So where do you make YOUR money?

[Shakone]

I am not sure why you feel insulted, this is merely debate.

You did imply that you had traded a random entry system and you had to backtrack from that somewhat so your bruising in that respect is self inflicted.

The above quoted statement is correct. The concept of coin flip & trailing stop is THE SAME as a 'bet' that markets will trend. There are options strategies that do the same thing. Now - take a look at Citigroup chart, this coin flip strategy would absolutely fail here because the trending periods are not sufficient.

Now - a monkey could enter at random & you could apply a trailing stop BUT a monkey could not identify a market that will trend, which you would have to do in order to make this 'random' system work.

So - if random entry now means that you need to first pick a market that you believe will trend over the trading period, then it is not reall random. You have merely stretched a point to give a system the appearance of randomness to someone that delves no deeper.

I don't feel insulted, and I didn't backtrack. You read what you want to read, and don't focus on the question that was posed, but rather what you want to say. Yet another example of you doing that would be

The above quoted statement is correct. The concept of coin flip & trailing stop is THE SAME as a 'bet' that markets will trend. There are options strategies that do the same thing. Now - take a look at Citigroup chart, this coin flip strategy would absolutely fail here because the trending periods are not sufficient.

You want to talk about trailing stop. I didn't say it had to be trailing stop. You're imposing an exit strategy on the entry so that you can say what you want to say. That's irrelevant.

We have established now that you CAN be profitable with random entry, and you have accepted this (albeit kicking and screaming).

Now your next point is separate, it seems you are saying that under particular market conditions and on a particular instrument such as Citigroup, you might not be able to, because there is no significant trend. This is an entirely different question. You're having great difficulty with this point. The question wasn't that you couldn't choose the instrument, or the exit or the money management, it was ONLY that the entry was random. ONLY the entry is random.

Anyway, in the case of Citigroup, while I wouldn't want to trade that myself, and would probably fail miserably on it, you say there is no trend. On what timeframe are you saying there is no trend? If you're a daily trader, there is a reasonable trend from February until April (where its price went up 50-60% in that time -50% not enough movement for you?). Then there's another trend down until may. Choppier after that, but again trends up reasonably from September until now. That's daily. Maybe that September until now will look like a great trend on hourly, or perhaps there's a good trend on an even longer timeframe than daily.

What are you going to change the question to next? It has to be your choice of timeframe, your choice of instrument, your choice of money management, and then random entry can't work?

If you want to play games and say it isn't random entry when a trader flips a coin for entry direction and chooses to exit a trade, or you want to complain that the choice of market or timeframe makes it non random entry, then you can do that, but it becomes ludicrous, and if you take it to the extreme you will lose the point anyway. Since, if we take it to extremes, every trade IS random. Whether you think you have a great system or not, there is always a probability your computer will die, connection break, broker have problems, problems with your feed, the exchange goes down, you have a heart attack, there's a fire, you make a mistake, you have a fit blah blah. These are random events, which make every single trade you've ever entered random. Now are you sure you're telling me you can't make money with random entry?

It is getting pointless. DT don't believe it. I'm quite fine with that. I've made my point, you disagree and that's fair enough. I don't envisage any more mileage in this, at least none I am willing to provide.

 

[thelerner]

thelerner.

"This" = agreement.

Good, I wasn't sure. IMHO we need others input to keep us on track. I have years of experience, but .. at this stage, what I'm concentrating on is subtracting .. simplifying.. KISS (Keeping It Simple Stup..)


IMO there are times when the market is not a random walk(ie. coin flip), there is fundamental news about the company/commodity (known to some or all) , an economic shift that is lifting the market or sector, or herd mentality. (The big Question is how much of the time??)

Often WE create herd mentality, even if it makes no sense. Enough people have a 7,21 50 etc. day moving average on there screens or have the same support/resistance lines drawn so that they make a stock move. There is also the shock wave of the big boys moving in and out w/ 10's of millions of pounds.

I may not know what it is, or exactly what sparks it, but the markets move in waves and I intend to catch some.

Michael

 

[DionysusToast]

Shakone

Your definition of a 'random entry' system is actually equivalent to an option strategy called a 'strangle'.

It will make money when a strangle makes money, although rather less because of all the false starts.

Either way - the system requires a judgement that price will act in a certain way. Hence it not being random, only having the appearance of randomness to those that don't scratch 'neath the surface.

DT

 

[DionysusToast]

Anyway, in the case of Citigroup, while I wouldn't want to trade that myself, and would probably fail miserably on it, you say there is no trend. On what timeframe are you saying there is no trend? If you're a daily trader, there is a reasonable trend from February until April (where its price went up 50-60% in that time -50% not enough movement for you?). Then there's another trend down until may. Choppier after that, but again trends up reasonably from September until now. That's daily. Maybe that September until now will look like a great trend on hourly, or perhaps there's a good trend on an even longer timeframe than daily.

Just to put things in perspective for you. That 'great trend' from September until now has moved the price of Citigroup up 70 cents.

Perhaps a thread on the application of common sense is required.

 

[Shakone]

Shakone

Your definition of a 'random entry' system is actually equivalent to an option strategy called a 'strangle'.

It will make money when a strangle makes money, although rather less because of all the false starts.

Either way - the system requires a judgement that price will act in a certain way. Hence it not being random, only having the appearance of randomness to those that don't scratch 'neath the surface.

DT

No it is not equivalent. If I toss a coin and it is heads so I go long. I can exit whenever I like now, and I've paid the spread. I do not profit because it trends down as I would if it were equivalent to a strangle (the premium is also different to the spread). I will lose money when the strangle makes money if it goes down. If I am long a strangle my risk is just the premium. If I enter with direction based on a coin toss, my risk is not. They are not the same. You're wrong.

Either way - the system requires a judgement that price will act in a certain way.

Isn't this true of every profitable system? If the spread were so large and the instrument moves extremely small, you couldn't make money with Technical analysis, fundamentals, LII or anything. That says nothing about whether TA, FA or LII CAN be profitable.

 

[Shakone]

As for your other post. I didn't say huge trend, nor did I say it WAS a great trend, I said "maybe it would be a great trend" relative to the smaller timeframe (1 hour) from September (do you understand the word maybe?). You are reading what you want again. I didn't bother looking at the time, because I thought the 50% rise would have been sifficient for my point. But looking again, September until now is a 20% rise, yes not a lot in cents terms with respect to spread (do you think everyone cares only about cents, or do you think there are some people who trade more with %'s in mind? Is your view of the world so small?). There was also a 50-60% increase in a share price in a couple of months (from February until April). If I go longer term, the trend down from Jan 2007 to 2009 is obviously huge. Plenty of other good trends at other times too. Maybe there will be a huge trend in the future lasting years. So how can you say that the long term trader won't get enough significant trends to make money? Are you psychic and know all future trends?

You said for Citigroup the trending periods are not significant. So from early 2007 to early 2009 is not significant enough for you? lol. Goodbye DT

 

[DionysusToast]

Shakone - when discussing Citigroup, I am discussing post-bail out Citigroup. The current Citigroup is the same instrument as prior Citigroup in name only.

Common sense dictates that a 20% move in a month is pretty worthless when that 20% is actually a 40c move.

The strangle is a bet that the market will make a sustained move which is exactly what your random entry system is. It is not random. It is a specific bet that the market will move, although without specifying direction.

This really is the thread that keeps giving.

The bottom line is that it is SKILL that makes you profitable but LUCK that dictates the extent to which you are profitable IF you have good money management skills.

 

[meanreversion]

Gents - you're going round in circles and surely wasting your time now.

The discussion over what is "random" will never be answered to anyone's satisfaction, because there are too many components.

As an analogy, a mechanical system is entirely rules based therefore not discretionary - right? Wrong. There is discretion in choosing the variables, the markets, the bet size etc etc. A fully automated system is also discretionary, although we like to think of the former as being unconnected to the latter.

As for luck - you're always going to need it, even if skilful. We all know the names of the famous trend followers, but would it not be fair to say they got a little lucky that when they started, as commodities began to exhibit sensational trends?

Anthony Bolton, the famous fund manager, launched a China fund for Fidelity in April/May of this year and is now up 30%. Skill or luck? The Shanghai stock exchange is up exactly the same amount from that period.

In the end, it's impossible to say that something is 100% discretionary, or 100% random, or 100% lucky etc., they are not mutually exclusive.

 

[DionysusToast]

MR - the distinction is important.

The myth is "you can enter at random and if your money management is good, you will make a profit".

The reality - no-one actually does it and even those repeating the myth are looking for other directional strategies to trade. Odd considering they could save all the bother & just toss a coin. Usually the excuse it "it makes money, just not enough". Tell you what - wouldn't it be nice if these chaps tossed this profitable random strategy they don't used to the newbies ?

The truth "Given complimentary market conditions, it is possible to enter at random and have other parts of your system geared so that you still take advantage of those specific market conditions. In non-complimentary market conditions, the system will fail miserably"

Of course, the reality isn't half as alluring as the internet myth.

It's the trading equivalent of an magicians illusion. It's smoke & mirrors, nothing more.

In terms of luck. When you enter, skill gets you going in the right direction but there's a bit of luck involved in how far it goes. You can either be geared to take adantage of that or not IMO.

 

[barjon]

toastie

I suppose the only way to demonstrate the myth is for for you to toss a coin at a given time and let someone else make the entry and see if they can make a profit over a series of such trades - CounterViolent did something similar on gold some time ago if I recall and he turned a pretty penny or two. Even then I guess you would put any success down to luck.

It's quite interesting that you have been making the case in other threads that TA is rubbish and a fallacy. It follows, from your perspective, that any entry based on TA is essentially a random entry. It follows, again from your perspective, that anyone making money from their TA entries must be doing it because of their money management alone if you believe that TA has no validity.

It seems to me that you can't have it both ways

good trading

jon

 

[DionysusToast]

Not both ways Jon.

I have maintained that Textbook TA is nonsense. The fact is many people can't grasp that the 'Textbook' part of that statement is as important as the rest actually gives people on my side of the fence re-assurance that this is correct. It appears that some people are unable to process nuance. It is MAINSTREAM TA that I profess is nonsense. It is also the use of any form of TA in absence of other factors that is not only nonsense but downright dangerous. Trouble is - people want to learn 1 thing and then go trade anything. Good luck to them, I say.

I am not saying all analysis is nonsense and that only fundamentals should be used. People that use textbook TA are cannon fodder & there is a huge industry ensuring that there is a constant supply of fresh meat on the market.

People that repeat internet'trading 'wisdom' and cliches are also cannon fodder.

If you give me a set of trading rules that contain a random aspect, I will tell you under which market conditions they will and won't work.

'Set a' will be market conditions that can generate profit and 'Set b' are market conditions that will generate losses. In other words - you have a strategy that will take advantage of 'Set a' market conditions. Call that random if you like. I call it a predictive trading strategy.

Anyway - will someone put up a thread of their working random entry system that they decided not to use for whatever reason ? I think it would be of immense help to the newbies.

 

[rathcoole_exile]

Anyway - will someone put up a thread of their working random entry system that they decided not to use for whatever reason ? I think it would be of immense help to the newbies.

Pedro,
after a bottle of Red my entries are always random

 

[HowardCohodas]

Trouble is - people want to learn 1 thing and then go trade anything. Good luck to them, I say.

If the only tool you know how to use is a hammer, every problem looks like a nail.

 

[Shakone]

Every trade you take has an element of randomness (maybe not 50:50, but still random), in entry and exit. Therefore anyone who thinks you can't enter with random entries and be profitable either thinks it is impossible to be profitable at all, or isn't facing the reality of what they do. What in your life isn't partly random?

You talk about the internet myth and this is your version of the myth. You talk about textbook TA, and this is your version of TA. If they don't work, in both cases it is something about your version that is not working for you. I don't remember getting a textbook when I was learning TA, but then I never took a course in it, so the textbook part doesn't mean anything to me. Mainstream TA doesn't work? Support and Resistance can work, and S&R are mainstream, as is trend. If someone then tells you not to limit TA to your version, but anything involving past price, you ignore that and keep arguing about your textbook version which doesn't work for you. If someone tells you that's not the random myth they are referring to, again it is your version you want to keep arguing about.

Your version of TA might not work. Your version of the myth might not work. I'm happy to accept that. It is like me saying Fundamental analysis doesn't work, and then someone argues, and I lose the point so then I say oh no, I mean textbook FA, i.e. the set of things which don't work that I consider mainstream. Yeah that doesn't work. Useful. To nobody. And pointless. Can someone post a random entry system which works? Well then what you're actually asking for is someone to give away part of their edge to you. Maybe someone will or has. But giving away a part of your edge to win an argument on the internet, lol. No chance.


There is a pattern here with you DT. And this is why as I mentioned earlier it is pretty pointless to argue with you, because you twist the argument to your version of things and can't focus on the actual point. Against my better judgement I continued to argue with you, which was clearly a mistake as MR pointed out. Who is the bigger fool, the fool or the man that argues with the fool. Well in this case it is me Time is too valuable for this.

 

[DionysusToast]

Here's the problem Shakone.

The trading myth "you can enter at random and with good money management you'll make money" is just more bullsh1t for newbies to wade through.

Nothing more, nothing less. It's just a blind alleyway these people don't need to go down.

Any newbie reading this will make the assumption (and fairly so) that there's some mystical money management technique which, if learnt will absolve them of having to pick a direction to trade in or to make a call on how the market is going to move.

Why people on here want to misdirect people in this manner, I have no idea.

As for 'giving away part of your edge' - honestly - you made me laugh out loud with that one.

So we have come to
- random entry works
- you don't use random entry because it doesn't make enough money
- you can't tell people how to use a random entry strategy because it would give away my edge

I am halfway to thinking that anyone that believes this total drivel deserves leading down a blind alleyway.

As for "I'm not going to argue any more" - what is it ? Four times you have said that now ?

 

[HowardCohodas]

I've hesitated to way in substantively on this discussion because I disagree with some who have posted here whom I respect. I'll try to add my remarks without harming any relationships.

There is a case to be made that random entry can possibly be profitable with appropriate money management. Around seven years ago when I was using my genetic algorithms (AI) package to optimize parameters on some well known money management strategies, I did the following experiment. Randomly pick a trading instrument. Randomly pick a direction (long or short). Use a money management strategy that set the amount to risk based on the gambler's ruin theorem. Set the stop loss determined my the money management strategy. Use trailing stops. Whenever a trade closed, begin with an new random direction on the same instrument.

The genetic algorithms program used several years of historic data to insure one or more market cycles. It divided the historical into two non-contiguous data sets, trained on one and validated on the second one that it had never seen during training. The objective of the exercise was to see if parameters could be picked for the key element in making this method profitable, the trailing stop.

It seems well known that markets move sideways about 80% of the time and trend 20%. The trick is to latch onto a trend and generate your profits there.

It got good results with the trailing stop setting that was not much different than is popular with respected authors. Drawdowns were reasonable. Consecutive loosing trades were beyond my comfort zone, but not outrageous. A sensitivity analysis showed the parameter settings were robust. That is, small changes in the parameter did not make large changes in results. I call this the "balancing on the head of a pin" syndrome, where a small change in parameter settings leads to catastrophic results.

I had little money to invest at the time, an active internet consulting business to work and a patent application in process. I did not have the time to pass it through the rest of my qualification process.

Someday, perhaps, I'll return to this research.

 

[profit13]

Profit dot biz is India's leading and financial information website. The site provides quality information and a lot of free services for traders or for make your money.

 

[rathcoole_exile]

By your logic, I would have actually gotten a monkey to trade profitably.

if you're using him for the Asian & Euro sessions, can I borrow him at night to trade the ES for me please ? :innocent:

 

[tommog]

I have done lots of testing into random entry. The results are quite interesting IMO.
Can you make a profit? NO, under no rigorous test have I ever seen a random entry system make a profit

BUT

The losses incurred are primarily through comissions/slippage etc (the old negative sum game argument). The actual net ticks out of the market, although negative, are not nearly as bad as one would expect.

I tried several experiements, for the purpose of gathering a lot of data the most relevent experiments I did were high frequency day trading (well high frequency if youre not a computer).

I set up a system that randomly went long or short the Mini dow with a 3 tick trailing stop. After closing out one trade immediatley entered a new trade. Over the course of a day it did about hundred trades and finished -30 ticks (not inclusing comissions). I ran this test on multiple markets on different days and results were similar. Now some of you may be thinking "big deal, it lost a load" but personally I find it quite intriguing that with absolutely NO intelligence or market experience just basic money management you can perform as well if not better than so called experts that claim to be masters of trading

 

[HowardCohodas]

I have done lots of testing into random entry. The results are quite interesting IMO.
Can you make a profit? NO, under no rigorous test have I ever seen a random entry system make a profit

Then I would submit that you did not have an effective money management strategy.

To what % did you limit your risk for each entry?
How did you set your stop loss? Not to what value, but by what analysis?
How did you set your trailing stop, if you had one. Same qualification as above.
​

When you answer these questions, then we can try to judge if you truly conducted a "rigorous" test.