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50% win ratio, 1:1 sl tp, and random entries

  • Post #1
  • Quote
  • First Post: Jun 25, 2019 2:01pm Jun 25, 2019 2:01pm
Dear trader do you think its possible to make profit with a 50% 50% win loss ratio 1:1 tp sl, so to speak random entry no indicator ? With the right money managent?

I would like to start a discussion if such a system is possible to create? I will give some ideas and maybe you can add up some or correct me if you have experience if im wrong.

Im tryna figure out, if a random entry with 1:1 tp sl is possible to be proven , to be working profitable.

I did a backtes with random entry and i figured out the maximimum amount lost in row was 24 trades, in 3 years. So funny fact if i would have give the programm the command to dont trade with money but count the trades and if 23 errors in a row appear then trade money on the 24th trade. My backtest results would be positive.

What i know wanna ask you, do you believe if i would have an ea and lets say give him the command to wait till 4 fail trades (random entry 1:1 ratio) in a row appear without trading money and give him 6 martingales from then on 1:2:4:8:16:32 i would need 11 trades that fail in a row to loose money. So the probability to lose 11 trades in a row is 0.5^11 that is 0.0004.

That means from 10.000 tries i would loose 4. Which would be in money 6x my martingale amount (statistically) so 6x64$ = 384$ should be the average loss on 10.000 tries. So i would need more than >384 winner with my martingale method in profit to be positive in the result ?

I would like to let code an ea and test it but i wanna hear your suggestion before and do you have any eyperience in something similar ? And do you think im right with my math ?

If you also have an idea how to make a good MM system on 50% 50% i would love to discuss further strategies .

Kr
NO
naked trading is like you enter into the wilderness without carrying anything and you only rely on instinct. the forex market cannot rely solely on instinct, many factors influence the movement in the market
Quoting vortexpme
Dear trader do you think its possible to make profit with a 50% 50% win loss ratio 1:1 tp sl, so to speak random entry no indicator ? With the right money managent? I would like to start a discussion if such a system is possible to create? I will give some ideas and maybe you can add up some or correct me if you have experience if im wrong. Im tryna figure out, if a random entry with 1:1 tp sl is possible to be proven , to be working profitable. I did a backtes with random entry and i figured out the maximimum amount lost in row was 24 trades, in...
Because of slippage, commission and / or spread, it will never be 1:1 ratio, anyway with martinagles you are loosing your time, there is no such shortcut.

Basically you are asking if in forex with randomn entries and martingales it is possible to make money, well if it was that easy Forexfactory would not exist because we would all be millionaires already...
LDFX Trading Ltd
  • Post #5
  • Quote
  • Edited Jun 26, 2019 2:41am Jun 25, 2019 10:28pm | Edited Jun 26, 2019 2:41am
Quoting vortexpme
Dear trader do you think its possible to make profit with a 50% 50% win loss ratio 1:1 tp sl, so to speak random entry no indicator ?
Probably not from using these settings.

Random entry techniques are more applicable to diversified divergent trading systems (eg. trend following/momentum breakout styles) that are price following in nature. These are systems that cut losses short and let profits run and have many small losses with occasional very large wins that pay for them all. Given this profit distribution profile, these systems have high positive skew. They are asymmetrically constrained and the profit is unbounded. They harvest alpha from the fat tailed distribution that occurs with liquid instruments in the long term. They need to be diversified as market divergence is unpredictable in nature and there can be long periods between trending conditions. The alpha of divergent systems lies in the exit. These systems are very enduring and long lasting but have volatile equity curves over their lifetimes. These systems operate well when markets diverge away from historic equilibrium. The Pwin of these systems tends to lie between 20-40% with a R:R of >1.5. These style of systems are far harder for the trader to stick to as it is counter-intuitive in nature to cut profits short and let profits run. Drawdowns take time to build up but are quickly removed when markets diverge. Most of the time you are in drawdown.

This is almost the antithesis of convergent systems that apply profit targets and operate off very selective entry conditions. They are predictive in nature operating off the principle that a future profit target is known or expected. Random entries with this style of system are not advised. The alpha of convergent systems lies in the entry. Mean reverting systems, price action traders, TA traders, grid traders, martingale variants and fundamental value-investment systems fall into this category and they are rarely diversified. In fact diversification for convergent systems is a waste of time. An example of a convergent system is where price has taken a large excursion away from a historic mean, and it is predicted that price will revert...... or that an instruments price is significantly lower than its intrinsic valuation and will revert to that estimated value over time. These systems tend to have wide stops or no stops and frequently possess tight profit targets. They have many small wins and occasional large losses. As a result, this style of system tends to possess negative skew. They harvest alpha from the leptokurtic peak of the profit distribution and not the tail of the distribution. They operate well when market conditions are predictable (stable) but fall off the cliff during divergent market phases with consecutive large losses that tend to blow up accounts. You need to continuously adapt your models if you apply these styles. The Pwin of these systems tends to lie above 60% with a R:R of <1.0 but they have an indeterminate and frequently short shelf life. Most traders prefer this style of system as they like to believe they are right more times than they are wrong....however they possess a sting in the tail over the long term. Drawdowns during favorable periods are limited but very quickly build during unfavourable conditions and rarely recover unless a trader adapts and finds new successful styles.
Quoting vortexpme
If you also have an idea how to make a good MM system on 50% 50% i would love to discuss further strategies . Kr
I never ever take trades for 1:1 ratio,

but for those who would, a good way is to have the stop trailing as soon as it gets in positive territory, that way you can reduce your average loss and make profit IF your system has a 50% hit rate at the 1:1 take profit level.
LDFX Trading Ltd
  • Post #7
  • Quote
  • Edited Jun 26, 2019 3:12am Jun 25, 2019 11:58pm | Edited Jun 26, 2019 3:12am
Quoting LDFX
{quote} Because of slippage, commission and / or spread, it will never be 1:1 ratio, anyway with martinagles you are loosing your time, there is no such shortcut. Basically you are asking if in forex with randomn entries and martingales it is possible to make money, well if it was that easy Forexfactory would not exist because we would all be millionaires already...
I agree with LDFX, it is very unlikely that you will get a ratio of 1:1.
edit* It seems the images did not insert properly, I have added them in for the 2nd time

The issue is that "random" entries (ie. flipping a normal coin) does not translate to a random system. Why? The market does not always go from the entry to the ~1:1 target. The first tick up or down after the entry has 50% chance, but after that it is no longer 50% as there is now a 25% chance (50%*50%) to get 2 upticks up if we assume the ticks are equal and so on. It would take many bars to hit either the SL or TP target. While 25 losses in a row can occur with 50% win ratio, it would require a sample size of over 16 million trades to see it happen. A 50% truly random system would be in the range of 9-14 after 500 to 16,000 trades. Adding martingale position sizing to a random 50% system with same $ value targets ($10, red line) in my example below:
Attached Image (click to enlarge)
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In the image above is a typical martingale equity curve of 50% win-rate system gaining or losing $10. Note the TP would be slightly further away to account for spread and commissions. So, already the strategy must have a tiny edge to still be 50% accuracy with slightly higher R:R. The biggest realized drawdown in the above example is ~$3,000 (red) and the expected value is $5 (blue) per trade taken. Now if we start to take the martingale trade on the 4th loss in a row we get the following example from the same equity curve as above:
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot2.png Size: 21 KB



In this above image we see now far fewer trades, but it still has that classic martingale drawdown look. Although the maximum realized drawdown is now ~$600 (red), the average return per trade has been reduced to $0.25 per trade (blue). Essentially, the profit increases in a linear (straight line) fashion, while the loss is exponential (drops off a cliff). This is far more apparent if the martingaleing is started later in the sequence as suggested by the OP. Why? It is reduced as the non-taken trades still make up the total trades count (still 2000 trades in my example for both).

My final takeaway: If you want to destroy an account, use random martingale. If you want to destroy an account more slowly with less profit potential use delayed/ staggered martingale.

Hope this helps with shedding some light on how staggering/ delaying a martingale will affect a strategy's profitability.

Kind Regards,
Tzamo
"Only you can Make the Future you will be proud to be a part of..." -Me
Quoting Copernicus
{quote} Probably not from using these settings. Random entry techniques are more applicable to diversified divergent trading systems (eg. trend following/momentum breakout styles) that are price following in nature. These are systems that cut losses short and let profits run and have many small losses with occasional very large wins that pay for them all. Given this profit distribution profile, these systems have high positive skew. They are asymmetrically constrained and the profit is unbounded. They harvest alpha from the fat tailed distribution...
Welcome back C
Quoting tzamo
{quote} I agree with LDFX, it is very unlikely that you will get a ratio of 1:1. edit* It seems the images did not insert properly, I have added them in for the 2nd time The issue is that "random" entries (ie. flipping a normal coin) does not translate to a random system. Why? The market does not always go from the entry to the ~1:1 target. The first tick up or down after the entry has 50% chance, but after that it is no longer 50% as there is now a 25% chance (50%*50%) to get 2 upticks up if we assume the ticks are equal and so on. It would...
Just a caution for EA and random entries; the random() function need to be seeded everytime you invoke it; otherwise the same sequence of entries are repeated in the backtest.

In the world of programming languages; it is actually impossible to create a random function; because we humans have not found a solution to it yet.
U can be lucky and maybe win some pips but in long time u have all the chance to fail, normally using Indicators u get a 50% probability of chance to win but without any indicator or just opening position randomly u have a lot other variables against u, spread, trend, breakouts, volatility. For example it's a bad idea to trade when is in a breakout zone, or sometimes when the trend is well difined open positions in the wrong way can make u lose lots of money
Quoting alphadude
{quote} Just a caution for EA and random entries; the random() function need to be seeded everytime you invoke it; otherwise the same sequence of entries are repeated in the backtest. In the world of programming languages; it is actually impossible to create a random function; because we humans have not found a solution to it yet.
It's ez to find a random function just use rand and combine it with current time variable thats all. Rand function will give u a random number associated to a unique number
Quoting alphadude
NO


Quoting MonkeyDick
U can be lucky and maybe win some pips but in long time u have all the chance to fail, normally using Indicators u get a 50% probability of chance to win but without any indicator or just opening position randomly u have a lot other variables against u, spread, trend, breakouts, volatility. For example it's a bad idea to trade when is in a breakout zone, or sometimes when the trend is well difined open positions in the wrong way can make u lose lots of money
IMHO, you have more chances without any indicators !
LDFX Trading Ltd
Hmmm.... I don't place much faith in indicators - by their very nature, they're lagging. However, I don't think this can be a winning strategy. For one thing, 1:1 is unrealistic. There's always slippage due to the bid/ask spread (which varies between brokers and even a given broker varies the spread during big-news events like the non-farm payroll). So, it's impossible to actually have 1:1. Also, any big news event will probably blow you out of the water. Martingales are a quick way to destroy your account as well. The odds don't change, just the size of the bets (trades). A sure-fire recipe for disaster. You should at least shoot for 2:1 : that probably won't work either, but it might at least postpone disaster for a while, until you develop an actual game-plan.
  • Post #15
  • Quote
  • Edited 12:55am Jun 27, 2019 12:27am | Edited 12:55am
Considering the market as a whole (and I mean ALL financial markets, forex, stocks (less so!), futures, bonds etc ..) ALL entries are random from the market's perspective.
It makes no difference to the market a a whole if entries are random or follow some strategy.
So, at the market level ALL trades are random. What does that tell us ? the following is one of the most interesting conclusion:

over time the entire amount of aggregated customer funds in all financial markets that can be traded lose by the amount of the transaction cost.
(The brokers' skyscrapers don't build themselves)
  • Post #16
  • Quote
  • Edited 1:39am Jun 27, 2019 1:28am | Edited 1:39am
Quoting Mingary
Considering the market as a whole (and I mean ALL financial markets, forex, stocks (less so!), futures, bonds etc ..) ALL entries are random from the market's perspective. It makes no difference to the market a a whole if entries are random or follow some strategy. So, at the market level ALL trades are random. What does that tell us ? the following is one of the most interesting conclusion: over time the entire amount of aggregated customer funds in all financial markets that can be traded lose by the amount of the transaction cost. (The brokers'...
I do not understand how you can talk about the market's perspective, each entries will shape the market, the market has no perspective at all, it is a reflect of our behavior, so of course the way we trade makes a difference.

Or did I not understand your point ?
LDFX Trading Ltd
50% with 1:1 meh
Necessity knows no law except to conquer
non-repaint ,counter trend ,1:1-2 tp sl
works on forex pairs,indices,shares,oil,gold
Attached Image(s) (click to enlarge)
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Quoting 5aztv88
non-repaint ,counter trend ,1:1-2 tp sl works on forex pairs,indices,shares,oil,gold {image} {image} {image}
would you like to share indicators n tpl?
Yes. I've done it outside of trading. But the trick with forex is getting a true 50/50 system Within acceptable deviation. Show me a robot that closely mimics the outcomes of a coin flip, and I'll show you the money management that will work.
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