Coin tossing and random entries
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Thread: Coin tossing and random entries

  1. #1
    Hi GeeSeven

    So as to not further hijack the thread in the hyperlink, this is in answer to your post :

    Quote Originally Posted by ;
    Dr. Van Tharp demoned in one of his novels that sound money management, exit egy and postion sizing can make random entrance a profitable system. Weird.
    I admire many of Van Tharp#8217;s views. I#8217;ve read Trade Your Way to Financial Freedom, subscribe to his free newsletters, and have watched a few of his movies. But just because he#8217;s written a couple of best-sellers, also runs seminars across the united states, doesn#8217;t allow him infallible, especially if people decide to quote him.

    On the outside, Van (and his mate Chuck LeBeau) seemingly feel a profitable system may be constructed around random entries. But it ought to be pointed out that their views have been publicized, in the context of stocks, throughout the trending bull markets of the 1990s. When markets fad, precision in entrance becomes significant.

    Consider the chart under the Dow Jones Index, particularly the 1990s. The extreme case of letting profits run is #8220;buy and hold#8221;, and the chart demonstrates why this policy paid investors off handsomely. For position and swing traders, there are definite advantages in carrying long positions and letting them ride. It ought to be mathematically self-evident that the more strongly prices tendency, the greater the advantages of letting profit journey.

    It#8217;s important also to specify what is meant by random entries. Chuck van and others are talking about the timing of the entries, not the direction. If the coin toss has been described in the link above had initiated brief trades once the market is trending up (or vice versa) #8211; which it might have done 50 percent of the time #8211; losses would be the likely result. I#8217;m convinced that Van would agree that the tendency is your friend, and this is ignored by a coin toss entry system that is totally random.

    [Incidentally, at a recent video of Van#8217;therefore I viewed, he says that he doesn#8217;t really trade himself. He's a trading and plogist coach who lets some of his investments to be managed by his most prosperous students, if I understand him correctly ].

    Forex brokers claim that one of the advantages of FX trading is that prices trend better than shares #8217;. Attempting to increase their customer base gives a good motive for them to say this. If I may be permitted to generalize, nations#8217; economies tend to move in cycles, meaning that over time there's a certain quantity of reversion to some mean. You can#8217;t make a fortune using #8220;buy and hold#8221; within a lifetime, by #8220;investing#8221; in FX, like you can with blue chip stocks (I know a gentleman who died recently aged 94, leaving behind a $23m fortune, courtesy of a lifetime of #8220;buy and hold#8221; of a basket of NZX stocks, and just exchanging the volatility for further units). Moreover, with FX one is trading a currency pair, which amounts to the potency of a single nation #8217;s market relative to the other. Not so with stocks. This implies that different strategies are required.

    Sorry if this sounds high-handed, but definitely it#8217;s unwise to take 1 quote from an author, and without providing anything in the way of an excuse, suppose that it had been meant to apply to all situations at all times. Like I mentioned in my original post, if there was just one rule that ensured trading achievement (e.g. random entrance allow profits run), it might be rightfully packed as the holy grail, and everybody would be using it. But trading is a zero (really, negative) amount game, involving willing buyers and willing sellers, and such facts alone necessitate that distinct egies are necessary for different situations.

    I feel that, where there is no substantial trend prejudice, entrance is at least as important as exit. I respectfully submit the following articles for your account:

    I am really willing to eat humble pie. If anyone can show me a system based on coin-toss entrance that produces a profit factor, on equilibrium across all market conditions, than my currently evolving strategy, I'd make the change.


  2. #2
    Quote Originally Posted by ;

    I believe you understand my feeling about calling short term market moves...
    We have had some fantastic discussions before, and that I respect your view. If I recall properly, you've said you've had quite profitable years, then followed by dropping. I concede that it is quite possible my latest performance was fortuitous. If markets are the product of belief systems, then belief systems may change unexpectedly, and at any moment.

    But I agree with Troikaone1 that when it gets to the stage where one believes a coin toss would be the best method that is available, an individual might as well stop trying. Trading is an expensive waste of both money and time if one doesn't have a border (even if it is not precisely measurable), or at least believe that one is on the road to attaining one.

    Either the market is a random walk, or you will find inefficiencies. We could wait to create selected entries, if needed when these occur infrequently. If we could exploit these to the point of overcoming broker costs, on equilibrium, then there's more than mere hope.... That's assuming the same inefficiencies will continue to recur.

  3. #3
    Quote Originally Posted by ;
    Trading is a costly waste of both money and time if one doesn't have an edge (even if it's not exactly quantifiable ), or believe that one is on the road to attaining one.

    Either the market is a random walk, or you will find inefficiencies. We could wait patiently to make carefully selected entries, if needed when these occur infrequently. If we could exploit these to the purpose of beating broker costs, on balance, then there's more than mere expect.... Well, that's presuming the same inefficiencies will continue to recur.
    What would be the reason an advantage would not be precisely measurable?

  4. #4
    Quote Originally Posted by ;
    For instance, if price is over some moving average then you've got a statistical advantage by simply taking long entries. Should you buy in the open of each 4 hour pub that is over the EMA 20 and close to the trade in the pub's close, you've got a chance of a trade. It's as simple as that.

    What pair did you use to the 60% chance of winning? In a subsequent post you cite shorting, is shorting contained in the 60%?

    Quote Originally Posted by ;
    Nope, you did it wrong. Buy at the new pub's open and market at the pub's close over the EMA 20. Sell in the new pub's open and buy at the pub's close beneath the EMA 20. No stop reduction, no take profit.

  5. #5
    Quote Originally Posted by ;
    What are the reason an edge wouldn't be precisely measurable?
    I was only replying in kind to FX-Petra's announcement No one has a quantifiable measuarble edge.... Nonetheless, I think it's fair to say that a (mathematical) edge could only be calculated from past benefits, and all results are subject to statistical error.

  6. #6
    Quote Originally Posted by ;
    quote Coin throw entry: Heads go brief. Tails do nothing. This would be in accore to THE BLACK SWAN. Stop loss prevents a runaway loss from the opposite direction and allows for a positive BLACK SWAN to make us wealthy. Market conditions become inconsequential because price action will provide gains. It would be intriguing if you replace your present entry with coin toss and keep the same exit, money and risk management systems in place.
    . . .nice read - thanks

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