Random Entry

[Rognvald]

Henry
I am an admirer of VT's theories. The one that interests me most is on position sizing in relation to volatility. Again its a money management thing and with it he proves (to me anyway) that money management & risk control are the most important components of successful trading.
Ron

 

[fttrader]

I don't remember where it's published but a couple of years ago 2 professional traders were trading the same 5 contracts on the S&P. Both entered the trade, one long one short then v.v. at exactly the same price. After the end of the session and about 20 trades both were up by very large amounts.

What this tells me is that anything might work, there are very clever people around which make getting it right is very difficult. A great deal more difficult than shooting down other people's ideas.

David.

 

[Bankbuster]

Hi all, I don't often post on T2Win, it's a great BB but too many posters and posts to wade thru on a daily basis, however, this thread has got me interested enough to want to reply.

This topic has been discussed previously on many occasions, it was raised by myself on the spreadsbetting.co.uk forum many moons ago.....I too am a big fan of VT, I also follow the teachings of Alex Elder. (and Chartman is pretty good as well....)

In my humble opinion exit strategy is the most important aspect of trading. Entry timing is only relevant to the trading system being employed, for example, it is possible for traders to use opposing entry setup's and yet both can operate profitable trading system's provided both use an appropriate exit strategy.

Opposing entry setup's may take the form of (1) opening range breakout or Ed Down's breakout levels and (2) buying/selling the pullback to the 15min 100bar moving average. Traders using these systems could enter opposite trades at the same moment in time. One will be a loser....the other a winner......in the long run both systems may be profitable provided a good exit strategy is being employed.


Regards from Bankbuster

 

[Grey1]

Good exit is looking into future and very difficult unless you have a crystal ball.. Have you ever asked yourself why you wont let your profit run ?
Stock market is an event driven game ( random) with a component of Over bought / Sold factor in it ( non random and deterministic ) . As a result of having this random element in the equation it would be difficult to see into future and consequently a good EXIT is only obtained by luck or chance or what ever you like to call it..

However ENTRTY is different.. Entry and Risk is where are trades start and one does not need to look far into future to calculate risk attached to each trade..

What about Back testing of random entry ?

1) Back testing in general is NO GUIDE WHAT SO EVER for future performance how ever is only a small window ..

2) Those who back test random entries have little concern about the risk of the trade.. In reality you can not assume this..

3) Back testing is often carried out over a long time frame with a very disciplined execution of each trade..

Making Money starts with RISK Assessment as primarily concern than fantastic exit ..

Those who concentrate on Exit and open a position randomly often stopped out in the first round..

PS:-- If I were you guys I would not take much notice of back tested result in any kind or form .. I must have back tested over 10 000 various strategies with fantastic out put with a shrinking bank balance once traded in REAL TIME..

 

[Scripophilist]

It's clear that most post replying to the original question ask more questions than they answer and some are downright wrong. Exit points, money management and risk management are the key artillery in a traders arsenal. With these you can do away with entry points.

I have run a random portfolio for a number of years as a placebo against my other positions. You would be suprised how well it has done. If you accept the short term the market is random then no harm in having a random entry point. Obvioulsy if you improve on that then great but why is it that the herd does not belive it behave like a herd?

 

[Bankbuster]

An exit strategy minimises risk and allows profitable trades to run to target position. No matter what entry technique you use there is always a chance that the trade may go against you.

Grey1, I agree that entry and risk are where the trade starts, however I have just pointed out 2 opposing (winning) systems that may take conflicting positions at the same moment in time. Each trader believing that the risk is worth taking. There must always be some-one to take the opposite view to make a market.

 

[martinwalker]

gobsmacked by some comments here
i was coached by Mr Charts who taught me how why when to enter, money and position managing, exit, lots more, the works
so why do you guys not recognise that to trade properly and successfully you must have ALL the elements in place, not just some of them - isn't that common sense anyhow?
so what is this? an academic argument?
and the herd? i was taught how to move before the herd moves and exit before the herd - thats being contrairian - not standing on the beach like king canute telling the sea to go back and then drowning - maybe i sound arrogant abrasive but i've been shown how to win this game and i keep on winning not cos i'm brill clever clogs but cos i've been shown how to understand and how to actually do the business sorry to go on
m

 

[Finlayson]

this is one of those discussions that could go on for ever as everyone wants to be right, it is human nature, & probably everyone is!

it is a bit like walking into your local & asking everyone what 'car u should buy'...............u will get lots & lots of opinions, most will tell u u should get the same car they drive.

opinions r like 'arses'.........everybody's got one!

it appears that the original comment about 'random entry' has been answered with the fact that it can , with the right application , prove successful.

this will not sit right with everyone though as people will want to think 'their way' of trading is the 'right way' .........& it is for them , otherwise they would be using another method.

there are many different ways to trade the markets succesfully, this is the nature of 'markets'. no one way is correct.

Martinwalker, if what u do works then that is great for u , that is all that matters. I trade the DAX & just have a weekly target of +50 to +100 points & that is all I require & my method is probably quite different to yours........but does that make me wrong!

think we can just say 'random entry' can work, its been proved........but it is 'horses for courses.

Jason

 

[Scripophilist]

There is more than one way to skin a cat and they all exist in the market that why the market exists.

But probably the biggest instinct is the herding instinct which is why I generally go against it. This thread is a classic case in point. People express opinions and those that don't conform to there opinion get beaten into a pulp in disgust. Other people watching this form an opinion around that and act occordingly.

Much research has been done on this and it has been proven on many occasions that people seek safety in numbers. It's an old instinct. As a fund manager used to say in the 60's, Nobody ever got fired for buying IBM and IT managers used to say the same as well!!!

 

[oatman]

Random entry.......my ar*e. If you can sit on your position long enough there's a good chance you'll make money. All the longs at 6000 will hang on . They're not trading and the market won't go up 'til they're out. If you can swing the odds in your favour, you've got to try. Anyone can trade out of a sh*t position, it forces you to use the best of your abilities, but why put yourself there in the first place with a bad entry. Don't toss a coin use an MA crossover. At least you might be with the trend. But then we've gone full circle. If you believe in random entry, you don't use TA :cheesy:

You need luck

 

[Mr. Charts]

This is one of the extremely rare occasions I disagree with Oatman; but only in so far as I think you make your own "luck"....;-)

Nice posts, Scrip, even when I disagree with you. Next time we meet we must have a more focussed debate ;-))
Best wishes,
Richard

 

[Bankbuster]

Random entry.......my ar*e. . Don't toss a coin use an MA crossover. At least you might be with the trend. But then we've gone full circle. If you believe in random entry, you don't use TA :cheesy:

You need luck

The LeBeau and Lucas Studies: Show that most TA indicators failed to perform better than random - including all the oscillators and various moving-average cross-over combinations that are so popular.

 

[Mr. Charts]

There is a great deal more to trading techniques than mere technical indicators, which are of very limited use.
The best analogy is that they are one dimensional in a four dimensional constantly dynamic market.
One dimensional man is an unhappy and unsuccessful man.
BTW, before anyone alludes to Marcuse's book of that name, it is nothing to do with TA.

 

[oatman]

Who decides at what time they make their "random" entry :?:

 

[damianoakley]

Thank you for everyone's comments - people's reactions to the original post I sent have been very interesting.

For those who instantly shot the idea of random entry to pieces, I would like to re-iterate that I DO NOT use random entry in my own trading system. I too prefer to try to swing the odds as much in my favour as possible by making a judgment on the market.

However, for those who would instantly dismiss random entry, I wonder what the result would be if we were to calculate the average winning strike rate of every stock market trader's system - and by that I mean a proven working profitable system with trading records showing trades over at least a year. I'm willing to bet that it would work out at around 50% - no better than random.

Thank you for everyone's comments. Happy trading.

 

[darrenf]

Just stumbled across this quote by Richard D. Wyckoff, a famous US trader in the early 1900's and it reminded me of this thread:-

--"Anyone who buys or sells a stock, a bond or a commodity for profit is speculating if he employs intelligent foresight. If he does not, he is gambling."

I think it sums up this debate quite well.

The "Intelligent foresight" bit is particularly relevant, whether you apply it to entries, exits, money management, trade management, risk controls etc, all these components add up to having intelligent foresight and having an edge in the marketplace which in the long run will lead to profits. This type of person can be called a speculator.

On the other hand, if you rely on random entries alone with none of the other componenents then you could be classed as a gambler and will most likely lose over time- big style.

That's not to say random entries, coupled with a solid trading plan won't generate profits.................?

 

[sidinuk]

reminds me of a variation on a golfing quote:

"Enter for show, exit for dough"

 

[misterboy]

Hi everyone,

After spending some time reading these boards, it seems to me that most people are concentrating on the wrong aspect of trading.

Everyone seems to want to concentrate on entry signals that are as high a percentage accuracy as possible. It's been proved that in the long-term, you can make money in the markets thru random entry - ie - entering the market long or short determined by the flip of a coin.

I think we should all think about that. All of the indicators and Technical Analysis that we use barely perform any better than random entry. If you think about it, that makes some sense. Once you enter the market, it can do 1 of 2 things - go up or go down - that's a 50% chance of your trade going the right way - no better than random.

Money management is the key - and yet most systems are based all around entry signals.

I would welcome anyone's comments on this.

I dont think thats a good idea at all. Even if you used a little bit of strategy (without indicators)rather than trading randomly you would do better. For example, check the daily trend, move to the hourly, if its up, wait until it too turns down (add an indicator if u want) and go with the trend until you have a profit.

 

[normbeef]

interesting debate... I would throw my 2p's worth in by saying even with a random entry you would still need a strategy.. i.e. where the stop loss is ? how much of your account to risk ? where is the door (exit) ?

Thing is, why would you employ a random entry when you can simply draw a line's on a graph along the peaks and trough's ? to form a range.. and enter / exit near each swing.

I have been VERY suprised many times by how accurate this can be.. it seems too easy to make money , but its a really is that easy and it costs you little if your not correct !! ...

so why flip a coin.. ?

 

[spxpro]

Hi everyone,

After spending some time reading these boards, it seems to me that most people are concentrating on the wrong aspect of trading.

Everyone seems to want to concentrate on entry signals that are as high a percentage accuracy as possible. It's been proved that in the long-term, you can make money in the markets thru random entry - ie - entering the market long or short determined by the flip of a coin.

I think we should all think about that. All of the indicators and Technical Analysis that we use barely perform any better than random entry. If you think about it, that makes some sense. Once you enter the market, it can do 1 of 2 things - go up or go down - that's a 50% chance of your trade going the right way - no better than random.

Money management is the key - and yet most systems are based all around entry signals.

I would welcome anyone's comments on this.

The only indicator that counts is price and since technical indicators are based on price action if one knows how to use them correctly and follow the market instead of trying to forecast it , coupled with good money management you could be a successful trader.

It has also been proven that trading with the overall direction of the market on higher timeframes taking entries from the lower ie follow the trend, as trends have a tendency to persist , is also a proven method to trade.


The problem i see with random entry is that during a strong trend or directional move if you consantly try to go against that move no money management technique in the world would save your account from being wiped out.

spxpro