The Coin-Flip Theory

If you talk about an analogy of forex and gambling, I just want to say this:

Say, when you see 100 consecutive "black" in roulette, do you bet "red" or "black" on next one?

If you bet on "black" you are more likely to succeed in forex. This is what I believe.

Of course, the winning rate of "black" and "red" is the same. But I'm talking about the mentality here -- the mentality that considers "100 consecutive black" as "a strong black trend." For that mentality, betting on "red" is like catching a falling knife bare hand. Yet, a majority of people bet on "red."

How many forex traders do you think have this kind of mentality? A very few, I say. That is why only a few traders are successful in forex.

Get it??

Is SL 34 or yesterdays H/L ? You said both in that sentence.

Are you risking 50% each trade.....and then base the lot size on what? SL or 34 or yesterdays H/L?

@ Forexgogo

I understand what you say but I don't agree with you fully. What if there are 100 "black" and the trend reverse. We need to keep our entry as random as possible to get the 50% ratio. We will make the profit with our SL, later tonight I will post something about a TP when the market is not volatile. There was a research if monkeys could trade vs humans and suprisingly they did better hint: randomness. http://www.automaticfinances.com/monkey-stock-picking/

@ cspip

If you trade with a leverage of 1:200 and you want to have max DD of 50% you can only afford to lose 34 pips no matter what lot size ofcourse. That's why we have a set in stone SL of 34 pips. If we just did every trade with a SL of 34 pips we would just break even. The money comes from yesterdays high/lows. When the high/lows are in range of 34 pips we use the high/lows. When they are not in range for example we buy a day and yesterday the low is 40 pips lower we just use the set in stone SL of 34 pips.

Volatility
Volatility of the market is kind of a big factor in my strategy. To gain 50% a day we need to have a difference of 34 pips between open and close in our favor because we don't use a TP. Someone can ask why do we need that 50% gain a day, that's immense. We need to have that 50% gain the hold of the risk reward ratio 1:1.

We have situations when the market is very volatile alot of red news etc. Then we are likely to have more then 34 pips moves a day. If we just put a TP at 34 pips we wouldn't make up for the days that the market is less volatile. So what we learn from this is to have not a TP at a volatile market.

We have also situations where the market is almost sleeping/ranged mode. We have no 34 pips difference between open and close. But in that time period the market can still move 34 pips and retrace for example. We can look here on FF at the calendar and see almost no important news for the pair (EUR/USD) When we see that we can use a special TP. I will explain this with a chart.

Example
At 20 June we sold. Market is medium volatile. Lets say we started that day on our account with 100 euro. The red lines are where you see what happened normally without a TP. We use 1 trade with 100% of the account ballance. SL yesterdays high but that's not in range of 34 pips so we use a set in stone 34 pips SL at 1.36362

Sel Day 6-20 (red lines)
Open 1.36022
Close 1.35803 Gain: 219 Pips/points
219 Pips x (0.00001/1.35803)x(100$ x 200) = 32$ +100$ = 132$

When we use my TP rule we can make more out of this day. When you want to use the TP rule the market needs to be medium/less volatile.

When you know this you open not 1 trade with 100% of the account ballance but you open 2 trades with both 50%.
Trade #1 you set a TP of 34 pips. SL yesterdays high but that's not in range of 34 pips so we use a set in stone 34 pips SL at 1.36362
Trade #2 you set no TP. SL yesterdays high but that's not in range of 34 pips so we use a set in stone 34 pips SL at 1.36362

Trade #1 (green lines, TP)
Sel Day 6-20
Open 1.36022
Close 1.35682 Gain: 340 Pips/points
340 Pips x (0.00001/1.35682)x(50$ x 200) = 25$ +100$ = 125$


Trade #2 (blue lines)
Sel Day 6-20
Open 1.36022
Close 1.35803 Gain: 219 Pips/points
219 Pips x (0.00001/1.35803)x(50$ x 200) = 16$ +100$ = 116$

16$ + 25$ + 100$ = 141$
As you can see only with a good/smart TP you can increase the profit of this particular day by 28%

(Pink SL,1.36362, for all trades)

Rules for TP
- Open two trades 50% each of the account.
- One trade with a TP at 34 pips.
- One trade with no TP.

PS: The collored lines of open and close need to be on top of each other ofcourse.

Green pipping to everyone

In trade #1 - you are not telling the truth when you say you gained "340 pips". You did NOT gain 340 pips. Instead, you actually gained 34.0 pips.

In trade #2 - you are not telling the truth when you say you gained "219 pips". You did NOT gain 219 pips. Instead, you actually gained 21.9 pips.

I don't understand why it is so hard for you to write the correct amount of pips you have gained. You are misleading people - especially those people that quickly scan your posts and only see the pip total you write.

@ Ace_1

I am saying 340 Pips/points as I have shown before it does not matter in the calculations, you know that. My posts are not made for the people that scan them quickly as they will never understand it. You will need to read everything from start carefully. If you don't want to spend time reading you will never succeed in forex. If you read everything well you understand why I write 340 Pips/points.

For the people that only search for the results in pips they will never succeed in forex because they don't understand it. It is not about the gain in amounts of pips. It does not matter if you make 10 Pips or 250 Pips I hope you understand this. You only need to gain something positive, if you would make like 5 pips a day you will be in financial freedom in no time. I hope you understand this.

Hi Ace, hope this is the last time we hear from you on this pips or points argument. Its pretty obvious open and close price are stated in the post, if ONE cannot do a simple calculation on 340 pips or 34 pips, then there is no point leading them.

My concern here would be to see if stone SL (at max DD 50%) can survive in long run. Ace, you are most welcome to contribute more ideas such as improving entry, trade management etc on the trading system.

Jesus the most negative people inhabit this website

Propose an idea and people try and tear you apart

@ wilsonch

I am backtesting it myself manually from the beginning of this year 1-1-2014. With start ammount 100 euro, 1:200 leverage.
We will see if the SL can survive the long run. I tested Win/Lose ratio of the last 5 months the results are in the second post.
I hope that I can post the results tonight.

Something OT, you will always have people like Ace also IRL. I don't mind that. They still bring something positive because I can make a good post about his reactions. Other people and Ace can learn from this. #Post 66.

http://www.tradingblox.com/forum/viewtopic.php?t=3637

@ Jysticim

Does it mean you are one hour in the trade?

@ MCRotter

They only had random entries and trailing stops. As I said before our money does not come from that it comes from the market analysis. If you would use the set in stone SL you would break even. We use support and resistance to determine our SL. Because we are sure that we make ~50% of the time a winning trade we need to cut our losses by using market analysing.

@ Kofix11

Read first page again and you will understand that we make 1 trade a day.

You're gains can't be correct, there is no way you have a 800+ pip winner since June 17

Its been over and over this.........he means 800+ pipettes or 80+ pips

I think guys you should stop focusing on the pips.... and look into the concept instead.... It was said many times.

Jysticim just a question here please, assuming you start out with $100 at 1:200 leverage and your broker does not permit anything below 1000 units of currency (0,01 lots) wouldnt 4 consecutive losses of 34 pips each (50% DD each time) mean you can't trade anymore. This of course would apply only if you started out with $100 and had 4 consecutive losses right away.

In post #2 could you tell us the max consecutive losses in your back test

@ fugly

Yes you are right about that. If you just have a basic account and broker doesn't allow a trade below 1000 units unfortunately you have to switch brokers.
Some reputable brokers that allow trades below 1000 units:
- XM
- MahiFX
- Oanda
- IBFX

I did a 5 months back test (now I am testing the whole year) with the result of 2 times in a row a hit of the 34 set in stone SL, that's a total DD of 75% stated in post #9

Plus I wouldn't start with more then 100$ as you know the big DD.

So, when you say an SL of 34, what you mean is 3.4 pips, right? My brokers EU spread is 2.5pips.... it wont even let me put an SL so close to that, as 1 tick in the wrong direction would stop me out. And even with a broker with 1pip spread are you saying 50% of the time it wont move 2.4pips in the wrong direction (accounting for the spread)?...

Pierre, the 3.4 pip s/l was if you were using the 2000:1 leverage. At 200:1 your stop would be 34 actual pips to hit the 50% dd