All strategies work

He is simply pointing out the stupidity of the statement that one can make money simply from "money management"

Those with a few years experience have a responsibility not to mislead potentially new traders with information that is plain wrong, and yet they continue to do so.

I dont know, and I really dont care!
My trading is all that matters to me.
Like I said, Im developing my own system with things that works,
FOR ME!!!

yeah. it's called math. Risk/Reward. Whatever you want to call it. Do you need proof that 4:1 is better than 2:1. Or better yet, that 1.5:1 is better than 1:1?

Then I didn't make my point clear and I apologize for that. What I meant was that MM has a greater effect on the account than the system itself and that MM can keep a system that is only correct 50% of the time in the black.

Do the math.

So you are saying that you get a R/R of > 2:1 by randomly entering the market?
I don't see what R/R has to do with flipping a coin to make money, your original post stated that it is possible to achieve positive expectancy via random entry.

That's actually a good idea. Tell you what, start a thread and I'll trade YOUR system or method and we'll compare accounts at the end of the month. If you're more of a discretionary naked chart type trader then just post where your entry, stop, and target are and I'll try and try and trade your same signal with my own entries, stops, and target. If you really want to make it count, how about we open up live accounts and use real money specifically for this little experiment. This isn't a pissing contest and I don't want it to come across like that. But I"m not going to waste my trading time with something like this if there's no financial reward for my efforts. If you don't trade live then there isn't much point to this because the dynamics that come into play with real money on the line vs play money are not even close.

Look, I know MM is the biggest factor because I lost a lot of money learning that factor even when I was correct over 80% of the time in my trades. Just this month alone if you go by wins/losses alone, I'm only 55%-60% correct. But my account growth rate hit an all time high for me because winners dwarf the losers sometimes up to 10:1. How people don't understand that is beyond me. But whatever. Since more than 80% traders lose real money, they can just keep doing what they're doing and providng the liquidity for the minority who actually make money.

I didn't say flipping a coin is positive expectency. I said with proper MM, flipping a coin as the signal can still be profitable. Huge difference.

A point here; wouldn't that be true of any strategy?

Loving this

I believe you both have strategies that work for you. The big question is whether you can make another strategy work for you.

And if you can't, why not? That's part of my question.

I don't want to belabor the point, but you still have not answered the question. Nobody is saying MM isn't important, but you still have not tabled any evidence of your original assertion that random entries are profitable.

Note: at no point did I say you weren't making money so I'm not sure why you want to turn this into some sort of 'pistols at dawn' type affair, except to provide a diversion from you inability to back up your original point. You might find my system a little hard to trade, attached is last weeks p/l curve, as you can see I place a lot of trades and my R/R for last week is .5 yet I still managed to make money. I also don't see what trading other peoples systems has to do with anything.

Anyway, there it is for better of worse, I'm not saying I'm the worlds best trader but I do wish people would deal with facts when dispensing wisdom to newbs...back to the shadows.

Another excellent post, Craig, I agree 100% with all the points you make. There's no point in my repeating everything that you've already said.

I also agree with Forexflash - if random entries are profitable, then why not simply write an EA that takes high RR trades, and instantly join the winners' circle? If it was that simple, everybody would do it, LOL. So many traders insist that exits are important, but nobody has ever been able to show me statistical proof as to how exits in themselves provide an edge. (On the contrary, I read that exits are tricky, problemmatic,....). So I will continue to believe that exits are little more than a trade off between win rate, and average win size. If you set your TP and SL to take 2:1 trades, then everything else being equal, your win rate will be proportionally smaller than if you take 1:1 trades.

Hertz, you are cutting to the chase by asking all of the right questions. Of course if two traders make the same entry and exit, they will make the same profit! Hence, contrary to popular belief, it is the strategy that counts, not the trader. If a trader, due to emotional or other reasons, can not apply his system/method/plan/strategy/approach (call it what you like) with discipline and consistency, then he effectively doesn't have a system. Everything beyond that is psychobabble, IMO. Again, if psychology and self-mastery are the only barriers, then every EA would be a guaranteed winner, which is clearly not the case. If the trader is the weak link, then an EA removes him from the equation.

I've provided XLSs (see posts #31, #32 and #43 in this thread) that demonstrate how MM (position sizing) in itself can not provide an edge. Sure, recklessly inconsistent MM and ill-discipline will bleed an account faster than an unprofitable strategy, and in fact may mask the latter, but (as Razzle says) any negative expectancy strategy must ultimately lead to ruin. And an unprofitable strategy must eventually result in a complete loss of discipline, in any case, as the mounting losses become unapalatable. Which again brings us back to the strategy as the essential prerequisite, as opposed to the trader.........

ScottyB makes the point about market knowledge. I must admit that since I've moved away from automated, indicator-based systems, and looked more at abstracts like trend, momentum, S/R, and 'price action', my trading has improved significantly. Knowing how price is likely to move, seeking out on-balance profitable patterns and trying to understand their possible underlying cause, is where I'm now heading, some 2-3 years down the track. And being patient enough to selectively take low risk entries, preferably where a number of potential edges augment each other. (That's all about entries, not exits, LOL). I've learned (and still very much learning) to sift very cautiously through forum info, and instead trust my own steadily growing knowledge, and hone my own ideas. In terms of gaining experience, there is no substitute for chart time.

There's a great essay here by Merlin on system development. Assuming I understand correctly, his view is that you should first find patterns and inefficiences that you believe reflect market psychology, and then use historical data to prove your assumptions, as opposed to starting with the historical data itself, and then fitting a system around it. Very profound, IMO.

Good luck, Hertz, I wish you all the best.

David

This is getting way off the original point. The original post was about strategies and finding what works. I was merely trying to point out that it's not just about the strategy but about the MM.

The proof of 50% outcome still being profitable is in the math like I said. But if you need to actually see it for yourself with working it out for yourself I"ve got a spreadsheet at the office that will show how a system only correct 50% of the time (same odds as flipping a coin) can be profitable. I'll post that up Monday. I don't know where you're getting where I said random entry.

I wasn't trying to make it a pistol draw deal, either. You threw out comparing p/l and I was just re-enforcing that saying it's a good idea and a chance to prove that it's not just about the system and that I could apply my MM and betting strategy to any system and probably come out ahead. That in itself is the lesson to be learned. Not who's the better trader or what system is better. btw, you're very good and the proof is in your curve and I congradulate you for that and there's a lot to be learned just from that graph even by a stubborn guy like myself.

Below are my results for this month. Just under 56% win rate yet a very positive profit factor and expected payoff this month. Still plenty of month left for me to screw that up, though.

With my method of adding on, it's expected that there will be losses at the end of a run plus I might take a couple of stabs at nailing a top or bottom on entry. That lends itself to having a barely over 50% win ratio. Fishing with a pole vs fishing with a net. 4 out 5 succesful casts with pole is nice. But 2 out of 5 succefull hauls with a net should still be more fish.

Nice reply, I think where we have perhaps misunderstood each other is that you seem to equate a ~50% win rate with a random entry (or at least that is how it reads in my head ). I would contend the two are very different. You obviously enter the market based on a set of criteria, which although may lead to a 50% win rate is far removed from simply flipping a coin. I don't know if I have explained that very well...so sorry if I have the wrong end of the stick.

BTW, there is a whole chapter on this very subject in 'The Encyclopedia of Trading Strategies', where they take random entries and apply different types of exits. They find that while a good exit may enhance stats, it does not constitute an edge in itself, though a good exit may be enough to turn a system into a winning one.

Hertz, check out this post from Topherhk88. All of his posts (there are only 15 of them, to date) are very insightful. Some in the "Admit it - your profits are based on luck" thread, that are also particularly relevant to your topic.

IMO, testing should give you a feel as to how good the strategy is (your point (a)), and a large sample size mitigates the possibility you describe in point (c).

Self-honesty should tell you if your implementation is faulty, i.e. lapses in discipline (point (b)).

There are risks involved in trading - potentially, anything can happen - but the longer you remain consistently profitable, the more confident you can be that you have a real methodological edge. However, it's probably a smart move (as Topher explains) to have an arbitrary pre-detremined level of drawdown, at which point you suspend your live trading, while you re-evaluate the effectiveness of your edge.

I would completely back that advise, Topherhk88's posts are IMHO the best on the site.

This post is part of my process of sifting through the forum info, so thanks all for indulging me.

I'm definately getting that chart time is a big part of the way forward.

Thanks for the encouragement

And thanks to all who have contributed. You didn't need to and it has helped, it's appreciated.

I know you might be looking for some profound answer on why you're failing, but you're never failing if you don't give up. What most people fail to realize is that time will make you a better trader if you don't give up. If someone wants to become a Doctor, time will be a factor. It takes eight years for a doctorate. If someone wants to become an officer in the military, time will be a factor because of the many schools involved. Anything that's worth anything always takes time. It took me 2 1/2 years to learn how to trade. It's a known fact that it takes most people 3 to 5 years to learn how to trade consistantly..... not 3 to 5 months. You have to find out what works for you. I've bought other people's systems, went to seminars in different countries, blogged for educational purposes, etc.... All of those things are important because you have to build a foundation. And once you start experimenting with indicators that you like, then use those indicators to start your foundation. That takes a long time because you have to learn how to put indicators together to create a system that has an edge and that you can be comfortable with. The main reason learning how to trade takes so long is because you have to find out who you are as a trader. There are several questions that have to be resolved before you can become a rocket trader. For example, what style of trading appeals to you? Do you like to position, swing, scalp, or day trade? What methodologies appeal to you? Elliott wave principle? Pivot points? The box Jenkins method? Gann concepts? What timeframes do you like to use? What is your bellweather time frame? What oscillator appeals to you? MACD? Stochastics? RSI? Williams percent R? How do you quantify supply and demand? How do you manage your trades? How do you determine price projection levels? How do you determine the trend? How do you mitigate risk? How do you limit your exposure to the market? Do you like candlestick and chart patterns? What type of trend lines do you use, Tom DeMark, common sense, or a combination of both? Is your style discretionary or mechanically based? I know this sounds like a lot of issues, and they are. But 95% of traders fail because of unresolved issues. Take my advice. Learn as much as you can, and continue to demo trade until you no longer have any internal conflicts.

Good point.
Q) How does a Baseball Batter who's avg is 333 recognize that a ball coming at him, from ~60' away @ >= 80mph, is spinning "this way" and therefore, he should swing "that way"?

A) He's seen it a thousand times or more already and studied.