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  • #21
  • Jan 8, 2018 9:10pm Jan 8, 2018 9:10pm
What a great exercise to start the new year - Happy New Year and prosperous trading to all!
  • #22
  • Jan 8, 2018 10:24pm Jan 8, 2018 10:24pm
I added this to the first post:

Clearly there is no strategy here yet. Entries are random.
A major point of doing this is to put aside most if not all of your assumptions and biases regarding trading. One example I can think of is "trading with the trend". It is difficult because most of us including myself have deeply ingrained beliefs regarding trading. So as ridiculous as it may seem I chose the coin flip as an entry method to eliminate any assumptions about why one should sell or buy. By choosing swings as a way of placing a stop loss I've already introduced an assumption or bias into this but I'm willing to accept that for now.

It's probably apparent to many that I'm making an attempt to drive home the importance of money management to include R:R and trade size as THE most important aspect of beginning a potential trading lifestyle. I believe the 95% that fail in trading are highly likely to either diminish the importance of money management or completely consider it irrelevant.

I don't know where this will go but I thing it can be an interesting and perhaps profitable learning experience.
  • #23
  • Jan 9, 2018 4:45am Jan 9, 2018 4:45am
Interesting

The first start of any science: what do I see, and what does that mean?
In which seeing nothing also is a valid result.
Do statistics form part of science, or are they the oposite of real science?
  • #24
  • Jan 9, 2018 8:48am Jan 9, 2018 8:48am
As I think about what kind of trading strategy I would like to end up with, I know I want something that requires a minimum amount of screen time. Given that the following seems important:

1. I would like to use limit orders as the dominant form of entry.
2. I don't want to second guess my entries. In other words once an entry has occurred it must go to profit target or stop loss.
3. Once a trade has hit profit or stop loss I would like to be able to look at the chart and identify the next trade. This may occur immediately or it may occur later as a limit order. This does not necessarily mean an "always in the market" strategy.
4. There will also need to be criteria to trash a limit order that does not get filled.

Here's a follow-up on trade 1.

Attached Image (click to enlarge)
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  • #25
  • Jan 9, 2018 11:08am Jan 9, 2018 11:08am
Hi Winston,
I tried a few simulations somewhat similar to this a few years ago. I used end of day daily prices and ran different combinations of stop distances and return:risk requirements. Like you, I did this on a set-and-forget basis, the trade could only be closed by hitting the fixed stop or target. I got rid of directional bias by running each simulation twice on the same data, one long always and one short always.

The results of all that? If I summed up all the portfolios the overall net result was roughly breakeven. So disappointing!
The essential problem was that a 3:1 R:R had about a 25% success rate so 1 winner 3x as big as each of the 3 losers that went with it on average; a 1:1 ratio had about a 50% success rate and so on. It just didn't get anywhere, what was won on the swings was lost on the roundabouts. There were also some pretty scary drawdowns on the bigger R:R ratios.

I concluded, sadly, that this suggested most all mechanical systems were not going to work. I believe consistently profitable traders are profitable because they create an edge through better trade selection and/or better cutting losers/running winners, both down to their discretionary skills; and always very strict risk control.
I guess the real question then is where the superior discretionary skills come from: intuition, experience, psyche, etc, etc. Your idea is as good as mine!

Anyhow, great idea, best of luck.
  • #26
  • Jan 9, 2018 11:35am Jan 9, 2018 11:35am
Hi Winston,

As ProfitFarmer suggested I don't believe 10 trades are a large enough sample to derive any meaningful conclusion form it, but you may already know that.

I carried out such an experiment a few years ago with a considerably larger sample size.

I don't want to spoil the fun for you by sharing the result, unless you want me to.
  • #27
  • Jan 9, 2018 5:34pm Jan 9, 2018 5:34pm
This thread is about a common sense approach with a twist to methodically arrive at a trading strategy. It is not about performing statistically significant operations to arrive at a trading strategy. I'll leave that to all of you back-testers, EA developers, etc. etc. So don't worry about bursting my bubble because I'm using only 10 trades to start tweaking. I'm well aware of exactly what I'm doing. So you don't have to second guess my intentions. Reality is that each one of us most likely looks at every single trade as a learning opportunity. I bet most of us even tweak our own methods even after one trade...probably a loss. Some tweaks are conscious and others are not. So relax and enjoy the ride or move on to something that is better suited to you. Take care.
  • #28
  • Jan 9, 2018 7:18pm Jan 9, 2018 7:18pm
I'm watching this first trade with a little anticipation. Thought it might hit the profit target. Now it's turned back a bit and is hovering. Maybe it's just me since I'm the one doing this but I admit I'm a little anxious for this trade to conclude one way or the other. Do you thing this happens often in most traders everyday trading? Are we willing to be patient and let it play out or do we get out early with less than our planned R:R. I guess if you don't have one you might already be out. Hmmm????
Attached Image (click to enlarge)
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  • #29
  • Jan 9, 2018 7:20pm Jan 9, 2018 7:20pm
Quoting Winston Reed
Going to have a little fun and build a system from scratch as if I was a new trader with limited knowledge. I have a $5,000 virtual account. The rules will be as follows: 1. I will enter at least one trade per day and it will be a random entry by flipping a coin. Heads I buy, Tails I sell. 2. I will trade only the EURUSD H1 chart using no indicators. 3. I will use the previous swing as a stop loss as long as the stop does not exceed 100 pips or 2% of my $5,000 account as each pip will be $1. If the previous swing is too large then I can use my maximum...
LOL...are you still partying the New Year?me too
The last man standing
  • #30
  • Jan 9, 2018 7:38pm Jan 9, 2018 7:38pm
Quoting G.Kad
{quote} LOL...are you still partying the New Year?me too The last man standing
LOL. I think I'm always partying brother!
  • #31
  • Jan 9, 2018 8:06pm Jan 9, 2018 8:06pm
Quoting Winston Reed
I added this to the first post: Clearly there is no strategy here yet. Entries are random. A major point of doing this is to put aside most if not all of your assumptions and biases regarding trading. One example I can think of is "trading with the trend". It is difficult because most of us including myself have deeply ingrained beliefs regarding trading. So as ridiculous as it may seem I chose the coin flip as an entry method to eliminate any assumptions about why one should sell or buy. By choosing swings as a way of placing a stop loss I've already...

I think the trouble I have had with coin flip trading is that I presumed a balanced coin. What I found is that the coin in trading is weighted towards head or tails. Now a newbie will not know this, but without this information, there is no way to stop the newbie from selling into a fundamental bull trend and vice versa, they will die a quick death.
If you are good at something, never do it for free--Joker
  • #32
  • Jan 9, 2018 8:11pm Jan 9, 2018 8:11pm
Quoting Winston Reed
I'm watching this first trade with a little anticipation. Thought it might hit the profit target. Now it's turned back a bit and is hovering. Maybe it's just me since I'm the one doing this but I admit I'm a little anxious for this trade to conclude one way or the other. Do you thing this happens often in most traders everyday trading? Are we willing to be patient and let it play out or do we get out early with less than our planned R:R. I guess if you don't have one you might already be out. Hmmm???? {image}
Nobody cares but... IMHO it got pretty good chances for TP to be hitted today... actually, I'm keep on selling Eur, Gbp and Eur/jpy for 2 days in a raw... It's actually bridged pretty decent return, I can close them now and call it a month, lol... Let's see what today gonna bring.
  • #33
  • Jan 9, 2018 10:26pm Jan 9, 2018 10:26pm
Quoting jmn5611;106552'm98
{quote} I think the trouble I have had with coin flip trading is that I presumed a balanced coin. What I found is that the coin in tradin is weighted towards head or tails. Now a newbie will not know this, but without this information, there is no way to stop the newbie from selling into a fundamental bull trend and vice versa, they will die a quick death.
I'm using an app for the coin flip. The coin flip is meant to eliminate making a decision on whether to sell or buy. Making such a decision involves strategy and I'm essentially starting with no strategy.
Money management is the only "strategy" for the first 10 trades.
  • #34
  • Jan 9, 2018 11:10pm Jan 9, 2018 11:10pm
Cool Winston.

I also prefer random. I've worked with various lines in the sand. Which lines, doesn't really matter much. R:R is, of course, always important. The formula I prefer for risk is 1:? . My trades all have a 22 pip risk, a trail of 35, and the target is only met by how far price pulls back. In the various methods I use and test, the win/loss is rarely over 50%, but the averages run approx. +45 and -17. If a trade sets up, I just take it, no matter what the upcoming news is. I entered the UsdCad Friday, during NFP for a very quick 50p.

The market will do what it does, regardless of what is showing up on the charts or in your brain. Fixating on specific R:R drives me crazy. Like trying to paint a fart green.

So far, I’m only confident using this method on UsdCad (favorite), EU, NU, AU, AJ.

This provides 3 to 10 trades most weeks.
  • #36
  • Jan 10, 2018 8:07am Jan 10, 2018 8:07am
Trade 1 stopped. -20
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  • #37
  • Jan 10, 2018 8:09am Jan 10, 2018 8:09am
Trade 2. Coin flip: TAILS. Sell.
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  • #38
  • Jan 10, 2018 8:11am Jan 10, 2018 8:11am
Defining the swing to tuck the SL behind is something I'll address after the 10 trades. I can see there is some subjectivity to this. It needs to be objective. I have some ideas but not going to change anything until the 10 trades are done.
  • #39
  • Jan 11, 2018 9:51am Jan 11, 2018 9:51am
Quoting Winston Reed
Trade 2. Coin flip: TAILS. Sell. {image}
Trade 2 stopped -65
Total -85
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  • #40
  • Jan 11, 2018 9:57am Jan 11, 2018 9:57am
Trade 3. Coin flip tails again!!!. Sell.
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