asked me to comment...so I will (but don't know why I was asked, care to comment on that coffee?)

What NET has described is not terribly far off from my own path. It is what I have tried to convince others of on this board (and elsewhere) for eons. You can NOT know what will happen next. And of course, you don't need to.) Problem is, there is an underlying human need to know. The need is so powerful that most of us will do anything, up to and including self sabotage to get that certainty. That's why 95% fail at this game. These losers simply can't give up on the need to know.

TA is successful (for those selling books, seminars, videos, etc) for one reason only: it supplies it's followers with some level of certainty. I'm not using coin flips (I have discovered something equally simple but far more elegant) but had the same shift in thinking. The shift from trying to "figure out what's going to happen next" to " I can't know anything but my risk".

For me, this shift was caused by studying TA so deeply, seeking the underlying concepts in such detail, that I got into sort of a double bind. I finally got to the point that I could use TA to equally call any given market scenario as a great short or a great long. Boy, did that give me a headache for a while.

Fundamental analysis is equally weak. Just try following supply and demand in a commodity market for a day, seeking out all the nuances in the beliefs and behaviours of the market particapants that directly effect the s/d curve. No neural network in the universe can deal with shifting supply/demand curves based on human pyschology in real time.

Coffee, I don't see any need for a shift in NET's "map". He followed RULE #1 to the letter of the law: if what you're doin ain't workin, try somthin diff. RULE #2 is even more interesting and creates even more argument from the masses: if what you're doin IS workin, try somthin different too.

Congrat's NET, I suspect you got it. Now run with it!
 
Quote from OldTrader:

How about a rhetorical question: If you are unable to determine a proper entrance other than by coin flip, what makes you so sure you can execute a "beautifully timed exit"?

While you're pondering that, allow me to point out a simple fact. Yes, technical analysis may only provide slightly better odds than a coin flip. BUT, what you miss here is that through properly used TA you may be able to enter at times where the odds of maximum gain exist, while the risk of minimum loss is present. In other words, let's assume that the trade will be little more successful than a coin toss, but when successful, it will be VERY successful because of the nature of the entry.

Is this true of an entry based upon coin toss? We don't know. And therein lies the problem with this 'new' method of yours.

The real solution to your original problem lies in simply developing some discipline to take your entries, and then couple them with the "beautifully timed exits" that you supposedly know how to do. Flipping a coin to correct your trading problems reminds me of all the phoney diet solutions to overweight, phoney solution to stop smoking, etc. Learn some discipline....it will help your trading, along with the rest of your life.

OldTrader
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LMAO

Do you remember the guy that wanted to trade spoos using the california lotto numbers for entries and exits - that took the cake :eek:

nitro :D :D
 
Quote from Pabst:

Net: Oldtrader is part of this old school of philosophy that thinks you need to know whats going to happen if you want to make money. Since reading Flipping Your Way to Financial Freedom two years ago I've changed my life. The dirty little secret: Everyone from Soros on down is using coin tossing entries. Some of the more sophisticated funds are working on exit strats with both coins and decks of cards. I don't want to get into some of the more esoteric derivatives trades involving dice throwing but I will say, if you see me roll snake eyes, cover your short options premium! I'm trying to cut down on my trading and the number of signals generated by flipping. I'm now taking an average of 13 flips with a 34 flip crossover. MUCH smoother equity line. GOOD LUCK NET!!
More...

Soros? I saw him in an interview with Maria Bartiromo. I'm not so sure he has progressed to the point of using a coin flip for trading. According to his own statements his secrets to his trading (which were advertised all night until the show to get you to watch) are solely based on his back aches which tell him whether to buy or sell. When he gets a really bad back ache he knows to sell. If I didn't know he was a Billionaire, by just looking at the way he carry's himself and his statements I would think him to be very ignorant.

Actually this thread reminds me of another poster who has been 2x short QQQ since May and has called a top just about 3 times a day since. I suggested to the guy that he must not be flipping a coin to come up with his calls otherwise he would have gotten a few of them correct.
 
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