The Art of Coin Tossing

Playing around with a system that is very much like a coin toss in nature. Going to journal the results here.
Some people might think I am crazy but most if not all of my trades are going to be with a risk:reward ratio less than 1:1. The worst R:R I will use is 3:1 and the most common will be around 2:1. Since I am expecting and will be required to have such a high winrate in order for this system work this will be using a very aggressive risk management plan. I will be risking 10% or less per trade.
Since this account is so risk aggressive drawdowns are too expected. A draw down of 35% is totally healthy and expectable for this system.
Heads = Long
Tails = Short
Do not ask me how the system works. If I wanted to go in to that the thread would be in a different location. I will talk about the system in general terms but I will not post entry rules or steps or anything like that.
Let the games begin.


Current Goal: $850.00

A Little About the System: As I stated earlier the news is my least favorite part of the market to trade. This is because the news is the levy flight in the market. Those that know me know I firmly believe the market is a random walk with a levy flight. Those that know also know that I think phycology is very important in trading and more times then not, if you can do the opposite of the herd your results will likely be opposite of the herd. So what is the herd doing? What is every one taught to trade and what is every one trying to capture? The trend. The News. The Levy Flight. Every body is trying to capture the levy flight or the trend of the market and in doing so they end up getting chopped to bits by the random walk. Since everybody is chasing the Levy Flight I have learned to chase the random walk. As crazy as it sounds, it is much more predictable than the levy walk or the next trend. As I said, it is extremely hard to predict when and where the levy flight or trend will take place. It is how ever very easy to see when the levy flight or trend has taken place after the fact. This is often a big problem for most traders, by the time they notice the market is trending, the trend is over. And what do we know will always happens after the levy flight takes place? The market reverts back to the random walk. So in a sense this is a mean reversion strategy as most of the market, especially shorter time frames spend most of their time in a random walk like state. So the goal is to find a levy flight that has already occurred and trade the reversion back into the random walk.

Flipping 2 Coins Today.



Time to wait for the coins to land.

hi sis,

just wondering are you immediately put the trade, or you decide when to enter the trade LOL, i remember one of CP post in his thread about coin toss

Best of Luck of your journey, i have similiar entry in both pair

Hey edgartan, I know exactly what post you are talking about. My trades are not a truly decided by a real coin toss, the "coin toss" deciding which direction i trade is decided by the market. I also consider it a coin toss system because I am either right or wrong. No trailing stops or BE. heads or tails. Although I will close out trades before red news if they are too close to my stop to avoid slippage. News is my least favorite thing to trade.

the same as CP story LOL, love your work

let see what market give us today

-edgar

Was on the wrong side of the coin for EJ.


Still waiting on EU. Hopefully it will land by the end of the day.
While waiting flipped another two coins for AUDCAD & EURAUD


Looking for these coins to land before the end of the week.

Still waiting for my coins to land. EURUSD looked like it was going to land on heads(long) but it appears to be flipping towards tails(short). The coin is still spinning though so we will see.



wish I had more leverage so I can take full position sizes... Bloody US Brokers...

The Coin has landed. And the results are... TAILS!



2 more coins are flipping, these ones may be flipping for a few days though as they are longer term trades.

Will be interesting to see how the AUD news affects the open orders... I normally do not hold through red news but because these trades are using such wide stops and targets I am not too worried about the whipsaw likely to occur.

LOL u catch that spike with yours AUD CAD.

Still waiting for AUDCAD to close out. looks like it will be heads hitting my TP.

Called Tails on GBPAUD & EURAUD, both paid nicely

Interesting results you are getting Sys. If it keeps going like this, there will be a central message popping out from it which I will be very interested to hear. :-)

Hey C thanks for dropping in. Hopefully there will be something useful you find from it

AUDCAD Landed on heads. So far it's been a great start to the week.

About 5-6 years ago I ran a similar risk>reward model in a live forward test for about 13-14 Months.. it made money but the draw-downs were more than i was looking for at the time.. Good luck Sis with your coin toss.. I'll be following with interest..

Hi Ja

This approach and yours sounds similar to Van Tharpe's random entry system which demonstrates pretty categorically that entries simply do not matter and may as well simply be a coin flip. Provided the market is liquid and displays volatility it really is the exit strategy that counts. But no matter how this is presented, many traders have a real problem coming to grips with this. I am interested in the results that Sis is getting as over time I think this conclusion will be spelled out loud and clear which I think is Sis's intent. :-)

coin toss gooing all aud bull in three coin tosses and all aud pairs. Im thinking you are rigging the cointoss

Hey C.. I'm sure Van Tharpe's findings are correct to his work though I'm not sure my model would have worked in random mode, mine was manufactured very much on a set of edges which related to the market environment of that period.. I cant talk for Sis because I don't know he's model though I suspect 21vs7 is correct in his analogy.. Interesting project anyway..

Hey Ja

I agree with you on the critical need for an edge but what I have found in relation to an entry is simply the need to commit to a trade and thereby not miss the trade opportunity if your chosen approach tells you that you need to be in the trade. The edge with the technique I use (trend following) lies in trading the trend itself with an unlimited profit target and tight stop loss condition which is assumed to have a sufficient positive bias as opposed to simply being a random sequence of price moves.

For example, as a trend follower, you need to commit to a trade if a trend is in play, for without a committment there is frequently a lost opportunity cost. Trends of significance are few and far between and you don't want to miss out on them when they occur by virtue of waiting for the perfect setup. Provided that the technique says that a trend exists I have found that I should be actually agnostic about when and where I enter. Of course with hindsight you can always choose the perfect entry to maximise your profit in trend but the process of waiting itself for a 'sniper entry' actually frequently does you no favours as what is more important is that you are in the trend in the first place.

So when is the best time to enter a trend?.....and that is the million dollar question for me. It actually seems to be where the conditions of a trend are being met, and once the mind is made up that a trend exists, it is simply a matter of hitting the trigger finger. The decision I therefore reached is that a breakout in the direction of he trend is as good as any other entry simply because the conditions of the trend are being met in the breakout condition. Furthermore, in waiting for a sniper entry with a retracement entry, you can be waiting for a long time for that to occur with no guarantee that it ever will....thereby you sit around twiddling your thumbs as opportunity cost builds up.

I can't really comment on other trading strategies but I assume the edge in these instances will be based on different factors to a trend follower and once again, not necessarily tied to the method of entry apart from the fact that when these conditions are met, it is best to commit to the trade as opposed to waiting for the perfect setup that may never actually occur.

I would be interested to hear other thoughts about this and also get Sis's views on this particularly in relation to the approach he is trialling here and why? Actually don't worry Sis, I have re-read your intro and understand what you are doing.

For example, at the casino there are methods to keep you in the game a long time despite the house edge through aggressive risk management such as progression plays (eg. Trioplay). A raw trading approach that simply uses an aggressive risk management approach with an unsymmetrical risk reward profile (as Sis is engaging) may in fact be achieving this aim as opposed to being an attempt to generate sustainable positive returns using a built in edge. However once you have these foundations built into any strategy, then if there is such a thing as an edge associated with a small non-random element in this market which Sis is questioning in his intro you can then further compound positive returns. This is actually the approach I used in developing the technique I employ from ground up. Unfortunately however finding a true edge in this market from price action alone is an extremely difficult exercise and the reason I trade trends is that of all the techniques I have experienced, the trend (not all trends but some long trends) are the only price anomaly of any consistent pattern that appears to have some kernel of non-randomness about it.

Hey j4d

Yeah using this high win rate, high risk reward model did take some getting used to but I have grown to love them. If the system has a truly high win rate the drawdown should be equal as if you are using a reverse R:R of 1:2 or 1:3. With the R:R I am using my overall/max drawdown should be around 4 losses in a row in the worst case scenario. If I were to use a 1:2, since my WR will go down by default due to the R:R the amount of draw I am going to receive will be the same profit wise except it will could possibly come across 12 consecutive losses instead of 4. I personally am not the kind of person like thats to be wrong 5-8 times before I am right which has really pushed me towards the sub 1:1 R:R ratios.