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Coin Toss Experiment (Strategy)
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Coin Toss Experiment (Strategy)

  #51 (permalink)
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treydog999 View Post
Now I guess the next step would be to do trailing stops, or break even stops. I just came to think of it. I think these may have skewing effects because they adjust during the lifecycle of the trade as opposed to being fixed. I may try to run this myself. My hypothesis is that its going to be detrimental, because in essence these things only occur when you have gotten MFE, not when you have incurred MAE. So your always taking your full loser when it comes straight down. But you take smaller winners in general because of the trail or BE stops.

Yes, it would be quite interesting to test different exit strategies to see if any produce a negative expectancy in a random entry system which would be a cause to eliminate them.

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  #52 (permalink)
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A casino has an edge and we all agree on that. Regardless of when, how and where you play, they will take the player's money. 10 years and 20 years from now, they will win because they truly have an edge. Once in a while, there is a large winner, they take a small loss for an hour, and then they continue to win indefinitely. They truly have the odds in their favor. An edge in our case is a mathematical definition where the odds are in oneís favor.

When we trade, and have positive expectancy does that give us an edge? Does our strategy regardless of whether we use it now, tomorrow and in 20 years will continue to win? Sadly we know the reality of that. Therefore we do not have an edge.


I propose to replace the word edge with the word anomaly. Therefore, when you build a strategy, you need to define what anomaly you are exploiting. If you can define it verbally, you have an advantage over those who canít.
The basis of this definition will allow you to examine all the necessary components when you back test. This will also allow you to examine the appropriate risk management with such a strategy.

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  #53 (permalink)
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Alright so I ran the random entry system on 6E with 5 minute bars like i had last time. 1-1-2003 to present day. I used the same 15-15 hard stop and target as before to keep consistency. No commissions/slippage.

Break even after 8 ticks of profit (15-15 stop target)

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trailing 15 ticks (15-15 stop target)
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These strategies in general affect winrate, Reward Risk Ratios, and holding time in trades. But in general still again, trade management converges to 0.

Looking at the Break Even strategy. Break evens here I believe are not counted as winners no losers. So in the end you get a 1:1 Reward Risk ratio. But your winrate is in the toilet compared to a 1:1 strategy.

The trailing stop strategy does something interesting that may be beneficial though not net profitable in any way. is the increase in the ratio of winners to losers. So if your in the combine for example, trailing your stop is a guaranteed way to nail at least 1 of the stats. This trailing stop was 15 ticks on a 15 tick stop, so it never actually started to lock in profits.


But I think conceptually these exercises continue to show us that at the end of the day, trade management doesn't mean jack, outside of psychology and preference.

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  #54 (permalink)
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Coin Toss Continued

I have decided to compare on the same spreadsheet my experiments. This time using a 1 minute chart on 6E. the standard 15 ticks remains the same.

I tested the following.
1:1
2:1
1:1 and 2:1 scaling out
1:1 and 2:1 scaling out with 15 tick trailing on entire position
1:1 with 8 tick Break even
1:1 and 2:1 scale out with BE after 1st target (15 ticks)
1:1 Scale IN after +8 tick profit

Comparison spread sheet
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Notice the expectancy in ticks is fractions of a tick across the board.
the only difference is win rate and ratio of winners to losers. That is all trade management changes.

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  #55 (permalink)
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Iím new to the forum. Iíd like to add a wrinkle to the random entry discussion.
The theory is to trade successfully you cut your losses short and let your winners run. The system you have been testing limits your winners.

If you enter a trade with a trailing stop and donít have a target you will catch a big move every so often. This in theory will increase your average win size.

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  #56 (permalink)
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mattz View Post
A casino has an edge and we all agree on that. Regardless of when, how and where you play, they will take the player's money. 10 years and 20 years from now, they will win because they truly have an edge. Once in a while, there is a large winner, they take a small loss for an hour, and then they continue to win indefinitely. They truly have the odds in their favor. An edge in our case is a mathematical definition where the odds are in oneís favor.

When we trade, and have positive expectancy does that give us an edge? Does our strategy regardless of whether we use it now, tomorrow and in 20 years will continue to win? Sadly we know the reality of that. Therefore we do not have an edge.


I propose to replace the word edge with the word anomaly. Therefore, when you build a strategy, you need to define what anomaly you are exploiting. If you can define it verbally, you have an advantage over those who canít.
The basis of this definition will allow you to examine all the necessary components when you back test. This will also allow you to examine the appropriate risk management with such a strategy.

there isn't any real edge in the literal sense, i.e., the casino's edge, or floor trader's edge (buying-the-bid or selling-the-offer)

the edge lies within the individual

anomalies and mis-pricings are only one part of the puzzle

the ability to interpret price action, uncover patterns (as ephemeral as they may be) and determine price drivers,

translate it into an un-biased action that maximizes profit, and mitigates loss

and then self-correct when it all changes

the sum of these parts = the edge

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  #57 (permalink)
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deaddog View Post
I’m new to the forum. I’d like to add a wrinkle to the random entry discussion.
The theory is to trade successfully you cut your losses short and let your winners run. The system you have been testing limits your winners.

If you enter a trade with a trailing stop and don’t have a target you will catch a big move every so often. This in theory will increase your average win size.

here is the results with the 15 tick trailing no profit target.

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It is actually by far the worst performer. With a negative expectancy >1. I know its not much more than the rest but still bad. For that you get a 1.665 RR and 34.34 % win rate. you would do better doing a straight AIAO 2:1. You give up 1.34% winrate but gain .32 RR.

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  #58 (permalink)
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treydog999 View Post
here is the results with the 15 tick trailing no profit target.




It is actually by far the worst performer. With a negative expectancy >1. I know its not much more than the rest but still bad. For that you get a 1.665 RR and 34.34 % win rate. you would do better doing a straight AIAO 2:1. You give up 1.34% winrate but gain .32 RR.

So much for theory

I do have one question. If the stop is 15 ticks and you are not allowing for slippage why is there such a difference in the largest losing trade. If you are stopped out at 15 ticks shouldnít all systems have the same largest losing trade?

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  #59 (permalink)
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deaddog View Post
So much for theory

I do have one question. If the stop is 15 ticks and you are not allowing for slippage why is there such a difference in the largest losing trade. If you are stopped out at 15 ticks shouldnít all systems have the same largest losing trade?

The market can still slip you. I am not adding in additional slippage or commissions. It is still using the market data as it appears.

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  #60 (permalink)
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treydog999 View Post
The market can still slip you. I am not adding in additional slippage or commissions. It is still using the market data as it appears.

Iím a stock trader and not familiar with 6E. What amount equals a 15 tick stop?

It seems strange that you would have such a wide discrepancy.

Iím assuming that numbers are dollar amounts.

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