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

  • #21
  • Jun 27, 2019 3:07am Jun 27, 2019 3:07am
RRR x Probability of Outcome with correct MM is what keeps you in the game on the long run.

You can be wrong 20 times, if your RRR is extremely high, you will stay in the game.

Regards,
Max
  • #22
  • Edited 6:31am Jun 27, 2019 6:15am | Edited 6:31am
Quoting LDFX
{quote} 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 ?
"the way we trade makes a difference"
It makes a difference to the individual trader. It makes no difference to the market

If you could see a market with beeps going on and off for every trade that is placed it would appear as random noise
  • #23
  • Jun 27, 2019 8:01am Jun 27, 2019 8:01am
Quoting silentlip
{quote} would you like to share indicators n tpl?
it is not free.if you want more information DM me.
  • #24
  • Jun 27, 2019 9:27am Jun 27, 2019 9:27am
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...
[/b]
Copernicus,
My experience of random trading has been a rewarding one and mirrors what you have described .
https://www.forexfactory.com/showthread.php?t=921297

I traded with no Stoploss and tried to find ways to manage drawdown.
I found using margin level per cent as well as number of open positions helpful .
My experiment was to capitalise on momentum trading unleashed by Brexit events. It paid off to do unguided random trading of GY purely on the basis of momentum . MY Trading Explorer captured 82 days of trading surrounding Brexit events from end Jan to end March and shaking off drawdown between April to May.
Practice makes a person perfect
  • #25
  • Jun 27, 2019 3:27pm Jun 27, 2019 3:27pm
Martingale work with two conditions :
1) You have a 100.000$ account
2) you risk 0.10% per entry (100$)
Money moves the market, not an indicator.
  • #26
  • Jun 27, 2019 4:25pm Jun 27, 2019 4:25pm
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...
Of course is not possible. Trading is not free, if you have real random system you will slowly lose your money, thanks to the spread (and commissions and swaps)

Every system that involves martingale in some form will eventually (1 to 2 years max) blow your account. You will for sure have a losing streak higher than 11 trades, since the market is not random and from time to time you have big directional moves. (and even if it is random "The longest recorded streak of one color in roulette in American casino history happened in 1943 when the color red won 32 consecutive times")

No money management can make losing system wining, the opposite (making wining system lose with bad MM) is quite possible. You need to have edge.

I personally use systems with even lower than 50:50 win rate, it is possible to have very good results with such systems, such systems are also more resilient and robust.
  • #27
  • Jun 27, 2019 5:43pm Jun 27, 2019 5:43pm
Quoting simnz
{quote}[/b] Copernicus, My experience of random trading has been a rewarding one and mirrors what you have described . https://www.forexfactory.com/showthread.php?t=921297 I traded with no Stoploss and tried to find ways to manage drawdown. I found using margin level per cent as well as number of open positions helpful . My experiment was to capitalise on momentum trading unleashed by Brexit events. It paid off to do unguided random trading of GY purely on the basis of momentum . MY Trading Explorer captured 82 days of trading surrounding...
Interesting approach S. Provided that you can manage risk, preserve your capital and can tolerate long-winded drawdowns then you can stay in the game a very long time with methods such as these and slowly build the bank. :-)
  • #28
  • Edited 8:51pm Jun 27, 2019 8:17pm | Edited 8:51pm
I wasn't going to mention anything about this topic but big words and twisted explanations and the plethora of colorful NO's got me. It is amazing how many clueless trades are around doling out advice. I don't even know what ' diversified divergent trading systems' means. Oh is it like 'trend following/momentum breakout styles'? I thought random entries were random entries which means you enter pairs anytime, any trend any pair and for no reason. Similar to the monkey throwing darts at the wall with a random list of pairs written all over it.

News piece: The 'fat tail' conundrum and 'danglers' which were the topic of many discussions a decade ago have been solved...at least indirectly.

Yes, I am speaking in code. No, I'm not giving away anything about the system other than no SL, so I don't care about 1:1 sl/tp. How about 0:1? lol. For none believers who are going to ask me for TE n MFB, well, sorry, you won't get those but I am open to a help a professor or an academic who wants to prove that the monkey theory works or wants to prove that the fx market is random BECAUSE it responds to random entries.

This EA with random entries ran from 01/15/19 until 05/31/19. No SL. SL is for losers. (I wrote that for LDFX who believes so deeply in SL use). I shut it down because: Too many trades (tzmo should like the almost 10K sample size tho), too many open positions and not being profitable enough for my taste (2% in 2.5 months not enough). I turned on the platform carrying the demo just now and it entered a few trades as if it had never been shut off. I may or may not run it again. Obviously it doesn't mind being off for a whole month.

That's all you get, YES it is very much possible. Now you can throw away all your FA and TA because the market responds quite well to random entries because the market itself is random overall. However, more precise entries of course will yield better profits so, get those TA's back on the charts and trade the market for a reason for more profit.

Ignore the NO's on this thread and the big sophisticated terms...they do not have a clue what they are talking about. Notice that my chart doesn't have ' volatile equity curves' or 'negative skew' and I doubt the markets have diverged away from historic equilibrium.....

My god..I am glad I don't talk/write that way or I would shoot myself!
Attached Image (click to enlarge)
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  • #29
  • Jun 27, 2019 8:32pm Jun 27, 2019 8:32pm
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...

Oh come on LDFX...stop it!
  • #30
  • Jun 27, 2019 8:49pm Jun 27, 2019 8:49pm
Quoting OutThere
Notice that my chart doesn't have ' volatile equity curves' or 'negative skew' and I doubt the markets have diverged away from historic equilibrium..... My god..I am glad I don't talk/write that way or I would shoot myself! {image}
Yes I was quite surprised considering your average loss was -$4.31 with an average win of $1.86 which is negative skew.

Your floating P/L at -$5,223.20 represents a current drawdown of 5.10% on your equity which is not represented in your equity curve as it simply reflects closed positions and is representative of a grid or martingale effort. Your nice linear equity curve is symptomatic of risk warehousing which is a popular technique used by retail vendors to make things look pearly.

In fact considering your closed PL is $7,608.45, with a floating PL of -$5,223.20 I can understand why you need such a hefty equity position of $107K to allow for margin requirements.
  • #31
  • Jun 27, 2019 8:55pm Jun 27, 2019 8:55pm
Quoting Copernicus
{quote} Yes I was quite surprised considering your average loss was -$4.31 with an average win of $1.86 which is negative skew. Your floating P/L at -$5,223.20 represents a current drawdown of 5.10% on your equity which is not represented in your equity curve as it simply reflects closed positions and is representative of a grid or martingale effort. Your nice linear equity curve is symptomatic of risk warehousing which is a popular technique used by retail vendors to make things look pearly. In fact considering your closed PL is $7,608.45, with...
Fair enough but the account is in profit and the method is profitable. That is what the OP is asking: Is it possible? YES it is. Does it have to be pretty? No, not really but this ain't ugly either.

The most DD of this system has been $6201 and the most margin used has been $406. That means it would have run the same with 10K, so 100K deposit for this is overkill.
  • #32
  • Jun 27, 2019 9:00pm Jun 27, 2019 9:00pm
Quoting OutThere
{quote} Fair enough but the account is in profit and the method is profitable. That is what the OP is asking: Is it possible? YES it is. Does it have to be pretty? No, not really but this ain't ugly either. The most DD of this system has been $6201 and the most margin used has been $406. That means it have run the same with 10K, so 100K deposit for this is overkill.
You caught me on a bad day. I like big words :-)
  • #33
  • Jun 27, 2019 9:20pm Jun 27, 2019 9:20pm
Quoting Copernicus
{quote} You caught me on a bad day. I like big words :-)
Ok but can u do me a favor and define "diversified divergent trading systems" that include trend following/momentum breakout?

I mean what is divergent about trend following? If you are a trend follower, you follow the trend and that is that. If you are into trend divergence, then you are not a trend follower unless a change in trend is defined as the divergence. If so, that is already included in the meaning of trend follower. Also, if we are talking random, how does trend following or momentum breakout enter the concept here?
  • #34
  • Jun 27, 2019 9:29pm Jun 27, 2019 9:29pm
Well there's no correct answer to this really
End of the day everyone of us retails are just trying to get a piece of cake from the market.
No matter how the Risk management is, no stop loss tight stop loss, whatever indicators, a system that makes money is a good system

Important notes are
1. Now you have a hypothesis, you need a SYSTEM for it
2. Validate your hypothesis through back test/forward test
3. Test your efficiency for the system
  • #35
  • Jun 27, 2019 9:41pm Jun 27, 2019 9:41pm
I'm not sure why we're still getting no's. Just because you don't know how, doesn't mean someone else doesn't know. It's all about controlling the flow of money. You don't even need pyramiding or fat tailing, though, yeah, some have solved that.

But seriously. Give me a system that opens 50% trades Long for fixed profit and loss targets. and 50% of the trades short with the same fixed profit and loss target, in a non trend environment IE random distribution and I will most certainly make money with it. It's not as easyt at it sounds to make a 50/50 system though in fx because of the tendency to trend or range. So getting it to be truly random and 50/50.. I haven't figured that out. But haven't really tried either

Anyway.. give me a 50/50 ea, less than 3% transaction costs, and I will add my money management and give it back to you as long as you don't share it with anyone.
  • #36
  • Edited Jun 28, 2019 6:47am Jun 27, 2019 9:49pm | Edited Jun 28, 2019 6:47am
Quoting OutThere
{quote} Ok but can u do me a favor and define "diversified divergent trading systems" that include trend following/momentum breakout? I mean what is divergent about trend following? If you are a trend follower, you follow the trend and that is that. If you are into trend divergence, then you are not a trend follower unless a change in trend is defined as the divergence. If so, that is already included in the meaning of trend follower. Also, if we are talking random, how does trend following or momentum breakout enter the concept here?
You can be a trend trader but not a diversified trend trader. For example you can trade a single market with a trend following system that cuts losses short and lets profits run....but you are unlikely to achieve long term success as the trending condition that offers significant returns is a rare and unpredictable event. Some markets offer very little trending opportunities over the last 20 years or so while others may have only 1-3 occurrences per year. The bottom line is that it is the market which determines your success or not and not your trend following/momentum breakout system. If markets don't trend then you just spin the wheels and slowly build the drawdown despite the effort placed in system design. In fact the success of diversified trend following systems is predicated on how you preserve your capital as all trending systems should catch trends when they occur. Markets trend at unpredictable times and there can be long periods of fairly stable equilibrium to the market condition where 'significant' trends offering very high R:R do not exist.

Diversification is key to capturing strong trends as 'significant' trends that offer large wins to pay for the many small losses along the way are few in number and unpredictable in nature. Diversification also allows you to benefit from superimposing return streams (from different markets) which help to dampen random components of your equity curve by destructive interference.

For example let's say you have two different return streams over the same time interval from trading two different markets. Most of the trade results are from random outcomes and are represented theoretically in the spreadsheet below as either $10 win or -$10 loss. There is one result in both return streams where two fairly highly correlated markets were diverging (strongly trending away from equilibrium) and give rise to good wins of $75 and $125 respectively (highlighted in pink). Think of these good wins as the real signals in an otherwise random distribution of returns.

Attached Image (click to enlarge)
Click to Enlarge Name: Capture.PNG Size: 5 KB


Notice the impact of superimposing the return streams on top of each other through trading a diversified portfolio. You will see that the random results can be offset (highlighted in yellow) as random outcomes by definition are not correlated. What this does at the the portfolio level is to amplify the signal to noise ratio. This is why diversification with a portfolio of uncorrelated return streams offers a free lunch to your trading edge. Real signals of positive correlation amplify portfolio returns while random results dampen returns contributing to lower drawdowns.

When I refer to divergent and convergent I am talking about two broad patterns of market condition. The idea is about mixing two features of the market which is the propensity of the market to be in equilibrium, and the propensity of the market to transition to a new equilibrium.

During fairly predictable times of market equilibrium predictive convergent methods work such as mean reversion, TA, price action, grid trading and martingale approaches. They rely of a repeatable pattern or condition which is symptomatic of markets being in equilibrium. When price ventures away from that equilibrium, it is anticipated to return to that equilibrium. Medium to long term trend following techniques rarely do well in these conditions (such as the past 10 years or so since the GFC with central bank intervention buying the dips and selling the tips).

However when markets are transitioning to new equilibrium levels, they are said to 'diverge away' from the prior condition. This is when trend following and momentum breakout techniques can make their bonanza. That is why they are referred to as divergent strategies. You cannot anticipate these transitions due to the complexity and fragility of financial markets....but if you have a diversified strategy that trades long or short and you wait for the significant move away from equilibrium and jump on board with tight stops, no profit target and a trail in place, you can ride them for as long as they last. When these rare unpredictable events occur, you may get the sweet pay day that makes all the pain worth it.

As a side note, divergent traders do not predict future price...but they follow price. They take all trade setups and regard Type 2 errors (errors arising from missing an opportunity) as a sin. They need to capture all significant trends as they simply do not know which one will be the big winner. This is different to those that call them selves trend traders but wait for retracements before entering a trend. You can miss some of the biggies this way....and this type of trend follower mixes aspects of prediction with price following.

People who like these styles of trading owe their success to only a handful of major winners over their lifetimes.....but when you speak to this style of trader who has been very successful, it is usually the handful of 'mega events' that define their success story.....the Pareto principle in action. The vast majority of other times they are in drawdown or churning their wheels.

In terms of whether random entries work in diversified trend following systems.....yes they do as diversification increases the signal to noise ratio allowing this style of strategy to be turned on 24/7 without incurring significant drawdowns while waiting for divergence. They key element of this style of system is the exit which cannot be random and which must be unbounded in nature allowing profits to run for as long as the market transition takes. Trailing exits are therefore a necessity but random entries are perfectly acceptable provided you are widely diversified. This style of system therefore predates on the fat tails that may exist in a market attributed to periods when markets exhibit collective crowd behaviour. At all other times they spin their wheels and slowly build up drawdowns.

....anyways, I hope that explains things a bit better. :-)

Cheers
  • #37
  • Jun 27, 2019 10:18pm Jun 27, 2019 10:18pm
Quoting Copernicus
{quote} You can be a trend trader but not a diversified trend trader. For example you can trade a single market with a trend following system that cuts losses short and lets profits run....but you are unlikely to achieve long term success as the rare trending condition that offers significant returns is a rare and unpredictable event. Some markets rarely have them at all.....others may have only 1-3 occurrences per year. The bottom line is that it is the market which determines your success or not and not your trend following/momentum breakout system....
Well. ok, thx for the explanation. I think I need to read it a couple of times but we are talking about random entries in this thread. That means 1st trade could fall in line with a trend. 2nd entry will be going against that trend and the 3rd one will fall smack in the middle of a consolidation and so on over and over again. Now if you mean that a trader trying to make random entries a success should do it using several instruments and hope that if all these random entries added up will help the sum total, then I can relate, however, that could backfire as well. What if all your chosen instruments tank in relation to your trades? You get extra DD. The opposite is true too. That puts us back into the random pot. You would be hoping that since the market is random (in my view), the randomness of it all will bail you out if in trouble. In that case, no point lining up instruments that by nature will rise and fall in opposition to each other because that would be too much engineering things and it will no longer be random.


I have decided that your way of thinking is way different than mine. " cuts losses short and lets profits run" is not the way I operate and relying on a few huge profitable trades is not me. "wait for the significant move away from equilibrium and jump on board with tight stops, no profit target and a trail in place" etc. etc. Not me either. I think we went to different trading schools. lol.
  • #38
  • Jun 27, 2019 10:27pm Jun 27, 2019 10:27pm
Quoting OutThere
{quote} Well. ok, thx for the explanation. I think I need to read it a couple of times but we are talking about random entries in this thread. That means 1st trade could fall in line with a trend. 2nd entry will be going against that trend and the 3rd one will fall smack in the middle of a consolidation and so on over and over again. Now if you mean that a trader trying to make random entries a success should do it using several instruments and hope that if all these random entries added up will help the sum total, then I can relate, however, that...
Here is a 21 year test undertaken by Jez Liberty on a portfolio of currencies and futures using a random entry condition of flipping a coin for short or long with a trailing stop condition and occasional re-balancing. Pretty good overall results.

 

  1. The system first “tosses a coin” to decide whether to go long or short the market.
  2. An initial stop is set below/above the entry price at a distance equal to a fixed multiple of the volatility measure.
  3. That entry-stop distance is used to calculate the position size, so that the risk per trade (amount lost if trade gets stopped out) is equal to the fixed percentage of account equity.
  4. Every day, the trailing stop is adjusted so that it is never further than the fixed multiple of the volatility measure. The stop always gets closer to the market and never gets adjusted further away from the market (i.e. if the market turns back toward the stop, the stop level does not change).
  5. When the position hits the trailing stop level, it gets closed and a new position is open. The direction of that new position is again determined by a new coin-toss.

Attached Image (click to enlarge)
Click to Enlarge Name: Capture.PNG Size: 63 KB


...more here.
  • #39
  • Jun 27, 2019 10:47pm Jun 27, 2019 10:47pm
Quoting Copernicus
{quote} You can be a trend trader but not a diversified trend trader. For example you can trade a single market with a trend following system that cuts losses short and lets profits run....but you are unlikely to achieve long term success as the rare trending condition that offers significant returns is a rare and unpredictable event. Some markets rarely have them at all.....others may have only 1-3 occurrences per year. The bottom line is that it is the market which determines your success or not and not your trend following/momentum breakout system....
It's all good in theory and in principle I'm also big fan of diversified trading systems. The problem however is that today the Forex market is too erratic and slow and these necessary "mega events" simply never happen on a large enough scale. With such low interest rates and the global reduction of leverage FX is losing it's attractiveness and the big sharks are moving back to the stock markets or to some alternative exotic instruments like crypto and options.

Historically the stock market was and is THE PLACE to apply diversified trend following. This is where the whole idea started anyway, more than a century ago.
The stock prices traditionally and by definition have the tendency to go up. While FX is mostly mean reverting and the smooth trends never last long enough.

Another point which you did not mention is that aggressive pyramiding(additional leverage) is also necessary in order to extract any meaningful returns from the "mega events" aka the fat tails. Without pyramiding, the few big winners are only big enough to cover the long strings of losses. Best case scenario you make only a little bit of profit. Simply not worth the effort.

Another thing worth mentioning is that the diversified approach is effective only if the markets in the portfolio are not correlated! This alone is a big problem in FX because the pairs show relatively high correlation.

With all that being said I'm always open to new ideas. If you have something which is new or unknown to me, I'm willing to put the work (for free) to turn it into reality. Simply outline a strategy which you believe have the potential to be profitable and will write the code in mql4 or mql5 and we can make all kinds of tests. So we can prove or disprove the concept.
  • #40
  • Jun 27, 2019 10:54pm Jun 27, 2019 10:54pm
Quoting Copernicus
{quote} Here is a 21 year test undertaken by Jez Liberty on a portfolio of currencies and futures using a random entry condition of flipping a coin for short or long with a trailing stop condition and occasional re-balancing. Pretty good overall results. The system first “tosses a coin” to decide whether to go long or short the market. An initial stop is set below/above the entry price at a distance equal to a fixed multiple of the volatility measure. That entry-stop distance is used to calculate the position size, so that the risk per trade (amount...
Okay, so random entries work. Why isn't everyone using random entries then?

I mean there are these established do's and don'ts in trading such as martingale is bad. SL is good. Don't revenge trade, read news, trend is your friend Etc. Why don't we have random entries as being good?

People spend untold amounts of energy and time to get the entry right and I don't blame them. A good entry is obviously good but hey, if random entry works, maybe everyone should focus on exits. That was the whole point of my random entry EA screenshot. Work on your exits everybody!
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