Why Is The Obvious Not So Obvious?

[Pelt]

...You can make money trading by just tossing a coin to go long or short..providing..you have strict money management rules and "stick to it". If you do not believe me..then try it out..only way..forget about what anyone says..go and prove it to yourself!!!!

Now..once you prove it to yourself..or disprove it..come back and we will analyze your tosses and risk taken..all will be revealed in relation to how well you carried out the tasks.

In case you want to try it..as most will not..that I am certain of..here are the rules.

1. Divide your capital into at least 10 pieces..I would divide it into at least 50 for swing trades..into 100 for daytrades..but that is me..the choice is yours..but as the key is proper risk management then you must have a meaningful sample of trades to analyze.

2. Decide what you want to use for stop loss amount and profit target amount..or if you will use the charts to take your loss or profit based on your chart reading skills..remember..once you start you will be always in the market..either long or short..so..after your first entry..when your get stopped out..or win..you will toss the coin again and re-enter immediately..heads for long..tails for short.

3. Do it for as long as the money lasts..or until you have made an adequate number of trades for sampling..then the results can be looked at.

Note:as the key is both dividing your capital (the correct portions based on what style you pick..as in position..swing or daytrading)..and you stop loss and take profit criteria..spend some time on these..you do not have to worry one little bit about direction..as that is covered by the coin toss.

I will be very surprised if one person actually does it..but I am often wrong

I dunno why it took me so long, but I actually carried out this experiment? Over the course of a little over two months, live account, tiny money, real trades though, 100 trades.

Attached is a doc(some headings open collapsed) if anyone is curious, but here are the cliff notes if not interested in the word doc.

Direction was chosen by the coin flip. R:R was set at 1:1. Dollars risked was always a fixed amount through entire experiment, I.e., based on my reading of the instructions, I was not resizing as a % of account as account value increased/decreased. Target/Stop size was created by using 3 *(47 Period ATR on a 30 min chart). Always in.

Win % wound up being within the margin of error of a typical coin flip using 100 samples, 59% win.

I do not think the outcome is important, but I did make quite a few observations I intend to re-run, but w/o the coin.

 

[Vindago]

Interesting experiment.

2 other suggestions:

• same as above but with a R/R of 1:2 or above
• enter trade in the direction opposite to the intended one (e.g. whenever you think you should go long you go short instead and vice versa)

the second one was kind of suggested by NYSEStocks or The Expert or The Oracle, I have tried it on small scale and it works pretty well for some time, than things change...

 

[Vindago]

By the way, while the experiment run by Pelt does not need to be run live over 2 months as the entry, stop and target position are defined independently from Price Action. A trader could do this analysis on past data, saving some time, but the emotional and cognitive impact would be lost and we well know that the issue with trading that remains once one figure out how price move is the emotional/cognitive impact on trading.

 

[Pelt]

Interesting experiment.

2 other suggestions:

• same as above but with a R/R of 1:2 or above
• enter trade in the direction opposite to the intended one (e.g. whenever you think you should go long you go short instead and vice versa)

the second one was kind of suggested by NYSEStocks or The Expert or The Oracle, I have tried it on small scale and it works pretty well for some time, than things change...

Your second bullet point, I have done this before also. This would be easy assuming one had a mechanical way of picking direction, like a coin toss or an indicator. But if using intuition(as you seem to have mentioned), a different story.

For this discussion, assuming a non-mechanical way of picking... I had some initial success doing this, but after time it became a TRUE mind-fuck. Eventually it got to the point where I couldn't figure out which decisions were my own, and which were the opposite . It was interesting nonetheless.

I would imagine, if I could flip my entry keys, and NOT see the screen afterwards, it could work, or if my broker just gave me the opposite orders w/o my knowledge.

On a similar topic, but different...

As I was running this experiment live, I took note of what MY expectation of movement would be. In the doc, in the section containing all the screenshots of the entries, I would annotate "WITH intuition" or "AGAINST intuition."

THis wasn't exactly how I would trade, as most of the time I wouldn't take a trade there, but I would just spend 5-10 seconds, and make a snap decision if I thought the trade would move that 3*ATR UP or DOWN. I would actually make this decision BEFORE I flipped the coin as not to bias myself.

Overall... my "intuition" had a terrible 43% win rate, which is lower than the coin flip, but still within the margin of error for a coin flip given 100 samples.

Also of note, around trade 75, I decided I would base my intuition on what my opinion of the 'trend' was. Typically this was just deciding if price was above where it was 24 hours ago, or lower. THe win rate for the LAST 25 trades was 53.85%. I'm not making any judgement on the expectation of a 'trend,' but just saying that seems to be better than my 'intuition' of where price may go.

Attached are graphs plotting win% of the 3 scenarios of the test, The coin-flip, my intuition(trades 0-100), and the slice showing trades 75-100.

 

[Vindago]

Yeah, the second experiment works pretty well at first, then, as you say, it becomes a mind fuck

as for the last 25 trades it make sense that the win rate improved as you were more likely following price direction.

I am working on this very point, I have clearly seen on charts that trading in the direction the price has been moving before is the way to go, and when I do so I have good results, then I revert to the horrible bad habit of trying to enter at a pivot point, with the obvious results

 

[SkyChef]

That was proven by some Monte Carlo Excel prog written during the ancient PC age that in order to win in 50/50 chance (true uncertainty), it's required to have at least 1.6 R/R including commissions.
I have that program b4 (don't know where it is now) and ran that a long time ago just to see it myself. Some new programs also calculate baseline capital just in case u got a string of consecutive bad lucks.

 

[M4-1]

some interesting posts about risk and profit..BUT..was there not an equation mentioned many times in this thread.. something like..

T=M

come on guys..if it was as simple as flipping a coin with a fixed % risk then any monkey could do it..BUT..as you all know..it is NOT that simple

the real important one is the T

 

[M4-1]

Yeah, the second experiment works pretty well at first, then, as you say, it becomes a mind fuck

as for the last 25 trades it make sense that the win rate improved as you were more likely following price direction.

I am working on this very point, I have clearly seen on charts that trading in the direction the price has been moving before is the way to go, and when I do so I have good results, then I revert to the horrible bad habit of trying to enter at a pivot point, with the obvious results

if you do what everyone else does..then..you will get what everyone else gets..simple really !

you have to remember that 99% is pure and utter rubbish..touted by those who know how to get fools to part with their hard earned money !!

pivots..fibs..ma's..blah blah blah's..all they ALL do is to distract YOU from what you HAVE to look at !!!

i really do sit back and laugh a lot now..mostly at myself and how thick and stupid i really was for so long..but then again..as the saying goes !!!!

HISTORY does indeed repeat itself !!!!!

 

[M4-1]

i look and see..what not it be
the dopes on end..go round the bend
the buzz word now..is not fat cow
but vol per price..it looks so nice

but we all know..that looks don't show
what real is there..when things are bare
to find the grail..think of the snail
just take your time..and wait for chime

the chime can be..plus one you see
or minus two..in front of you
to see the tree..in forest be
click window wide..and look Outside

 

[Onra]

some interesting posts about risk and profit..BUT..was there not an equation mentioned many times in this thread.. something like..

T=M

come on guys..if it was as simple as flipping a coin with a fixed % risk then any monkey could do it..BUT..as you all know..it is NOT that simple

the real important one is the T

Is it more like "Timing"; e.g reacting only after ...

or something else?