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Coin-Toss Trading Strategy

  • #21
  • Feb 8, 2008 5:29pm Feb 8, 2008 5:29pm
It's much less risky than martindale and has worked for 5 years now of pretty steady growth and 6000% profit. Paris
  • #22
  • Feb 8, 2008 8:00pm Feb 8, 2008 8:00pm
Quoting Paris Hilton
It's much less risky than martindale and has worked for 5 years now of pretty steady growth and 6000% profit. Paris
Whoever told you that is obviously lying.
  • #23
  • Feb 8, 2008 8:11pm Feb 8, 2008 8:11pm
Be careful Paris, I suspect you copied that from the website. Caution is needed whenever someone is selling a product.
  • #24
  • Feb 9, 2008 9:30am Feb 9, 2008 9:30am
If you do a search for binary at TSD there are a couple threads that got into this.
Also, mixed reviews at http://www.forexpeacearmy.com/public...ofitsareup.com
  • #25
  • Feb 9, 2008 5:57pm Feb 9, 2008 5:57pm
Just a though on your coin toss idea might work if you programed it to trade during important news time were you could get a 100 pip move. Take any side of the trade with a stop loss at 30pip and take profit around 80-100. 50/50 odds with work if you have bigger move in the market and you gain more then you lose. Or try taking different side in a cross pair. like eur/usd usd/chf. When big news comes out in the us. Buy or sell both at the same time with both stop loss at 30 take profit at 80. Good chance your going to get a net 50 pips. just an idea to think about.
  • #26
  • Feb 9, 2008 6:04pm Feb 9, 2008 6:04pm
I'm familiar with those sort of systems bjcool74, my problem is mainly the fact that my broker increases spreads about 10 min before and during the news. Besides, my personal goal is to develop a better exit strategy. Entry strategy I have taken care of many times over through the numerous EAs that I have programmed here on this forum.
  • #27
  • Feb 9, 2008 6:14pm Feb 9, 2008 6:14pm
Hi All,

There is no way MM can make a coin toss profitable. It is possible to have infinite tails, or infinite heads. That coupled with a coin toss not being a 50-50 chance will lead anyone who tries to tackle this problem with spent time (an infintiy) only to to find out there is no way MM can make a coin toss profitable.

Regards,
lucidlamp
  • #28
  • Feb 9, 2008 6:31pm Feb 9, 2008 6:31pm
I disagree.

There was some article I read about how the Renaissance fund operates. They are an almost purely quantitative fund. That simply means that they try to find as many mathematical correlations between some event and the stock market. These events were as random as solar flares, or sun spots, or amount of hurricanes in a year. The gist of the article used the S&P 500 as an example.

If the price was X dollars away from a 30 period moving average, it has a certain percentage change of returning to that average instead of continuing away.

As for your coin-toss argument, it's true that a string of infinity heads is possible. But what's the likelihood?

If, out of 100 tosses, the first 20 are heads, it is assumed that the remaining possibilities are 30 heads and 50 tails. In that case, on the 21st coin toss, there is a 62.5% chance of tails. It's that sort of probability which I think is worth looking at.

I'm thinking something similar can be applied here.

Besides, it's not the entry I'm worried about. I have programmed at least 20 unique EAs each with their set of entries with their separate accuracies. I want to develop my general exit strategy.
  • #29
  • Feb 9, 2008 6:31pm Feb 9, 2008 6:31pm
Quoting billbss
It's a form of martingale. It won't work.
Actually billbss, I used the the Binary Equation System for over six months and it worked fantastic. I had profits of over 10% per month.

The problem was when I increased my account balance I found that at times I was risking thousands to make back my initial 200 bucks. The descrpency was not apparent when I had a low balance, but became very eveident when I had a high balance.

This kind of risk reward ratio was unaaceptable to me, but I did re-coup my losses and decided to move on. I think with a system that wins more than 52% of the time the binary equation strategy really would be a very big winner.

The real problem was not with the BES but with the trading system they were using it with which took too many losses in a row. The loses have nothing to do with the BES at all, and the BES stratgey is designed to recoup all losses with just two wins in a row, but the trading system had a hard time winning two in a row and the risk was magnified when it lost 5-10 in a row. So, with a better trading system the BES I think could be very successful and in fact I have be thinking about using it with my Pivot Point Strategy because 2 wins in a row are fairly common and mass amounts of losses in a row is fairly uncommmon. This is a prime example where the BES would shine.

In fact, I foaund Mike from Profits are Up is a real stand up guy.

Cheers,

Damon
"Keep your eyes on the helpers" - Mr. Rogers
  • #30
  • Feb 9, 2008 6:46pm Feb 9, 2008 6:46pm
Quoting Ronald Raygun
I'm familiar with those sort of systems bjcool74, my problem is mainly the fact that my broker increases spreads about 10 min before and during the news. Besides, my personal goal is to develop a better exit strategy. Entry strategy I have taken care of many times over through the numerous EAs that I have programmed here on this forum.
I think a trailing stop, that follows pip by pip. With an exit around or on a pivot point or fib. It takes courage to be a pig but you don't want to be the pig that gets slaughter. Many of times i get out of a trade to soon and miss out on another 100 pips or so. Then there are times that i say in to long and have that 100 pip move back to brake-even. That really sucks. The odds of getting out on the bottom or top is slim.
  • #31
  • Feb 9, 2008 6:46pm Feb 9, 2008 6:46pm
Quoting Paris Hilton
yes, that's exactly right. Paris
The trade method in the profits r up system has a 1:1 risk reward ratio and wins about 52% of the time.
However the daily oscillator system strategy has a 1.6:1 and wins more than 70% of the time.!!! It doesn't get much sweeter than this. Paris
Paris, I enjoyed my time using the BES. If you have a system that wins more then 70% of the time with a 1.6:1 RR ratio, the BES should really shine.

Where can I find information on this Daily Oscilator System you are talking about?

Cheers,

Damon
"Keep your eyes on the helpers" - Mr. Rogers
  • #32
  • Feb 9, 2008 6:49pm Feb 9, 2008 6:49pm
damonl:

It's here on the forum.

http://www.forexfactory.com/showthread.php?t=69151


bjcool74:

It's true that I can never get in at the top or the bottom. I'm just trying to get in consistently as close as possible.
  • #33
  • Feb 9, 2008 6:54pm Feb 9, 2008 6:54pm
Thanks Bro....I will definitely check it out.

Quoting Ronald Raygun
damonl:

It's here on the forum.

http://www.forexfactory.com/showthread.php?t=69151


bjcool74:

It's true that I can never get in at the top or the bottom. I'm just trying to get in consistently as close as possible.
"Keep your eyes on the helpers" - Mr. Rogers
  • #34
  • Feb 9, 2008 8:50pm Feb 9, 2008 8:50pm
Quoting damonl
Actually billbss, I used the the Binary Equation System for over six months and it worked fantastic. I had profits of over 10% per month.

The problem was when I increased my account balance I found that at times I was risking thousands to make back my initial 200 bucks. The descrpency was not apparent when I had a low balance, but became very eveident when I had a high balance.

This kind of risk reward ratio was unaaceptable to me, but I did re-coup my losses and decided to move on. I think with a system that wins more than 52% of the time the binary equation strategy really would be a very big winner.

The real problem was not with the BES but with the trading system they were using it with which took too many losses in a row. The loses have nothing to do with the BES at all, and the BES stratgey is designed to recoup all losses with just two wins in a row, but the trading system had a hard time winning two in a row and the risk was magnified when it lost 5-10 in a row. So, with a better trading system the BES I think could be very successful and in fact I have be thinking about using it with my Pivot Point Strategy because 2 wins in a row are fairly common and mass amounts of losses in a row is fairly uncommmon. This is a prime example where the BES would shine.

In fact, I foaund Mike from Profits are Up is a real stand up guy.

Cheers,

Damon

The so called binary equation is a modified martingale.
Just like any martingale, it will work only if you have an unlimited supply of money to prop it up with.

This one will take a little longer to ruin you than a pure martingale but it will ruin you if you use it long enough.

The best way to prove it is with a Monte Carlo simulator. It's an Excel plug-in.
Enter your win% into it along with your money management system and let it run. It will do hundreds or thousands of runs and report the results. You'll find out that the binary will either blow your account, or if you start with a unit size small enough not to blow you out your profit will be next to nothing.
On those few runs that you don't meet ruin, you will make much less that you would with a flat percentage bet.
  • #35
  • Feb 9, 2008 8:53pm Feb 9, 2008 8:53pm
I feel like I'm in the dark here. Can someone elaborate on how the Binary system calculates lot size?
  • #36
  • Feb 9, 2008 9:04pm Feb 9, 2008 9:04pm
Quoting Ronald Raygun
I feel like I'm in the dark here. Can someone elaborate on how the Binary system calculates lot size?
It's one of those things you have to pay for to learn how to go broke...LOL
It's a commercial "system".

In general it's a progression. After a win, you bet a bunch of money to make up for your previous losses, then hope you will win the next trade.
  • #37
  • Feb 9, 2008 9:23pm Feb 9, 2008 9:23pm
martingale Wikipedia


Originally, martingale referred to a class of betting strategies popular in 18th century France. The simplest of these strategies was designed for a game in which the gambler wins his stake if a coin comes up heads and loses it if the coin comes up tails. The strategy had the gambler double his bet after every loss, so that the first win would recover all previous losses plus win a profit equal to the original stake. Since a gambler with infinite wealth will with probability 1 eventually flip heads, the Martingale betting strategy was seen as a sure thing by those who practised it. Unfortunately, none of these practitioners in fact possessed infinite wealth, and the exponential growth of the bets would eventually bankrupt those foolish enough to use the Martingale. Moreover, it has become impossible to implement in modern casinos, due to the betting limit at the tables. Because the betting limits reduce the casino's short term variance, the martingale system itself does not pose a threat to the casino, and many will encourage its use, knowing that they have the house advantage no matter when or how much is wagered

Anti-Martingale
In a classic martingale betting style, gamblers will increase their bets after each loss in hopes that an eventual win will recover all previous losses. The anti-martingale approach instead increases bets after wins, while reducing them after a loss. The perception is that in this manner the gambler will benefit from a winning streak or a "hot hand", while reducing losses while "cold" or otherwise having a losing streak. This general idea of increasing bets when conditions are believed to be favorable can improve the odds in games with a memory by using a strategy like card counting. But in a true random memoryless game there is no such thing as a winning streak or losing streak (these notions are gambler's fallacy) so this strategy can't improve the expected winnings in such situations.
One activity where money management based on an anti-martingale approach has a recognized value[1] is speculation and trading. Many financial markets have some cyclical component to them, and the approach of an individual speculator or trader may only be appropriate for one portion of that cycle. Using an anti-martingale risk management scheme will increase profits during time periods when a trading approach is working well, while automatically decreasing exposure during portions of the cycle where trading is unprofitable. This is believed to decrease the risk of ruin for trading.
  • #38
  • Feb 9, 2008 10:24pm Feb 9, 2008 10:24pm
I'm assuming that this binary system is an application of anti-martingale.

In that case, perhaps we need to go a different route.

http://traderpsychology.blogspot.com...toss-game.html


Quote
To all of us who would really like to believe that our indicators will make us into successful traders, I can do no better than to introduce you to the coin-flip exercise. These are Woodie’s rules:

1. At the beginning of every five-minute bar, he flips a coin. One side is labeled “Buy” and the other side is labeled “Sell.”

2. Hold until you have a loss of X or a gain of 2X. Woodie trades the mini-Dow and the mini-Russell 2000. So he allows a loss of 10 ticks and has a target of 20 ticks.

3. If he gets a profit of +8 ticks, then he moves his stop-loss to Break-even + 1 (BE+1)

4. If the trade stalls out, then after three or five bars, he will exit with whatever profit that he can get.

That’s it! No indicators. No CCI, MACD, Stochastic, Doji’s or other candlestick formations. Just a simple, random binary device – a coin.And, over a long period of trades, he usually ends up with a profit! Doesn’t that just rot your socks!

Now are you still wedded to that high level of belief in your preferred indicator or trading methodology?The key here is the money management rules. Even with random entries, he can usually find enough winning trades and, because each winner is twice the value of the losing trades, the cumulative effect is to end up with a profit. Another key is his rule to move his stop to BE+1 so that even if a trade isn’t a 20-tick winner, he’s still able to hold onto his money and have it available for the next trade!

Now, the next time when the market seems to be slow or inactive, try the coin-flip exercise. You just might find enough profit, even with totally random entries, to start to challenge your beliefs about your chosen indicator or methodology. You might cause enough dognitive dissonance ao as to really make you uncomfortable. It just might be enough to help you to change your beliefs.p.s. Woodie’s statistics can be found here: http://woodiescciclub.com/forum/viewtopic.php?t=1317












I'm working on an EA right now for this system. However, in manual back-trading, it looks like I would have made money. (Manual back trading uses tick data and "replays" the market for you to trade.)
  • #39
  • Feb 9, 2008 10:29pm Feb 9, 2008 10:29pm
good luck. I would like to see what you come up with.
  • #40
  • Feb 9, 2008 10:43pm Feb 9, 2008 10:43pm
One thing about the Anti-Martingale. Anti-martingale is used when these traders have better odds like 70-30 or 80-20. It might e hard with 50-50 odds. Might blow up account faster with anti-martingale then with martingale
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