Win Rate vs R:R

DionysusToast

Legendary member
5,963 1,499
This thread is partly inspired by the ****** 'trendie'. Perhaps coin ****** would be more appropriate... :innocent:

On of the theories that lies behind random entry systems is that you can just get in at any point in time, in any direction and manage your way to profit.

One of the attractions to such a system is that it implies that you don't have to have an opinion the market when you trade. Realistically though - if you don't have an opinion at the time of entry, you really need to get one when you manage the trade. It's not absolution from having an opinion - it's just shifting responsibility.

With a random entry system, you need your winners to be bigger than your losers. You should expect to lose 50% of the time.

So a win rate of 50% is expected and yet at entry time there is no reason for your winners to be larger than your losers because your entry is random.

Anyway - say your starting point is a 50% win rate system. Which direction would you prefer to take that in and why?

1 - Improve the win rate and possibly accept a lower R:R
2 - Improve the R:R and possibly accept a lower win rate
3 - Look to both improve the R:R AND win rate

Obviously number 3 sounds like the best option but the "why" should really explain why you feel it's feasible.

As an aside, it might also be worth considering how your choice would impact the number of opportunities that would occur.
 
M

member275544

0 0
On of the theories that lies behind random entry systems is that you can just get in at any point in time, in any direction and manage your way to profit.

help me out here a bit please, I've got the flu so am a bit slow today..if the market is going down and you randomly choose long, there aint no amount of money/trade management is going to turn that around for you into a profit.
Random entry yes, but this presupposes at least you have the trend right, otherwise like I say, it simply is not going to happen.
 

DionysusToast

Legendary member
5,963 1,499
help me out here a bit please, I've got the flu so am a bit slow today..if the market is going down and you randomly choose long, there aint no amount of money/trade management is going to turn that around for you into a profit.
Random entry yes, but this presupposes at least you have the trend right, otherwise like I say, it simply is not going to happen.

Well - I don't agree with the theory but anyway, no trading method can be judged by a single losing trade can it?
 
M

member275544

0 0
Well - I don't agree with the theory but anyway, no trading method can be judged by a single losing trade can it?

then I would argue that you can't possibly improve a win rate based on my argument above. if its going down you can't turn it back again. so a win rate has to be based on whether your original random entry was lucky enough to be in the direction of the market, and if its 50 50, that is your win rate. it can't be improved upon. thats my logic anyway, which leaves only r/r
 

DionysusToast

Legendary member
5,963 1,499
then I would argue that you can't possibly improve a win rate based on my argument above. if its going down you can't turn it back again. so a win rate has to be based on whether your original random entry was lucky enough to be in the direction of the market, and if its 50 50, that is your win rate. it can't be improved upon. thats my logic anyway, which leaves only r/r

You shouldn't argue with me about it because I think coin toss systems are nonsense. It's just that talk of a coin toss system got me to thinking about what people are trying to achieve...

Hence the question

Anyway - say your starting point is a 50% win rate system. Which direction would you prefer to take that in and why?
 
Last edited:

DowJones

Experienced member
1,073 391
Random entry systems are BS - if you do not have an edge you will NOT be consistently profitable.
 

alfiemal

Active member
112 4
i would say random entry systems are bs aswell, but i would also say that all you need is a basic system to make money with good psychology and money management.

When you say 50% win rate, what does it mean? a 50% win rate at what risk reward, clearly if it was 1:2 then your cleaning up on a 50% win rate...
 
L

Liquid validity

0 0
I must have been lucky for the past 2 years then :rolleyes:
Yeah, its not the most efficient way.
It is consistent and requires little manual input.
Either way, who cares,
Do whatever floats your boat and works for you.
 
  • Like
Reactions: Jason101

random12345

Established member
793 280
I must have been lucky for the past 2 years then :rolleyes:
Yeah, its not the most efficient way.
It is consistent and requires little manual input.
Either way, who cares,
Do whatever floats your boat and works for you.

LV is more jaded than Orwell on his return from Catalonia these days.

A genuine loss to the forum.
 
  • Like
Reactions: Liquid validity

Shakone

Senior member
2,458 665
The irony is that a large % of the people trading, including some of those that think random entry is BS, are probably trading an entry that is equivalent to a random entry, and they don't even know it.
 
Last edited:

scholfield

Established member
993 233
The irony is that a large % of the people trading, including some of those that think random entry is BS, are probably trading an entry that is equivalent to a random entry, and they don't even know it.

Exactly.
That's kind of what I was getting in my 100 trades thread.
I've done OK in the first 100 trades (i.e I'm up) but i'm not convinced yet that i'm any better than random.

Started another batch of 100 trades yesterday!
 

DowJones

Experienced member
1,073 391
I must have been lucky for the past 2 years then :rolleyes:
Yeah, its not the most efficient way.
It is consistent and requires little manual input.
Either way, who cares,
Do whatever floats your boat and works for you.

If trading randomly is consistently making you money, I suggest you approach a BB bank/hedge fund, prove your success and let them pay you a fortune for your discovery...
 

DowJones

Experienced member
1,073 391
The irony is that a large % of the people trading, including some of those that think random entry is BS, are probably trading an entry that is equivalent to a random entry, and they don't even know it.

I totally agree. I'd estimate that most retail traders have no edge, which is a key reason they fail.
 

Shakone

Senior member
2,458 665
I totally agree. I'd estimate that most retail traders have no edge, which is a key reason they fail.

Not just people without edges.

If you wanted to test whether your entry was equivalent to a random entry, what do you think is the best way to do it?

You can't use any sophisticated exit techniques, because that would invalidate the test. You could try just taking fixed stops and targets as Scholfield refers to. You'd have to vary these a bit so that you weren't unknowingly taking advantage of some property of the market.

Alternatively, you could look at the distribution of the price some fixed period of time after entry.

Any other methods?
 
Last edited:

Atilla

Legendary member
19,445 2,875
You shouldn't argue with me about it because I think coin toss systems are nonsense. It's just that talk of a coin toss system got me to thinking about what people are trying to achieve...

Quote:
Anyway - say your starting point is a 50% win rate system. Which direction would you prefer to take that in and why?

Hence the question

Does random entry mean 50% of calls are long and 50% of calls are short?

In which case does it matter which direction the random trades are done in? In fact I would go as far as to say you shouldn't have a reason for going long or short it should be random - as in thought-less !


Unless you are alluding to some indicator like MA to skew the long's v short % calls etc. Then it's not random.


Sounds like you have man flue too :p
 
 
AdBlock Detected

We get it, advertisements are annoying!

But it's thanks to our sponsors that access to Trade2Win remains free for all. By viewing our ads you help us pay our bills, so please support the site and disable your AdBlocker.

I've Disabled AdBlock