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200MA f(x) Trading

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Quoting MnrComposite
Space, Time & Ergodicity When you first look at a price chart, you see that we are watching price evolve over 2 axes, price and time. And as you watch the price trade, it appears that these 2 axes are linked and are moving together. But… are they really? When you step back and think about it, you will find that the 2 axes are completely different, in terms of their drivers. The time axis moves along at whatever constant rate you arbitrarily selected while the price access is entirely driven by actual orders trading over the bid-ask spread. For some,...
Hey MnrComposite,
I do see what you are saying about the price axis, driven by buying and selling
The following example you had given though... Yes, the expected value is positive if we look at the expectancy. However, there is failure to check if we can play the game enough times to make use of this positive expectancy in the long run. I do not think this was demonstrated and it was not clear if 40% of initial amount or 40% of current balance is used.

If one was to play this game, common sense should have triggered and said: 'Hey, 50% chance...If I lose 40% each time, how many times can I play (if risking 40% of initial value each time)?' It would be 2 times..and then one would go bust... Then considering what would be the likely chance we would see 2x losses in a row when we first start to play... Well, 0.5 * 0.5 = 0.25...meaning that we would have 25% chance to go bust if we start playing this game right in the first 2 trades... However, if one does not mind going 'bust' a few times and starting again; It should make profit in the long run from what I can see in my example, if the risk remains 40% of initial investment (since we are not just talking about a random 40%, but 40% of something).
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If the example was risking 40% of current balance, then I would say the average expectancy may not be calculated accurately as now the weightings of each 'trade' are no longer in balance. My rough estimate is that it will be a range from -75% to 600% using 100 trade sample sizes...So the expectancy would look exponential/ parabolic and luck will determine what way it goes it seems ^_^
"Only you can Make the Future you will be proud to be a part of..." -Me
Quoting tzamo
{quote} Hey MnrComposite, I do see what you are saying about the price axis, driven by buying and selling The following example you had given though... Yes, the expected value is positive if we look at the expectancy. However, there is failure to check if we can play the game enough times to make use of this positive expectancy in the long run. I do not think this was demonstrated and it was not clear if 40% of initial amount or 40% of current balance is used. If one was to play this game, common sense should have triggered and said: 'Hey,...

You are correct, as long as you can stop down the path you are currently on and start again, you will end up being profitable BUT that is not the rules of the system. The rules are you risk 40% of your equity to make 50%. Not just 40% of starting equity, but 40% at each step. This means there are no absorbing barriers in the system and it will be a continuous process forever.

This is where you become path-dependent and since the game goes on forever, no losers ever come back to be winners, the few remaining winners just inevitably become losers.

Again, this system isn't practical, and being practical isn't the point, the point is to highlight that you can take ONLY +EV decisions and still lose with almost absolute certainty under certain conditions (the third chart in origin post, if continued, drops continuously until only <0.00000001 of traders would end in profit, as the game goes on). Continue to play long enough, no one wins, even though the expected value of everyone's decisions is positive.

The reason is, the payoff function is non-ergodic.
Viewing the market through f(x)
Minor Composite All Time Return: 13.9%
AUDNZD finally closed...

Just holding USDJPY long. For sure though this was going to get stopped out but it's held on. Will hold over the weekend.
Viewing the market through f(x)
Minor Composite All Time Return: 13.9%
Quoting MnrComposite
Current Open Trades: {image} Everything is green minus EUR/USD short. That has been consolidating quite a bit. It's still a great short here with a roughly 40% probability of reaching the TP before the SL. You can do the math on the current RR offered by the market to see if that decision makes sense or not.
Hi,
Please upload your trading charts with entry and exit marked so that newcomers can learn something. Thanks.
Quoting MnrComposite
{quote} You are correct, as long as you can stop down the path you are currently on and start again, you will end up being profitable BUT that is not the rules of the system. The rules are you risk 40% of your equity to make 50%. Not just 40% of starting equity, but 40% at each step. This means there are no absorbing barriers in the system and it will be a continuous process forever. This is where you become path-dependent and since the game goes on forever, no losers ever come back to be winners, the few remaining winners just inevitably become...
Yeah that is interesting. Are you able to repeat those 3 charts please, but instead cutting the risk by a factor of 10? eg. 5% gain vs a -4% loss, the ratio is still the same RRR of 1.25... The system described for risking 40% each step would struggle to get beyond 500 trades/ steps before failing.... Therefore it may give reason that such a system should have a negative expectancy (at these risk % values eg >30%??) due to some other variables we over-look and may not come into play when x% of initial is risked or lower risk % per step...
"Only you can Make the Future you will be proud to be a part of..." -Me
  • Post #66
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  • Jan 18, 5:57am (41 hr ago) Jan 18, 5:57am (41 hr ago)
Quoting MnrComposite
{quote} You are correct, as long as you can stop down the path you are currently on and start again, you will end up being profitable BUT that is not the rules of the system. The rules are you risk 40% of your equity to make 50%. Not just 40% of starting equity, but 40% at each step. This means there are no absorbing barriers in the system and it will be a continuous process forever. This is where you become path-dependent and since the game goes on forever, no losers ever come back to be winners, the few remaining winners just inevitably become...
Please explain your system with more pictures so that we the novice will understand better
  • Post #67
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  • Jan 18, 11:40pm (23 hr ago) Jan 18, 11:40pm (23 hr ago)
Some 200 MA stats to consider.

GBPUSD, 1 hr chart, last 5000 bars.

Each swing (swing being price closing above or below MA) on average moves 181 or more pips from its starting point (close)... BUT only 11% of swings are actually equal to or greater than 181 pips.

What do yall think are the implications of a stat like this?
Viewing the market through f(x)
Minor Composite All Time Return: 13.9%
  • Post #68
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  • Jan 18, 11:44pm (23 hr ago) Jan 18, 11:44pm (23 hr ago)
Quoting tzamo
{quote} Yeah that is interesting. Are you able to repeat those 3 charts please, but instead cutting the risk by a factor of 10? eg. 5% gain vs a -4% loss, the ratio is still the same RRR of 1.25... The system described for risking 40% each step would struggle to get beyond 500 trades/ steps before failing.... Therefore it may give reason that such a system should have a negative expectancy (at these risk % values eg >30%??) due to some other variables we over-look and may not come into play when x% of initial is risked or lower risk % per step...
So if the risk factor is cut the system works. The system is broken essentially because it goes beyond the kelly criterion max bet value. The math for kelly bet is basically the same for this.

I do want to explore more on why the max value bet levels are where they are. I suspect it has to do with how the % required to make up DD is always larger than DD itself, so once that ratio gets to a certain point (probably based on RR), it breaks. I would be intrigued to see how this line looks across RR's 10:1-1:10.
Viewing the market through f(x)
Minor Composite All Time Return: 13.9%
  • Post #69
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  • Last Post: Jan 19, 5:45am (17 hr ago) Jan 19, 5:45am (17 hr ago)
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Hi, I like your trading style so I wanted to learn something about it and now I'm in the demo mode to see if I can handle it. Is this entry correct? Did you entered as well? Thank you so much for the feedback and for anything you already did and shared with us
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