Coin Toss Experiment vs Discretionary Trading

[Sang Froid]

"the only thing that isn't automated is my entry"

Yeah, correct. But that's a whole lot. It's totally important that your entry is not automated. Because yes impatience and lack of self-control (and the other things we mentioned) affect your exit, but they also affect your entry.

"where we differ I believe is that I have a the utmost conviction and faith in my own abilites and truly believe in myself"

Hey, you almost make it sound as if I were a spineless lazy bum... which is not the case. I've got almost everything under control, I worked my ass off as far as automated trading, and the only thing I cannot handle is discretionary trading. Yes, I have a whole 12 years of non-stop losses in discretionary trading, which shows something is indeed wrong in my mind and I am the first one to admit that. But that doesn't mean my life is out of control: in fact I am quite a control freak. For example, I don't smoke, don't drink, I am not overweight, and precisely because I make sure I don't buy cigarettes/beer/sweets. By the way, no offense but how can you say you have faith in what you'll be able to do with discretionary trading if you've just started smoking again (because of a lack in self-control)?

I am done with interrogating you. I just can relate so much to this "trading addiction" problem that I couldn't keep myself from talking about my experience. Ok, you've had 3 years of losses, and I've had 12 years of losses and therefore we're not showing the same symptoms as far having a gambling addiction. I am definitely sick and you're still within "healthy" unprofitable trading. However, I was like you 9 years ago (a "healthy" unprofitable trader who thought he was only trying to learn how to trade and not that he was losing because of a gambling addiction), so... you're warned. You could end up like me and waste another 9 years. So my advice is to start automated trading as soon as possible, first because it will stop your discretionary losses, and second because it will take years of work.

Other than this, thanks for your advice and precious feedback (from a fellow compulsive gambler).

I think there is a difference between a lack of self control and compulsive gambling. Yes I've started smoking again, do I really want to quit, I'm not sure, I do kind of enjoy it, especially with a beer, I know the health risks and I know I should stop, but do I really really want to?

Do I really really want to stop overtrading my account and stop taking punts when the market moves? HELL YES!!

A compulsive gambler no matter how hard he tries will always take long shots, usually against the odds. Win lose or draw a compulsive gambler gets a buzz off the trade, he needs to make a trade to satisfy that urge. Yes I'll be the first to admit I've struggled to cope with that buzz, but I'm so sure that was due to beginners exuberance. I've gambled in the past, mainly due to inexperience, my trades came off as gambles because I had no MM plan, I used to get an 'itchy mouse finger' and hit the buy button when I felt an urge then immediately think "what the f**k have I just done that for"? But in being able to recognise this means that I can change trait.

It's not impossible to limit myself to say a maximum of two trades per day, in fact compared to giving up smoking, only two trades a day is a stroll in the park on a summers day. As long as my RR and MM is sound I've got no problems.

I will be honest with you here, as I'm reading this I get the feeling that these are things that I'm trying desperately to convince myself are true. Only time will tell if I can overcome these flaws in my trading, it's not easy trying to change what is essentially your inherent personality.

 

[Sang Froid]

Day Two Results:

A very interesting day. Once again I stuck full hardy to my trading plan and only made two trades on my discretionary 3 Ducks account. BOTH LOSERS. I went long on both Eur/Usd and Aud/Usd, the price hit my S/L by 3 pips!! 3 goddamn measly pips before turning and headed north. I have to admit I'm quite gutted really, the signals were there, I even entered a buy order instead of a spot buy on the E/U to make sure that on the M5 the price had crossed the last high.

I'm still glad however that I stuck to my plan and didn't make anymore trades, however tempting it was, I had to close my platform though because the urge to revenge trade was a bit overwhelming, but tomorrow is a new day. If I can at least get one winner tomorrow I'll be back to break even so still a long way to go.

Like comedy timing is everything in this game I guess.


RESULTS:

DISCRETIONARY TRADE:

TRADES: 2
WINS: 0
LOSS: 2
PROFIT: -32

RUNNING TOTAL: -32



COIN TOSS:

TRADES: 3
WINS: 3
LOSS: 0
PROFIT: +85

RUNNING TOTAL: +98


+98 Pips for the week by tossing a coin I might have to somehow turn this into a full time strategy for me:-0

I'm off to drink all my beer in the fridge and smoke as many fags as I can, get this out my system

 

[HawkTrader]

Interesting. Have you seen this new thread that has just been started?

http://www.trade2win.com/boards/general-trading-chat/89760-trading-no-rules.html

It does seem that it's not the entry that should be worrying you, 3 ducks, 4 ducks, or dog farts (as maiden22 brilliantly put it), it is indeed the money management, trade management and risk control - and that seems to be what you focus on when flipping a coin, thus that is probably why you are winning.

 

[Sang Froid]

Interesting. Have you seen this new thread that has just been started?

http://www.trade2win.com/boards/general-trading-chat/89760-trading-no-rules.html

It does seem that it's not the entry that should be worrying you, 3 ducks, 4 ducks, or dog farts (as maiden22 brilliantly put it), it is indeed the money management, trade management and risk control - and that seems to be what you focus on when flipping a coin, thus that is probably why you are winning.

Very interesting, seems that this random entry thing might have more to it than meets the eye. Thanks for drawing my attention to this btw


*** I did actually have a chuckle to myself at the dog fart line

 

[Yamato]

I think there is a difference between a lack of self control and compulsive gambling. Yes I've started smoking again, do I really want to quit, I'm not sure, I do kind of enjoy it, especially with a beer, I know the health risks and I know I should stop, but do I really really want to?

Do I really really want to stop overtrading my account and stop taking punts when the market moves? HELL YES!!

A compulsive gambler no matter how hard he tries will always take long shots, usually against the odds. Win lose or draw a compulsive gambler gets a buzz off the trade, he needs to make a trade to satisfy that urge. Yes I'll be the first to admit I've struggled to cope with that buzz, but I'm so sure that was due to beginners exuberance. I've gambled in the past, mainly due to inexperience, my trades came off as gambles because I had no MM plan, I used to get an 'itchy mouse finger' and hit the buy button when I felt an urge then immediately think "what the f**k have I just done that for"? But in being able to recognise this means that I can change trait.

It's not impossible to limit myself to say a maximum of two trades per day, in fact compared to giving up smoking, only two trades a day is a stroll in the park on a summers day. As long as my RR and MM is sound I've got no problems.

I will be honest with you here, as I'm reading this I get the feeling that these are things that I'm trying desperately to convince myself are true. Only time will tell if I can overcome these flaws in my trading, it's not easy trying to change what is essentially your inherent personality.

I can relate to everything you are saying and that is why I keep on replying to you. Feel free to ignore me if I insist too much on the same topic (that's what I meant by "hijacking the thread", because i am quite obsessive).

Your concept of not giving up and being determined to succeed is what made me try for 12 long years, during which I lost real money. I felt I couldn't accept that others were able to make money with discretionary trading and I couldn't. I didn't want to admit and accept my limit. But after 12 years of this crap, tell you what: the easiest thing is to just quit. It's ok to quit after trying for 12 years. If you're not losing real money because of any possible limits similar to mine, it would a great step ahead already. Well, anyway, if one day you feel like quitting, give automated trading a chance, because all the passion and energy that has kept me from making money in discretionary trading (too much intensity, too much energy and need for action) is the same passion and energy that has made me build profitable automated systems (5 years of non-stop work).

By the way, I am not a gambler at heart. I was turned into a gambler by my efforts to become a profitable discretionary trader. I deviated from the right path immediately. I guess it happens to a lot of traders who are also not typical gamblers. I never played any games such as you can find at the casino, nor poker... I don't like betting on anything, nor lotteries. Trading got me to become a compulsive gambler. I wasn't predisposed to it at all. Yes, I was predisposed more than others of course, but I am not at all inclined to other types of gambling (those where I clearly don't have an edge, and cannot hope to gain one).

 

[Adamus]

Of course a random entry strategy can be improved on. At least I see it in my backtesting.

You only have limited opportunity to gain an edge in the market and your entries are one of them, amongst exits, position sizing, er... any more?

So anyway, by taking random entries, you are relying that much more on your other strategy components to implement an edge.

 

[Sang Froid]

Somebody please call me crazy and tell me stop thinking about developing this coin toss strategy. Basically I'm very serious now about making this into a full time strategy, of course I'm going to see out the month on demo, after all this is only day three, but I think with a bit of fine tuning and a tweak here and there I can really take this live.

For the first time in my trading career my trading (on the coin toss) is stress free. It's almost as if I don't care what happens to the trades because it's not me who makes the decision. When it's my own TA I can't handle being wrong. I beat myself up because I've been doing this for so long and still can't get it right. When it's the coin toss it's the coin who was wrong. This obviously enables me to place and to see through stress free trades with no desire to 'revenge trade' if I was wrong.

I think I need to do some tweaking though as I said before, now if anyone could offer any advice I'm all ears.

I think it's the MM side of things that needs adjusting. I'm happy with the 1:2 RR, but for instance today, the Gbp/Usd went to within 1 pip of T/P then turned and hit my S/L.
Maybe as a rule I should say that if the price gets to half of my T/P then I move my S/L up to break even? I don't think I could implement any of these pyramid trades that I've been reading about as I only make three trades per day all at the same time, so everyday is a new day and I'm not able to 'double up' etc...

Like I say any advice is more than appreciated, and if someone wants to tell me to stop thinking about this and give me good reasons then please go ahead.

Today I made no discretionary trades at all, I wanted to see how my coin toss trades came out. Even on a demo I can feel the stress when I'm trading discretionary because I have this need to be right all the time. I want to be the expert in my field and I can't handle being wrong. The coin toss I don't care about, as long as I have a sound MM plan and a good RR ratio I think I can become a better trader and trade in a much more carefree way. I also think that by having such tight stops and take profit margins that a random entry is just as viable as TA.

I think that when it comes to my discretionary trading I focus so much on that aspect that I miss what's going on around me. I analyse and re-analyse everything and am so tense and indeed intense when I'm doing it that a) I miss the really valid moves, and b) my own psyche is holding me back from really letting go and just trading what I see.


So anyway,

COIN TOSS RESULTS:

TRADES: 3
WINS: 1
LOSS: 2
PROFT: -1

RUNNING TOTAL: +97

Even with two out of three wrong trades today I broke even, in fact I actually showed a £1 profit in my account balance.

The more I think about this the more I like it, and let me tell you all why.

I'm a single 28 year old male, living in a low rent apartment in Derby city centre. I have very small outgoings, bills a credit card bill the usual stuff for a guy my age. In order to make a living out of this I need to make as a MINIMUM £150 a week and work two days (Saturday and Sunday) at the hotel where I currently work. In order to go full time on this I need to make a minimum of £300 per week. Now, with a lot size of 5.0 and T/P of 30, S/L of 15 and a maximum and minimum of 3 trades per day, I'd need to get 2 trades right more than I get wrong each week and I could pretty much go full time. Just 2 trades more right than wrong. This week alone I've made over £400 quid. By Tuesday I was over £300 quid, I'd have stopped then and not traded anymore this week.... job done.

 

[pboyles]

Any update on this? I assume it started to fail

 

[FXTrend240]

probably because it doesn't make sense. it is completely illogical to buy when heads/tails, unless the price of google changes when your coin flips or your coin really is magic, it doesn't make sense....

If he makes money then cool, but money management and risk reward and all of that stuff only takes you so far...

 

[Jack o'Clubs]

Surely just basic maths/statistics tells you that an entry based on a 50/50 random call won't work in the long-run once costs, spread etc are taken into account. Simply adjusting the target and stop for a 2:1 R/R just means you'll have two losers for every winner. If the market has an underlying trend or bias then you'll certainly lose money as half the time you'll be trading against the trend. You can't consistently make money in the market unless you have an edge, even if it is only very thin.

 

[Jack o'Clubs]

thats right.
cos once a market is in a trend, it never never ever reverses, corrects or even looks at going the other direction, not even for a point or two.
its a well known fact that Trends never suffers from pullbacks of any kind.

except your foreskin, you pryck

Do trends exist? Do trends exhibit the characteristics you've listed above? Is it still a trend? What does that tell you about the statistical probability of a 50/50 coin-toss working in a trending market (over whatever period you define the trend), even if it's reversing, correcting and looking at going in the other direction?

Are you seriously disagreeing that you need some form of edge to trade, and that a coin and some arbitrary R/R ratios will suffice?