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iwshares

Coin Toss and Money Management

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At the moment my trading system allows for a 2:1 profit loss ratio e.g. 16 pip limit, 8 pip loss. So far using analysis to pick the direction of the trade I've had a 13:10 win:loss ratio. This morning was 11:9 e.g. almost 50/50.

 

This made me think:

Why not drop the charts and pick up a coin to decide whether to buy or sell? It has no memory of what side it landed on so would seem to be as a good an analyst as me at the moment (lets ignore the rare chance of it landing on the side)...

 

Any thoughts guys?

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  iwshares said:
At the moment my trading system allows for a 2:1 profit loss ratio e.g. 16 pip limit, 8 pip loss. So far using analysis to pick the direction of the trade I've had a 13:10 win:loss ratio. This morning was 11:9 e.g. almost 50/50.

 

This made me think:

Why not drop the charts and pick up a coin to decide whether to buy or sell? It has no memory of what side it landed on so would seem to be as a good an analyst as me at the moment (lets ignore the rare chance of it landing on the side)...

 

Any thoughts guys?

 

If you want to engage in purely random activity, go to a casino. At least there you get to see some short tight skirts on a variety of women.

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brokerage will kill you, plus assuming you only trade longs=heads or similar a large run of heads or tails in a row can still take you out, or at least set you back enough that it will take a long time to recover if ever. But I guess if the return is always 2 to one, then it makes sense.

Maths geeks are better at explaining it than I but I think you need to run the profits longer.

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  SIUYA said:
brokerage will kill you, plus assuming you only trade longs=heads or similar a large run of heads or tails in a row can still take you out, or at least set you back enough that it will take a long time to recover if ever. But I guess if the return is always 2 to one, then it makes sense.

Maths geeks are better at explaining it than I but I think you need to run the profits longer.

 

I would recommend that you choose tails to go long instead of heads. I too like to live dangerously.

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Thanks guys, the first post was partially in jest but really happy for the constructive input. SIUYA I see what you mean about the 2:1 limit/stop. I've been thinking I need to reduce my stake anyway to have more pips both ways for the 1% of capital I risk each trade. I'll reduce my stake and try 3:1 so I can get it wrong 3 times for each trade I get right.

 

Hope you have a great Easter and good trading next week!

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  iwshares said:

Why not drop the charts and pick up a coin to decide whether to buy or sell? ...

 

this topic came up a few years back when i was on Woodies CCi site, so woodie put it to a test. go long / short on next bar open determined by coin flip. target = 10, stop =5. it was profitable. not rocket science...price is either going up or down, no?

 

peter

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  peterjerome said:
this topic came up a few years back when i was on Woodies CCi site, so woodie put it to a test. go long / short on next bar open determined by coin flip. target = 10, stop =5. it was profitable. not rocket science...price is either going up or down, no?

 

peter

 

Peter,

 

I think you might improve results over a random flip of a coin if you look at the aroon oscilator before you consider the cci patterns. But, I would only do so if the chaiken monyflow index confirmed the darvas box break out. At that point I would make sure that price stayed within the donchian channels and watched for a fib retracement of a fisher transform signal.

 

MM

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  MightyMouse said:
Peter,

 

I think you might improve results over a random flip of a coin if you look at the aroon oscilator before you consider the cci patterns. But, I would only do so if the chaiken monyflow index confirmed the darvas box break out. At that point I would make sure that price stayed within the donchian channels and watched for a fib retracement of a fisher transform signal.

 

MM

 

MM,

true enough...taking a random Long position when market is already headed north, and converse for a Short positon will significantly improve the odds. however, the whole point of the coin flip (as i understand it) was could you be successful with a random entry when using a 2-1 reward / risk.

peter.

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  peterjerome said:
MM,

true enough...taking a random Long position when market is already headed north, and converse for a Short positon will significantly improve the odds. however, the whole point of the coin flip (as i understand it) was could you be successful with a random entry when using a 2-1 reward / risk.

peter.

 

Peter, I was really only kidding. I only had time to get to the f's in my list of indicators.

 

But if you do are in the habit of trading in the direction of a trend, and care less whether you win more times than you lose, you will end up better off than a random coin flip if you give it enough time. The fact that people are willing to lose money and quit, virtually guarantees there will be some there for you.

 

MM

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  MightyMouse said:
Peter, I was really only kidding. I only had time to get to the f's in my list of indicators.

 

MM,

i knew that!

i love sharing ideas...my biggest fear is that eventually everyone will figure out my methodology and there goes my edge. it's the "fallacy of composition"., like arriving early to get a good seat.

peter

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  MightyMouse said:
Peter,

 

I think you might improve results over a random flip of a coin if you look at the aroon oscilator before you consider the cci patterns. But, I would only do so if the chaiken monyflow index confirmed the darvas box break out. At that point I would make sure that price stayed within the donchian channels and watched for a fib retracement of a fisher transform signal.

 

MM

Now, THAT's funny. Kudos.

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I think it'd be a foolish endeavor bound to fail.... unless you assigned an action to when it falls on the side. I'd say sell all of your belongings, divorce your spouse if you have one, and move to Taipei to marry a prostitute (or three), but I'm pretty conservative so you might want to get a little crazier :missy:.

 

If not for this you'd be sure to perish under the fickle futures trading gods.

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  samanthasing said:
I think it'd be a foolish endeavor bound to fail.... unless you assigned an action to when it falls on the side. I'd say sell all of your belongings, divorce your spouse if you have one, and move to Taipei to marry a prostitute (or three), but I'm pretty conservative so you might want to get a little crazier :missy:.

 

If not for this you'd be sure to perish under the fickle futures trading gods.

 

The trading gods are fair and honest. They take exactly what you are willing to give and give exactly what you are willing to take.

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  joshdance said:
In all seriousness, the coin toss is a really bad idea for *long term* success, I think.

 

Conversely I'd argue that you can learn a great deal by taking random entries. I strongly advise that people try it.

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  zupcon said:
Conversely I'd argue that you can learn a great deal by taking random entries. I strongly advise that people try it.

 

 

zupcon,

so true..i searched years for the holy grail and ultimately learned simple is better.

you do NOTneed the holy grail to be a successful position trader

peter

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  zupcon said:
Conversely I'd argue that you can learn a great deal by taking random entries. I strongly advise that people try it.

 

For practice only you mean? In doing so, are you shifting the focus on managing the trade, instead of the entry--is that the purpose of this?

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Hey, what about time? I mean, when do you toss the coin? You can have a rule on that.. things like '30 minutes after London open'. Or something like 'after ADX turned up". Personally, I had the idea of random entries with SL at 1.5 ATR and take profit at 2.5 ATR (but never actualize it). This in demo, to compare that performance to the one of real trading, to get a measure of how one eventually mess up things :crap: I think you have to take all your responsibilities, and choosing the entry is one of them. That's why I was interested in comparing to random entries. I'm sure many people will be better off with them - but you want being better than many people right?

 

Oh ya, another possibility is trading with the trend and let the random variable to timing.

By the way, of course managing trades is the main thing and a random entry can be a good stratagem in order to focus on that (as people tend to focus on entries instead). Again, I'm talking about exercises.

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