Can you make money by simply flipping a coin?

I would like to explore the idea of finding an indicator, indicators, or a price action pattern that wins only 50% of the time but yields profits twice as big as the losses.

This way you only have to be right 40% of the time to make consistent money.


Any ideas?

you're more or less talking about money management when it comes to making profits with only a 40% win ratio

It is, but takes maximum discipline. Better to parlay the discipline with technical and fundamental analysis so that your odds are better than the proverbial 50/50 of a coin toss.

Coin flips...check out Ryan Jones.

50% pattern. try Engulfing bars/candles on the daily...TASC has an article in a recent issue covering this.

Finally head on over to this thread....It's exactly what this mole prescribes...

http://www.forexfactory.com/showthread.php?t=345838

Better imvho to put a criteria on your spec's!

For example:

Tp= 22pips (2 pips to cover spread)
Sl = 10pips

Trading Time = Frankfurt - NY close
Avoid Trading News releases....

TFrame = M5


But flicking a coin should ultimately fail... if market was random and u are betting on a random event 10 pips up... 10 pips down... the problem is that u need to cover Spread so u will always be paying that price... + commission.. I am probably not explaining it properly but i tried
=============

But With the specs above I think you can easily find 1 or 2 systems in this section of forums... I have looked at a few which work well....

There are some simple ones like.. If previous day was up... Buy.. visa versa etc...

No. You can't money manage a break-even system into a winner.

I think Van Tharp was responsible for promoting that nonsense and he has since disowned it.

good that you are not after high win-rates as all the other newbs. As for the price action patterns, there is an easy way: open your charts and log in every instance of a price action pattern and find out its metrics.

The coin flip thing is utter and complete nonsense. To make money in the markets you need an edge. Find a pattern that deviates from random data, preferably sharply. Some of the patterns are so simple you won't even think of it. Avoid complicated things, if you can't explain what you do to a child, it's not reliable. Good luck

Yes, and we can simply make money and loss money just by flipping the coin. Chances of winning and losses are 50-50. But friend it doesn’t happen in forex.

Really (simple patterns)? So, you are trading based on any specific strictures? Or anything else?

The likely truth here is what you are looking for does not exist. If it did then every competent trader on the planet would eventually adopt it and we would all be astonishingly rich. But we collectively aren't so it probably isn't there.

That said, you can employ any number of relatively simple entry methods and generate average profits a little bit bigger than average losses whilst keeping the win rate at the random 50% level. This is a positive edge and will net you good profits over time if employed with discipline, consistency and sound risk control.

What creates the edge here is managing each position appropriately depending on how the trade goes. Say you start with stop loss and profit target equal distances away from the entry (a 1:1 reward:risk which has no edge at 50% success).

If the trade goes your way you can bring up the stop a little to reduce your potential loss should it reverse, whilst still giving it room to breathe. Equally, if a trade looks strong at the initial profit target you can try to let it run on a few extra points to boost the gain. As and when a trade goes against you just take the loss at the stop, either at the initial level or a slightly better price if you've been able to move it up previously.

None of this is technically difficult (though it does make substantial demands on your emotions, psychology and discipline) and none of it requires you to have better than a 50% random entry method. However, you cannot just say 'I want profits twice the size of losses' or similar because the markets just don't work as cleanly and neatly as that. You have to take whatever edge the market is willing to give you on any given trade.

Being able to do this effectively and efficiently over and over again I'd say is the key to profitable trading, not finding some wonder indicator/pattern/etc. that will magically generate a consistent edge for you. It's just not there, you have to create it for yourself.

50% winning ratio with a long run is not any easy task; if would; then the success rate will be more than 60% even higher.

1:2 risk reward ratio is better. Even your losing trader greater than winning trader, you can be profitable. I think with this ratio you can make consistent money 35-40% of the time.

Chance of winning to losing is 1:1 and that can never be applied to forex trading.

I dont think there is any such indicator

By this way you will not find any strategy or system. We need to follow trail and error methods to find a good strategy. We have to try strategy, updated it, customize it according to our trading personality. A strategy works for me may not works for you.