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[challenge] Show me a way to make profit with 50-53% WR!

  • #41
  • Edited 10:15am Sep 13, 2017 9:47am | Edited 10:15am
Quoting GuyBaker
{quote} I tested this kind of idea on my data, it doesn't work although intuitively it feels like it should, the thing is there is no correlation between the trades that have gone and what the result of the next trades will be, exactly like a coin toss, I guess I knew that really, but you got me all hot under the collar for a moment
Told you , That doesn't work.
We have even tried to count trade amounts that is predicted to reverse in to mean and keep changing the trade direction. (Monty hall)

This time , We had some good results for some of %50 strategies.

Idea was like , If first trade Looser , Next trade we do reverse signal.
But count is =++1
If the next trade is winner count is decreased if looser count increased and signals reversed again.
Once Count goes back to 0 we make profit from it and stop trading that rule.

when we tried that with many different strategies (coins) unfortunately even some of rules made profit there have been rules that count doesnt go back to zero for very long time and they eat profit from the ones we made.

So anything below %53 wr just disaster.
Take it easy.
  • #42
  • Sep 13, 2017 11:17am Sep 13, 2017 11:17am
I am sceptical that any correlation can be found between the result of one trade and the next, but I suppose there might be some reason for it. Danger in too much tinkering and of course you will be fitting to the curve, but you know that.
I live entirely from the growth of my personal trading account
  • #43
  • Sep 13, 2017 5:08pm Sep 13, 2017 5:08pm
Quoting GuyBaker
{quote} I tested this kind of idea on my data, it doesn't work although intuitively it feels like it should, the thing is there is no correlation between the trades that have gone and what the result of the next trades will be, exactly like a coin toss, I guess I knew that really, but you got me all hot under the collar for a moment
So I tested too...
Here an example.
My w% average approx 82% all trades all days.
My Tuesdays were standing out, at 97% win averages.

This Tuesday I thought either you guys are right, and it is no reversal in my stat toward mean, and I trade heavy and keep 97% win
Or I am right and sadly will see my win rate reverse toward the mean average 82%
Tuesday ended 65% win, now the average of Tuesdays closer to the mean total.

If it is meaningless, great, that means the next Tuesdays I have to make near 100% for a good while to make back this start to look 97%.
If not meaningless, and there is a tendency to larger deviations tend to drift back toward mean, ( as I would expect) it might still worth getting the hot about

That said, my Fridays are the lowest at 72%...so should see some improvement there?

If there is no way that statistics reverse to mean when it comes to trading, fine with me. If there is, fine with me too. I can be happy with any of this.
there is always, always another trade!!
  • #44
  • Sep 13, 2017 7:23pm Sep 13, 2017 7:23pm
Firstly, yeah the numbers are the numbers, I am only interested in improving profits, not massaging my ego, I got rid of most of that a long time ago as I could not afford to keep it

Secondly, mean revision, clearly happens, even in a coin toss, but we cannot not know over how many events it will occur.

How many events did you test in your "see you next Tuesday" analysis? On mine I tested over 2100 live recorded trades and I could not see a correlation, that of course is not to say that there is something different about our systems that makes it work for yours and not for mine, but if that is the case I suggest that the reason is not mean revision of the win rate of your strategy per se but some other factor.
I live entirely from the growth of my personal trading account
  • #45
  • Sep 22, 2017 10:25am Sep 22, 2017 10:25am
Quoting GuyBaker
Secondly, mean revision, clearly happens, even in a coin toss, but we cannot not know over how many events it will occur.
Coin toss doesn't revert to a mean: it has no memory, is always 50/50, whereas mean reversion implies that the probability of an opposite result to the previous one exceeds 50%.

The fact that a coin toss distribution approaches 50/50 over a large number of tosses is not mean reversion, it is merely the application of the law of large numbers.
  • #46
  • Sep 22, 2017 12:28pm Sep 22, 2017 12:28pm
Quoting hanover
{quote} Coin toss doesn't revert to a mean: it has no memory, is always 50/50, whereas mean reversion implies that the probability of an opposite result to the previous one exceeds 50%. The fact that a coin toss distribution approaches 50/50 over a large number of tosses is not mean reversion, it is merely the application of the law of large numbers.

I guess that is true, but I don't think it changes my point.
I live entirely from the growth of my personal trading account
  • #47
  • Sep 23, 2017 1:38am Sep 23, 2017 1:38am
Quoting hanover
{quote} Coin toss doesn't revert to a mean: it has no memory, is always 50/50, whereas mean reversion implies that the probability of an opposite result to the previous one exceeds 50%. The fact that a coin toss distribution approaches 50/50 over a large number of tosses is not mean reversion, it is merely the application of the law of large numbers.
And that is the great weakness of TA. Price and time series have random components. So a price chart and all the indicators that go with it are optical illusions really. All those wedges and trends and triple tops are viewed after the fact. What moves an instrument, especially a spread instrument like a currency pair is based on market fundamentals relative to the currencies involved.

So to the OP, learn the drivers of your currency, estimate what that should do to the currency, and when the currency starts to behave as expected, place the trade. If you are right, add more. If you are wrong by more than a standard deviation of some measure of volatility then get out.
If you are good at something, never do it for free--Joker
  • #48
  • Sep 23, 2017 2:29am Sep 23, 2017 2:29am
Quoting hanover
{quote} Coin toss doesn't revert to a mean: it has no memory, is always 50/50, whereas mean reversion implies that the probability of an opposite result to the previous one exceeds 50%. The fact that a coin toss distribution approaches 50/50 over a large number of tosses is not mean reversion, it is merely the application of the law of large numbers.
What do you think if there is no mean reversal...as in exact,
Would a reversal toward mean likely still exist?

Would that be possible to base some trading on it?
What point is in trading when results would stop be judged as random, and start to be accepted as non-random?
X number of entries? Or X amount of time? Or a combination of both?

If neither, and you believe that whatever you do is complete random anytime and all the time, why still around a trading forum?
If accept that coin toss and trading is same, trading couldn't really have an edge.
But if some winning for X entries more than loss, and over time, that suggest some edge should be present. Or is that all luck?

Or trading isn't like a coin toss exactly?
Perhaps when academics toss coins, on paper, nothing else, it has little emotions in that exercise.
Maybe trading has all about emotions too, by human traders, or by robots trying to translate and react to toss emotions from human traders.
Trading can be different from coin toss.

Coins don't have memories, nor emotions.
Traders have memories and emotions.
This can and probably do very different results from the paper academics study to reality.

On a personal note:
I don't fully subscribe to reversal to mean....but I very strongly believe in trading in some reversal toward the mean.
In fact, my trading is mostly based on it. Can be all lucky coincidence, but the more entries and the more time elapses, I believe maybe it has merits.
If I wouldn't, I wouldn't trade it.
It is not 50-50 based...it is more like assuming that a pocket of say 100 coin toss at 90-10, maybe followed by a 45-55...
Of course all that in trading context look very different.
So, for a real example, if currency strength measured 0-9, all it assumes that for no currency for an extended period will be measured at at extreme 8.5-9, without at least temporarily reverting toward a mean like weakening to 6-7 ( not even working on the 4.5 mean as must have).

Can or does this real example work?
I sincerely believe it, and that it has more merit to it than 90% of the systems however fancy in the system thread.
A weekend giveaway.
there is always, always another trade!!
  • #49
  • Sep 23, 2017 3:53am Sep 23, 2017 3:53am
Quoting Quants
It is a very simple question.. Spread Fixed = 2 Pips. Per trade 50.000 Trades will be opened Each trade after gets opened have %50 to %53 probability To win or Loose 1:1 RR = 20 pip TP = 20 PIP SL = 20 PIP Spread turns TO WIN AND LOOSER Win = 18 PIP Loose = 22 PIP Consecutive Wins , Looses UNKNOWN ! ( But you can make a scenario according to max consec win and looser ) 26.000 Winners = 468.000 PIP WIN 24.000 Loosers = -528.000 PIP LOOSE How can you beat this ?

Hi Quants,

I was interested in your example as my own method has delivered a long term win rate of 54% and a net (i.e. after round trip costs) R:R ratio of 1:1 so not too far away from your numbers. Due to the marginality of the method I risk only 1% of the account per trade but I make about 750 trades a year (I am a short term intraday trader) and this nets me around 60% pa on initial capital before any compounding effect.

Yes, the method is pretty marginal and it's the large number of trades annually that makes it worthwhile. It requires excellent discipline, consistency and risk control to work and my experience is that it's much more about these factors rather than trying to unearth some super profitable method which I doubt reliably exists (though that could just be my personal ineptitude speaking!)
  • #50
  • Last Post: Sep 23, 2017 12:54pm Sep 23, 2017 12:54pm
Quoting GuyBaker
I don't think it changes my point.
Fair enough.
___________________

Quoting jmn5611
And that is the great weakness of TA......
Agree totally, TA/PA charts only the past, and fails to directly address the underlying causes of price behavior (some thoughts here. Having said that, I've chatted with pro traders who use only TA/PA and have been profitable for several years).
___________________

Quoting profitfarmer
What do you think if there is no mean reversal......
I was talking specifically about coin toss; it doesn't necessarily apply to the markets (some thoughts in myth #22 here).
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