The Coin-Flip Theory

The Coin-Flip Theory
Hello everybody,

I would like to tell you something about this strategy http://www.forexfactory.com/showthread.php?t=494447 (more a system, because there is no MM included etc.) I am a student 19 years old, I study economics. I traded demo since my 16th and real when I was 18 years old. I saw alot strategy's and systems, made my own out of others and after alot tweaking it was finally done. It made and still does make a steady x% monthly. Everyday I had to do the same thing preparation mental, read somewhat about the news upcomming (I trade technical); this got me bored. I still liked trading alot don't get me wrong.

Then I read this thread about a month ago, http://www.forexfactory.com/showthre...444377&page=79 from a mathematical standpoint it is fairly easy, but in practice it is really hard as always often with mathematical things. I really love to make things work so I began to search for a basic working system for this, made my own out of others (what I really recommend for beginners after they read everything at Babypips).

Now I am going to tell you why I am posting this here. My system for Rags to Riches is almost the same as what OP posted here http://www.forexfactory.com/showthread.php?t=494447.

The rules:
- Trade on the hourly on major pairs, I only traded EUR/USD
- Trade @ the second candle after the opening of the London session (so you don't get disturbed by opening breakouts).
- Close the trade @ opening level of the candle
- Open the trade @ closing level of the candle
- Buy when the candle is Bullish
- Sell when the candle is Bearish
- There is no TP level
- SL is yesterdays high or low(depends on if you are selling or buying ofcourse).

Something more about the SL. I have a EA that closes the trade and not a set in stone SL incase the broker stop hunts (what I think they don't do but you never know). The EA closes the trade when a candle closes above/below yesterdays high/low. So it doesn't close the trade when it spikes in the range and retraces.

Because it is a really risky system you can start with a really low bank. I started with 100$(one trade is the whole bank), almost everyone in the trading business can afford to lose that and if you can't you shouldn't trade at all. I traded with a super high leverage 1:2000. This is not needed but I did this to see how I would react. You need to have nerves of steel if you want to trade with 1:2000. Because this is over leveraged I can't just use the normal SL rule. My DD must be 50% in order to work with 1:2000 so I can only afford to lose 34 pips (5 digit broker, spread is 5-8 pips, commission is more then average when you make winning trade but zero when you make a losing trade so that’s really nice!) I said to myself to use this rule after I got 500% growth because I thought I would never make it.

The results:
From 17-June till Today Leverage 1:2000 Start with 100$

Sell Day 1:
Open 1.35619
Close 1.35531 Gain: 88 Pips
88 Pips x (0.00001/1.35531)x(100$ x 2000) = 129$ +100$ = 229$

Buy Day 2:
Open 1.35570
Close 1.36375 Gain: 805 Pips
805 Pips x (0.00001/1.36375)x(229$ x 2000) = 2703$ +229$ = 2,932$

Sell Day 3:
Open 1.36349
Close 1.36103 Gain: 246 Pips
246Pips x (0.00001/1.36103)x(2932$ x 2000) = 10,598$ +2703$ = 13,530$

Sell Day 4:
Open 1.36023
Close 1.35803 Gain: 220 Pips
220Pips x (0.00001/1.35803)x(13,530$ x 2000) = 43,837$ +10,598$ = 54,435$

Sell Day 5:
Open 1.35764
Close 1.35798 Gain: -34Pips
-34Pips x (0.00001/1.35798)x(54,435$ x 2000) = -27,257$ +544,35$ = 27,178$

Sell Day 6:
Open 1.36197
Close 1.36088 Gain: 109 Pips
109Pips x (0.00001/1.36088)x(27,178$ x 2000) = 43,536$ +27,178$ = 70,714$

Buy Day 7:
Open 1.36028
Close 1.36230 Gain: 202 Pips
202Pips x (0.00001/1.36230)x(70,714$ x 2000) = 209,707$ +707,14$ = 280,421$

Sell Day 8:
Open 1.36138
Close 1.36172 Gain: -34 Pips
-34Pips x (0.00001/1.36172)x(280,421$ x 2000) = -140,210$ +280,421$ = 140,210$

Sell Day 9:
Open 1.36115
Close 1.36149 Gain: -34 Pips
-34Pips x (0.00001/1.36149 )x(280,421$ x 2000) = -140,210$ +280,421$ = 140,210$

Sell Day 10:
Open 1.36527
Close 1.36561 Gain: -34 Pips
-34Pips x (0.00001/1.36561)x(140,210$ x 2000) = -70,105$ +140,210$ = 70,105$

Buy Day 11:
Open 1.36886
Close 1.36852 Gain: -34Pips
-34Pips x (0.00001/1.36852)x(70,105$ x 2000) = -35,052$ +70,105$ = 35,052$

Buy Day 12:
Open 1.36555
Close 1.36521 Gain: -34 Pips
-34Pips x (0.00001/1.36521)x(35,052$ x 2000) = -17,526$ +35,052$ = 17,526$

Sell Day 13:
Open 1.36515
Close 1.35881 Gain: 634 Pips
634Pips x (0.00001/1.35881)x(17,526$ x 2000) = 163,547$ +17,526$ = 181,073$

Buy Day 14:
Open 1.35879
Close 1.35981 Gain: 102 Pips
102Pips x (0.00001/1.35981)x(181,073$ x 2000) = 271,847$ +181,073$ = 452,920$

Sell Day 15:
Open 1.35953
Close 1.36987 Gain: -34 Pips
-34Pips x (0.00001/1.36987)x(452,920$ x 2000) = -226,460$ +452,920$ = 226,460$

Sell Day 16:
Open 1.35928
Close 1.35962 Gain: -34 Pips
-34Pips x (0.00001/1.35962)x(226,460$ x 2000) = -113,230$ +226,460$ = 113,230$

Buy Day 17:
Open 1.36123
Close 1.36337 Gain: 214 Pips
214Pips x (0.00001/1.36337)x(113,230$ x 2000) = 355,460$ +113,230$ = 468,690$

Sell Day 18:
Open 1.36237
Close 1.36127 Gain: 110 Pips
110Pips x (0.00001/1.36127)x(468,690$ x 2000) = 757,467$ +468690$ = 1,226,157$

Sell Day 19:
Open 1.36039
Close 1.36073 Gain: -34 Pips
-34Pips x (0.00001/1.36073)x(1,226,157$ x 2000) = -613,078$ +1,226,157$$ = 613,078$

Sell Day 20:
Open 1.36210
Close 1.36040 Gain: 170 Pips
170Pips x (0.00001/1.36040)x(613,078$ x 2000) = 1,532,244$ +613,078$ = 2,145,322$

Total Gain: 2594 Pips
Growth: 429,060%



Sell Day 21:
Open 1.35968
Close 1.35426 Gain: 542 Pips
542Pips x (0.00001/1.35426)x(2,145,322$ x 2000) = 17,171,954$ +2,145,322$ = 19,317,276$

Sorry for clutter based out of Excel.

The conclusion:
I did this with real money because it is only 100$. The second day my nerves were tested to see almost a margin call is not fun after that I was full of joy the first days, ofcourse, but the 5th day I shit my pants. To see such big DD(I knew it before I started but still....) and especially with large sums of money its so painful. The world stops for a moment. So my first reaction that day is to pull all the money of it. That was still a big deal 27k. I still continued it on paper to see if I was lucky, to see the pros and cons etc. It was a big gamble. I wouldn't recommend it but you will learn a big lesson, to see how you react and how emotional driven you are in such situations. Then it is really worth the 100$.

What also is worth mentioning is that a system is not everything but a strategy is. As you can see the entries are almost the same as a coin flip. But what you can do with good SL and TP, with support and resistance(yesterdays high/low). Cut your losers and let your winners run. Use a leverage what you can handle, good MM etc etc etc.

Maybe ill start an account on a broker with lower leverage like 1:200 and that allows a Forex Factory Explorer

Green pipping to everyone

Hello everyone,

Sell Day 21:
Open 1.35968
Close 1.35426 Gain: 542 Pips
542Pips x (0.00001/1.35426)x(2,145,322$ x 2000) = 17,171,954$ +2,145,322$ = 19,317,276$

As you can see with this high leverage your risk is lower then your reward. But because you can only lose 34 pips, (3.4 Pips for 4 digit-broker) plus the spread it is almost impossible. But if you go 10 factors lower, 1:200, your SL will be arround 340 pips (34 Pips for 4 digit-broker) and you can search for yesterdays high/lows etc. Because I think the market is only built on physiological interactions, its all about the mind of people who buy and sell. So resistance and support are key levels thats why yesterdays high/low is so important for this strategy. I will give you an example at sell day 5 where it went wrong.

The results realistic point of view:
From 17-June till Today Leverage 1:200 Start with 100$

Sell Day 1:
Open 1.35619
Close 1.35531 Gain: 88 Pips
88 Pips x (0.00001/1.35531)x(100$ x 200) = 13$ +100$ = 113$

Buy Day 2:
Open 1.35570
Close 1.36375 Gain: 805 Pips
805 Pips x (0.00001/1.36375)x(113$ x 200) = 134$ +113$ = 247$

Sell Day 3:
Open 1.36349
Close 1.36103 Gain: 246 Pips
246Pips x (0.00001/1.36103)x(247$ x 200) = 89$ +247$ = 336$

Sell Day 4:
Open 1.36023
Close 1.35803 Gain: 220 Pips
220Pips x (0.00001/1.35803)x(336$ x 200) = 109$ +336$ = 445$


Why SL rule works with -340 Pips

Sell Day 5 Example:
Open 1.35764
Close 1.36104 Gain: -340Pips
-340Pips x (0.00001/1.36104)x(445$ x 200) = -222$ +445$ = 223$

Total Gain: 1359 Pips
Growth: 223% (44,6% a day average)

You still have a nice 50% DD but the problem is that you won't gain over 50% a day. So if you won't gain more then 50% a day you are done after 7 losing trades in a row (then you are back to 1% of your capital before the 7 losses). Maybe you think 7 losses in a row is almost impossible to occur but thats not true. Before I traded I was really into the casino game roulette, hence my avatar, because you work with alot of statistics and I love that(never gambled real with roulette). All of you probably know the Martingale strategy and that in the long run it always fails. Read about it here http://en.wikipedia.org/wiki/Martingale_(betting_system) Because the entry is like a coin flip you can easily use http://en.wikipedia.org/wiki/Gambler's_fallacy:
http://upload.wikimedia.org/math/b/2...2d1c8dd3df.png.

The Gambler's Fallacy means that when people lose like 10 times in a row and then they think next time I will and must win, but with the coin flip the chances are still 50%.

One trade will have 50% chance of winning or losing the next day the new trade will have the same winning chance but 2 losing trades have a 25% chance to occur. What most people think is that after alot of loses the next must and will win but this is wrong as stated above. Losing 7 times in a row has a 99.9% chance to occur in 500 trades. That can be in the last 100 trades when 1% is still a big chunk of money but this can ofcourse also occur in the first 100 trades when 1% of the capital is not even a penny.

In reality it is different because you will use some real market analysing and not a random set in stone SL. You will work with support and ressistance, yesterdays high/low and that is where al the money comes from. A not very difficult to understand procedure and practical to use. But when the support or resistance levels are out of range of the 340/34 pips unfortunately you need a set in stone random SL but this doesn't occur that much.

Sell Day 5 Reality(See screenshot):
Open 1.35765
Close 1.36100 Gain: -335Pips
-335Pips x (0.00001/1.36100)x(445$ x 200) = -219$ +445$ = 226$

DD of 49% and that is below 50% and thats what we need.

This is not a really good example but I hope you get the point. As this is still not a really realistic point of view because we have 5 days here and you can't base anything on that. I researched last 5 months and my conclusion is that:

Total trades: 114

We got 61 trades won. 53.5%


We got 53 trades lost. 46.5%

- We got 22 trades stopped out by 340 SL. 41.5%
- We got 31 trades stopped out by key levels. 58.5%

At last I want to tell you that how more trades you will make how better you get to the 50% ratio. So as you can eliminate the 50% losing trades by using technical market analysis, the support and resistance levels etc. You are a winner because if you think in different way, the eliminated loses that are not a 50% DD but 40% DD are your winning trades. Think about that.

Green pipping to everyone

The results realistic point of view:
From 17-June till Today Leverage 1:200 Start with 100$

Sell Day 1:
Open 1.35619
Close 1.35531 Gain: 88 Pips
88 Pips x (0.00001/1.35531)x(100$ x 200) = 13$ +100$ = 113$

Buy Day 2:
Open 1.35570
Close 1.36375 Gain: 805 Pips
805 Pips x (0.00001/1.36375)x(113$ x 200) = 134$ +113$ = 247$

Sell Day 3:
Open 1.36349
Close 1.36103 Gain: 246 Pips
246Pips x (0.00001/1.36103)x(247$ x 200) = 89$ +247$ = 336$

Sell Day 4:
Open 1.36023
Close 1.35803 Gain: 220 Pips
220Pips x (0.00001/1.35803)x(336$ x 200) = 109$ +336$ = 445$
Sell Day 5:
Open 1.35765
Close 1.36100 Gain: -335Pips
-335Pips x (0.00001/1.36100)x(445$ x 200) = -219$ +445$ = 226$
Sell Day 6:
Open 1.36197
Close 1.36088 Gain: 109 Pips
109Pips x (0.00001/1.36088)x(226$ x 200) = 36$ +226$ = 262$

Buy Day 7:
Open 1.36028
Close 1.36230 Gain: 202 Pips
202Pips x (0.00001/1.36230)x(262$ x 200) = 79$ +262$ = 341$

Sell Day 8:
Open 1.36138
Close 1.36205 Gain: -67 Pips
-67Pips x (0.00001/1.36205)x(341$ x 200) = -33$ +341$ = 307$

Sell Day 9:
Open 1.36115
Close 1.36333 Gain: -218 Pips
-218Pips x (0.00001/1.36333 )x(307$ x 200) = -98$ +307$ = 209$

Sell Day 10:
Open 1.36527
Close 1.36595 Gain: -68 Pips
-68Pips x (0.00001/1.36595)x(140,210$ x 200) = -20$ +209$ = 189$

Buy Day 11:
Open 1.36886
Close 1.36891 Gain: -95Pips
-95Pips x (0.00001/1.36891)x(189$ x 200) = -26$ +189$ = 163$

Buy Day 12:
Open 1.36608
Close 1.36543 Gain: -65 Pips
-65Pips x (0.00001/1. 36543)x(163$ x 200) = -15$ +163$ = 148$

Sell Day 13:
Open 1.36515
Close 1.35881 Gain: 634 Pips
634Pips x (0.00001/1.35881)x(148$ x 200) = 138$ +148$ = 286$

Buy Day 14:
Open 1.35879
Close 1.35981 Gain: 102 Pips
102Pips x (0.00001/1.35981)x(286$ x 200) = 42$ +286$ = 328$

Sell Day 15:
Open 1.35953
Close 1.36007Gain: -54 Pips
-54Pips x (0.00001/1.36007)x(328$ x 200) = -26$ +328$ = 302$

Sell Day 16:
Open 1.35930
Close 1.36098 Gain: -168 Pips
-168 Pips x (0.00001/1.36098)x(302$ x 200) = -74$ +302$ = 228$

Buy Day 17:
Open 1.36123
Close 1.36337 Gain: 214 Pips
214Pips x (0.00001/1.36337)x(228$ x 200) = 71$ +228$ = 225$

Sell Day 18:
Open 1.36237
Close 1.36127 Gain: 110 Pips
110Pips x (0.00001/1.36127)x(225$ x 200) = 36$ +225$ = 261$

Sell Day 19:
Open 1.36040
Close 1.36125 Gain: -85 Pips
-85Pips x (0.00001/1. 36125)x(261$ x 200) = -32$ +261$ = 229$

Sell Day 20:
Open 1.36210
Close 1.36040 Gain: 170 Pips
170Pips x (0.00001/1.36040)x(229$ x 200) = 57$ +229$ = 286$

Sell Day 21:
Open 1.35968
Close 1.35426 Gain: 542 Pips
542Pips x (0.00001/1.35426)x(286$ x 200) = 228$ +286$ = 514$

Sell Day 22:
Open 1.35355
Close 1.35296 Gain: 59 Pips
59 Pips x (0.00001/1.35296)x(514$ x 200) = 44$ +514$ = 558$

Total Gain: 2346 Pips
Growth: 558%

You are risking your half account size people don't seem to like that. I don't really care so much if you look it this way. Let's say you made 500$ out of 100$ with this strategy, take that 100$ of the account and what ever happends you never lose money.

Don't expect risking 1% of your account will make you rich the short way. Risk makes the big returns and big losses but you are prepared.

Next up I will tell you something about TP and how we can improve that.


Green pipping to everyone

Hai
Which broker did you get 2000 levarage and take your profits out.

Exness you got 1:2000

My questions are,
what will happen if you get ten consecutive losses?
When market is in ranged mode, many doji's, what you will do?

Powerful story. Did your broker really pay you the 19 million or was it a hypothetical example?

Jysticim your pips are out by a factor of 10.

1.35235
1.35335

This is 10 pips difference not 100. Keep up the good work though.

@ Forexgogo

See the chart, I hope you understand it.

@PipPirates
10 consecutive losses and then we talk about the set in stone SL losses probably won't occur because we use market analysis(support and resistance). I researched the last 5 months and we only get 2 50% DD losses in a row. So 2 losses will give you DD in total of 75% wich you can easily recover from.

For example
Buy Day 7:
Open 1.36028
Close 1.36230 Gain: 202 Pips
202Pips x (0.00001/1.36230)x(262$ x 200) = 79$ +262$ = 341$

Sell Day 8:
Open 1.36138
Close 1.36205 Gain: -67 Pips
-67Pips x (0.00001/1.36205)x(341$ x 200) = -33$ +341$ = 307$

Sell Day 9:
Open 1.36115
Close 1.36333 Gain: -218 Pips
-218Pips x (0.00001/1.36333 )x(307$ x 200) = -98$ +307$ = 209$

Sell Day 10:
Open 1.36527
Close 1.36595 Gain: -68 Pips
-68Pips x (0.00001/1.36595)x(140,210$ x 200) = -20$ +209$ = 189$

Buy Day 11:
Open 1.36886
Close 1.36891 Gain: -95Pips
-95Pips x (0.00001/1.36891)x(189$ x 200) = -26$ +189$ = 163$

Buy Day 12:
Open 1.36608
Close 1.36543 Gain: -65 Pips
-65Pips x (0.00001/1. 36543)x(163$ x 200) = -15$ +163$ = 148$

In these 5 losses with no market analysis you would have a DD of 96.8%
But in reality you have a total DD of 57% wich you can easily recover from as shown above.

You can also look at it differently. You can easily double/tripple you starting bank and if you do so you just get the 100$ of it and you are trading with free money. What ever happens you will will never lose.

As for the question about ranged mode etc. I will awnser when I talk about a TP then it will be much clearer.

U read not everything I see...

1.35235
1.35335

Pips are mostly shown as you say, in this example 10 pips a 4-digit Broker.
235-335 are still 100 points/pips in a 5-digit Broker it's just the way you look at it.

It is a game of probability. 50/50 chance .Enter with the mindset of playing with the 100$.You may come out smiling (unscathed) or sad (wounded).

The last digit is a point. A pip is a pip 4 or 5 digit broker

@ aje6767

If you read and understand it well you see that it is not a 50/50 chance.

Oh sorry I thought it is.I need to carefully go throug it again.

@ ExForX

Read again

I agree with BirminghamUK, A pip is a pip, 4 or 5 digit broker.
you can mess with lot sizes but not pips.

@ The Sparrow

With the calculations it doesn't matter it is only a word comprehension.

Sell Day 22:
Open 1.35355
Close 1.35296 Gain: 59 Pips
59 Pips x (0.00001/1.35296)x(514$ x 200) = 44$ +514$ = 558$

Sell Day 22:
Open 1.35355
Close 1.35296 Gain: 5.9 Pips
5.9 Pips x (0.0001/1.3523)x(514$ x 200) = 44$ +514$ = 558$

Let's continue on focussing on the strategy and not on the meaning of a pip.


Green pipping to everyone

Yes or no would have been shorter... anyway, I think I misunderstood indeed.


So you ended up with 27K and you withdrew it? Also great! Question still remains, this broker paid you that amount? People are always looking for good reliable brokers so it's valuable info.

I'm interested in the gambling theory. But 3.4 pips for 4 digit broker? I'm not yet convinced.