my first trading plan (very primitive)

Does anybody know where one can find a study on the price distribution of a commodity at time B as a function of time a (time B > time A)? Essential I'm trying to find the probability density function of Rho, where Rho is defined as Rho(Time B - Time A) = Price(Time B) - Price(Time A). My thought is that for somewhat short time periods, price movements are random and symmetrical. If this is the case, one might be able to open a position at Time A. One could limit the downside of this position by placing a stop-loss. If the stop-loss isn't reached by Time B, then one automatically closes his/her position. Over time, this system would surely make profits, so long as the probability of the price reaching the stop loss and then returning to profitibility within the alloted time isn't very high. If we assume that the width of Rho decreases with decreasing time, and we assume it takes some finite period of time to reach the stop loss, it seems to me that this system would work. I'm going to test this system for a few months and see what happens.

sounds good in theory, but a system with such low per trade expectations would surely be disfigured by commission and the spread.

Good point Merlin. That's why I was hoping to actually do a study on the distribution of prices as a function of time. if I had that information, I could actually do the calculation and see if limiting losses with a stop would more than offset the losses accrued from pip spreads. For now, I'm satisfied to just test the system. Assuming a few trades per day, roughly how long do I need to test a system to know if it is successful or not? I seem to recall from a Stats class I took a few years ago that I should calculate a 95% confidence interval to figure that out. Too bad I sold that stats book.

what do you mean? you have the data, its very easily accessible. if you need some to practice with, let me know.

I mean if I had the probability density function of price distribution as a function of time after a position is taken. I don't have that information. I was simply speculating that it was symmetrical for short time periods, and that the width of the distribution function increased with time.

I should also mention, in order to avoid missing a "big move" I was always going to simultaneously go long on both the EUR/USD and USD/CHF. Metatrader doesn't allow one to hedge, but the correlation coeffieicent between these two currency pairs is practically -1. So, I'm essentially hedging anyway.

I was also going to place my stops just below the las major support (all on the 15 minute chart). And by "short time period" I meant about 10 hours (I place the order at 8:00 PM and close the order at 6:00 AM Pacific time). Ideally I'd like to size my orders at 1% of my account balance, but Metatrader doesn't allow for micro-lots (at least my version doesn't).

thx for your idea...
but... how can we make money with your trading plan?

please give me an example... if you don't mind..

regards,