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The Black Swan Experiment

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  • Which Option would you choose?
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  • #1
  • First Post: Edited 5:29pm Nov 29, 2017 5:18pm | Edited 5:29pm
I have recently taken it upon myself to undergo an experiment of sorts. I started a couple weeks back with an insignificant amount I don't mind losing ($200) and have been scalping with an ultra-high risk/ultra-high leverage approach. I am trading with 500:1 leverage - any less and this won't be possible - where each 1 pip move represents 2% of my account balance. I have been targeting between 2-3 pips, which after commissions (I trade on ECN) nets about 3.5% per trade. Somewhere between 18-20 trades doubles your account. One losing trade of 40-50 pips (depending on margin requirements) will wipe out the account.

I will state the obvious now... Trading this approach indefinitely WILL at some point result in a loss of the entire balance (hence the thread title).

I know this is nothing new, and I'm sure traders have done this here with varying degrees of success. I started this thread because I am at the first milestone of 20 winning trades, and having doubled the account I am somewhat at odds of how to proceed. Here are the 3 options:

1) Withdraw my initial starting amount of $200. The positive here is the peace of mind that you are henceforth trading with "house money", as you will break even at the very worst. The negative is that you will be starting the cycle completely over.

2) Withdraw a fixed percentage, somewhere in the range of 20-50%, and then go for another cycle. Example: $200 -> $400 then withdraw $80, $320 -> $640 then withdraw $128, $512 -> $1,024 then withdraw $205, $819 -> $1,638 then withdraw $328, $1,311 -> $2,621 then withdraw $524 (at this point that would be 100 trades in a row which is extremely unlikely)

3) Keep going as I have and try for another cycle ($400 -> $800)

My trade explorer below has been filtered to show how the experiment has gone thus far. I have included a poll in this thread... how would you proceed?
  • #2
  • Edited 5:58pm Nov 29, 2017 5:44pm | Edited 5:58pm
You are doing fine; what kind of chart are you using? time based candles?

if you catch a REAL temporal unbalance in price then you can do it forever.. refine the entry point/SL and this will automatically rise you lot size and the compound its even bigger !! but that depends A LOT on how are you analizing/timing your entrys

I have 1 account as a "savings" account where the bulk of my money is; with this one i make a quick 100 bucks and open a new one.. then i trade with a big lot size and compound the crap out of it; then i "withdraw" another 100 bucks from it and start all over with that one (that first 100$ account and this one)

right now i have four "FREE 100 bucks" account compounding and lots of $ waiting for me to open new ones... my aim its to make at least 20 trades with each one and as many 100$ accounts as my conection can handle (sadly not that many)

OH !!! and the money pile up man.. QUICK !! best part its that its free because the accounts are open from the profits; i never touch my real capital, so it never goes down


EDIT: GOTA LOVE THIS FORUM, TONS OF "SPECTATORS" NO ONE SAYS A WORD =)
  • #3
  • Nov 29, 2017 7:01pm Nov 29, 2017 7:01pm
Here is how i would approach this:

1- If the starting balance was something i would not mind to lose, it should not add any peace of mind because it was already there. It would just make me start from 0 again.

2- As the starting balance is something i would not mind to lose, 20%-50% of it would mean really nothing, at least until a good amount of trades in a row. At this point you just slowed the process of growing the equity.

3- This is what i would do. But set a target, a number that means something to you. In my case i would try to get it somewhere 1.5k-2k and end it there.

I know that my prefered option has really low chances of success, but this was just an experiment for fun, right? Well, let's have fun!

Hope my point of view helps.
  • #4
  • Nov 29, 2017 8:56pm Nov 29, 2017 8:56pm
Withdraw my initial starting amount of $200 Trading this approach indefinitely WILL at some point result in a loss of the entire balance
  • #5
  • Nov 29, 2017 10:37pm Nov 29, 2017 10:37pm
Quoting havo
You are doing fine; what kind of chart are you using? time based candles?
I trade on 15M candles but also use 1H and 4H for additional confirmation.

Quoting Whikka
Here is how i would approach this: 1- If the starting balance was something i would not mind to lose, it should not add any peace of mind because it was already there. It would just make me start from 0 again. 2- As the starting balance is something i would not mind to lose, 20%-50% of it would mean really nothing, at least until a good amount of trades in a row. At this point you just slowed the process of growing the equity.

3- This is what i would do. But set a target, a number that means something to you. In my case i would try to get it somewhere 1.5k-2k and end it there.

I know that my prefered option has really low chances of success, but this was just an experiment for fun, right? Well, let's have fun!

Hope my point of view helps.
The thing is - I haven't quite worked out whether there's something to my approach or I'm just gambling and on a heater
  • #6
  • Nov 30, 2017 1:53am Nov 30, 2017 1:53am
Quoting havo
You are doing fine; what kind of chart are you using? time based candles? if you catch a REAL temporal unbalance in price then you can do it forever.. refine the entry point/SL and this will automatically rise you lot size and the compound its even bigger !! but that depends A LOT on how are you analizing/timing your entrys I have 1 account as a "savings" account where the bulk of my money is; with this one i make a quick 100 bucks and open a new one.. then i trade with a big lot size and compound the crap out of it; then i "withdraw" another 100...
Havo

Whats a "temporal unbalance in price"?

Thanks
  • #7
  • Nov 30, 2017 6:35am Nov 30, 2017 6:35am
Hi,

It depends where and what you want to achieve with it.
If you don't mind losing the initial deposit, run with it.
If you can start with less capital, say 100$, then, withdraw that sum and keep running with the account until you can secure your initial deposit and the "lower seed" amount, continue to run until burn or when you feel you want to withdraw.
The smaller seed sum would allow you to start over in case of a burn without actually investing any more of your own money.

I'm not quite sure what you want to achieve here, a steady flow of profits a quick profit or just as an exercise
  • #8
  • Nov 30, 2017 6:46am Nov 30, 2017 6:46am
Fourth option, Take your 400 bucks and run. Highly recommended
When you see it, BET big.
  • #9
  • Nov 30, 2017 9:23am Nov 30, 2017 9:23am
Quoting Rennaissance
Fourth option, Take your 400 bucks and run. Highly recommended
What fun is that???
  • #10
  • Nov 30, 2017 9:38am Nov 30, 2017 9:38am
Try and compound 1:1 with big lot sizes for 10 trades and see the result; thats easy if you are accurate with your entrys wich can give you a high hit rate
  • #11
  • Nov 30, 2017 9:43am Nov 30, 2017 9:43am
Quoting Reamasesa
I'm not quite sure what you want to achieve here, a steady flow of profits a quick profit or just as an exercise
Honestly, I'm not quite sure what I want to achieve here either. A big part of this is trying to determine whether my entry strategy is legitimately high winrate or not. It's hard to backtest because even though it does have clearly defined rules, there are times where I won't take a signal for various reasons.

What I'd LIKE to achieve is 100 straight wins for $10K, withdraw half and then use the remainder to make ~$10K a month. But that feels a bit delusional
  • #12
  • Nov 30, 2017 9:47am Nov 30, 2017 9:47am
Quoting havo
Try and compound 1:1 with big lot sizes for 10 trades and see the result; thats easy if you are accurate with your entrys wich can give you a high hit rate
I'm targeting 2-3 pips... If I go 1:1 r/r there's no way I'll have anywhere near as high a hit rate and with big lot sizes I'd get wiped out in no time.
  • #13
  • Nov 30, 2017 4:23pm Nov 30, 2017 4:23pm
Quoting Nico1359
{quote} Honestly, I'm not quite sure what I want to achieve here either. A big part of this is trying to determine whether my entry strategy is legitimately high winrate or not. It's hard to backtest because even though it does have clearly defined rules, there are times where I won't take a signal for various reasons. What I'd LIKE to achieve is 100 straight wins for $10K, withdraw half and then use the remainder to make ~$10K a month. But that feels a bit delusional
Not delusional at all, I'm doing it myself with various degrees of success and mostly failures
I would suggest going with multiple accounts or increasing the lot size, that way, you'll get profit enough to achieve your goal(s) with less number of trades.
  • #14
  • Nov 30, 2017 6:53pm Nov 30, 2017 6:53pm
Quoting Nico1359
{quote} Honestly, I'm not quite sure what I want to achieve here either. A big part of this is trying to determine whether my entry strategy is legitimately high winrate or not. It's hard to backtest because even though it does have clearly defined rules, there are times where I won't take a signal for various reasons. What I'd LIKE to achieve is 100 straight wins for $10K, withdraw half and then use the remainder to make ~$10K a month. But that feels a bit delusional
Winrate its directly connected to SL/TP and those 2 are directly connected to the entry point; play with those and you can boost your winrate, you can even turn an "average" strategy into a wining combo =)

"Maybe" Try to refine or play with that: SL/TP levels (you dont need a big trend either) and the entry point.. see how much it can boost the hit rate


also you dont NEED 100 Straight wins to get 10K$.. think about it, the higher the win rate the higher the lot you can put per trade, the higher the return and compound, etc etc.. Trust me; i can easily hit 1:1 anyday/time like nothing BUT if i try to go to a higher return (1:2 or higher) the win rate goes down a little AND then i have to lower the lot size, wich in turn lower my profit, wich in turn lower my compound, then i have to trade more, etc etc wich its EXACTLY what noobs do: they want to put max 1% per trade then aim for 1:5436 risk return ratio so they need a HUGE move evey time in order to make any kind of money, and overcome the 3 million small loses they get, etc etc..

think like a trading championship

BUT to do this you need SKILLS wich it looks like you have already, you just need a little change in perception of risk vs return
  • #15
  • Dec 1, 2017 1:00am Dec 1, 2017 1:00am
Why not drop down to 1m charts for more precise entries and tighter SL of say 10 pips. No need for 15m candles when targeting 1 or 2 pips.

When account doubled, withdraw half your winnings and repeat. This will grow trading account and winnings steadily but quickly as you increase lot size to 2% per pip of new balance,

Keep going I think you have a good chance of avoiding the Black Swan
When all conditions are met - Enter trade - sit back and FRET !!!
  • #16
  • Edited 1:34am Dec 1, 2017 1:15am | Edited 1:34am
Hi Nico1359,

Nice experiment. If you are going to be true to testing an ultra-high risk & leverage approach I think you owe it to yourself to keep going full tilt and see how big the account gets before you - as you have already correctly identified - inevitably blow the account. It'll be a great test of your nerve and at least that way you won't be tempted to try it for real!
Good luck!
  • #17
  • Dec 1, 2017 1:48am Dec 1, 2017 1:48am
Quoting jsf
Why not drop down to 1m charts for more precise entries and tighter SL of say 10 pips. No need for 15m candles when targeting 1 or 2 pips. When account doubled, withdraw half your winnings and repeat. This will grow trading account and winnings steadily but quickly as you increase lot size to 2% per pip of new balance, Keep going I think you have a good chance of avoiding the Black Swan
I'm just not a fan of trading on ultra low timeframes, even when scalping. Plus I already back tested my approach on 15M and was happy with it.
  • #18
  • Dec 1, 2017 11:25am Dec 1, 2017 11:25am
Ya know... When I started this, I said to myself, “A big plus to this is limited exposure in the market - after all, you’re just going for a couple pips 2 to 3 times a day. The chances of getting caught up in a big unforeseen news event will be pretty slim.”

The USD starts rocking along, I spot a signal to go long USD/CHF, and immediately after the news breaks about Flynn.

I made the call to get out after about -30 pips as this was definitely going to be the Black Swan - no two ways about it. And seeing there was still momentum, I got back in shorting the USD to try and get a little back.

All in all, I ended up pretty close to where I started two weeks ago. Not much to say. You run good, you run bad.

But not discouraged. I’ll pick it back up next week.
  • #19
  • Dec 1, 2017 3:14pm Dec 1, 2017 3:14pm
Hi, Your experiment reminds me of something I tried a while ago. My basic method operates intraday on a 10pt stop with a 10+ pt target but I was always tempted to take the seemingly easy 3-5pts that the market appeared very frequently to offer at some point on each trade. So I ran two parallel accounts taking the same trades but with one taking 3-5pts whenever offered and the other holding out to close on any expansion move netting at least 10pts. In both cases the stop was fixed at -10pts.

The results were interesting. I could often achieve 15+ successive winning trades on the 3-5pt method yet at the end of the day the original 10+pt method won hands down. The basic problem was the 3-5pt method required a win rate of 70+% just to break even and long winning streaks were wiped out by a short string of losses - something the equivalent of your black swan events in this context. The 10+pt method just didn't have this problem.

It taught me always to hold on to the winners because squeezing the full profit potential out of them is what pays for the losers and leaves you a net profit. The cost of doing this, though, is mostly emotional - seeing small profits evaporate into a loss. It hurts! But you just have to harden yourself to accept this is the way the game has to be played if you want to come out on top over the long haul.

Essentially, cut the losers, run the winners is not wrong and I do strongly believe whatever method you employ it has to embody this concept in some way if you want to win out long term.
  • #20
  • Dec 3, 2017 3:28am Dec 3, 2017 3:28am
Quoting marcmarc
I do strongly believe whatever method you employ it has to embody this concept in some way if you want to win out long term.


I have been tempted to close trades at 10pips and less assuming that I'm still ending the day profitable, but few bad trades easily wiped out all the gains. I've done this over and over again on a live account until my acc balance stood at 5$ from 200$ and I was trading with 0.01lot mostly sometimes 0.05lot. So I've seen it first hand.

And I also struggle holding trades, but since I've experienced it all with with real cash I now know with 100% that if I don't keep my winners bigger than my losers I'll never come out on top.

The thing that we as traders have to realize is that, money can be made trading (lot of it) but are you willing to sit through the waves ? price doesn't always go up or down continuously in a smooth trajectory there will be rejection levels either support or resistance, but if you're trading along with the momentum FEAR NOT ! your position will survive the minor waves, but if you are trading against the momentum my advice is to halt trading real cash and revert back to demo until you've learnt to trade with the momentum.

I am still learning as we speak, but I'm happy that I've realized this simple truth - RR matters !!! keep your TP open and SL fixed move your SL to BE and keep your trade running until there's an indication that price is going to reverse - price leaves marks if it wants to reverse , random moves against your position wiping out your SL rarely happens if you're trading with the momentum and have placed your SL at an optimum point.
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