Make money with random entries (by coin flip)

I have been watching as a several people on a forum discuss, argue and lend their ideas about entry techniques. They are going crazy over what the proper entry should be and why one chart pattern is better than the other. One person has even said how they purchased massive amounts of software to help them enter the market. Now don’t get me wrong, I always use techniques to get me in the market but I understand that this is the least important factor weighing on an investor’s overall success. I use technical analysis every day and I study patterns that allow me to enter with the ideal buy point (what I believe to be the ideal entry) but I know that strong up-trending stocks give me just as good a chance to make money as stocks breaking out of a cup with handle pattern. I am one that makes my living buying stocks making new highs so I can basically prove that the random entry strategy does work as long as strong money management and exit strategies exists.

I responded on the forum by saying: Entering at the right time is important and it can lower your risk and increase your overall expectancy but money management and exits are much more important than entry.

Studies have been done between random entry systems and specific systems that use entries based off of chart patterns with amazing results. The random entry system typically outperforms the structured entry system when it uses money management (position sizing techniques) and a strong exit strategy (assuming that the structured system doesn’t employ money management tools).

I love CANSLIM and O’Neil but the entry is not the most important aspect you should be focusing on, it is money management and exits. Most people don’t want to hear this and that is why so many “entry based systems” sell so well over the years. How many of those systems actually make their users money? CANSLIM does use a 7%-10% sell stop rule but it ignores position sizing and never explains the probabilities of the system when implemented in certain ways.

As I said, I make money using a system based from CANSLIM (an entry system) but it is heavily balanced with strong money management techniques and a strong exit strategy.

source, - "market talk with piranha".

-------------------------------------------------------------------------

hello friends, do you have any view/s on this topic. i do not want to argue with anyone but i truly believe on the title "make money with random entries (by coin flip)".

regards,
biyas

-------------------------------------------------------------------------

Ah,we are entitled to have an opinion,our beliefs,.........probably the systems guys here can statistically say whether this works out or not.......Personally,had tried this for a time........ouch!!,have had bruising losses,my broker of course went laughing to the bank......never worked for me.Basically believe that all limbs in trading are vital for success,and therefore should be given as much importance.

Statistically,I could be wrong........But personally,having a great entry is as important to my trading and more importantly,to my psyche!!

Although not refuting that strong money management and an exit strategy is as vital to trading success.

Saint

__________________
"You cannot change the direction of the wind,but you CAN adjust the sail..."

What is the time gap between two coin flips?

Regards,
--Ashish

'Coz you did not try it for infinite times. The random walk is applicable only when the events are repeated for infinite times. (I am just left wondering who will fund the professors for conducting their infinite number of trades!)

look at it, -

--------------------------------------------------------------------------------

Interesting stuff...here is my coin tossing forex trading for the last couple of months. I should stress this is paper only :-) Curiosity got me to try this out. Basically flip a coin each morning around 9 or 10am GMT and close out at end of day (or stopped out).

Three worksheets - 30, 50 and 100 point stops. Euro/$ and GBP/$, assuming 5 point spread and no slippage. Heads = buy, Tails = sell

I stopped the 30 point investigation as it was going nowhere in a hurry.

Not yet sure if I will put my real money there yet!


- smith

Attached Files

upload.xls (65.5 KB, 23 views)

Surely using a coin toss as a basis for trading decisions is a mugs game looking at the probability, since the coin and the market are unrelated.

What I mean is presuming u toss a head (meaning go long)

thats a 1/2 chance

The market has a 1/2 chance of going up( simplistic view!),

so the chance of you making the correct trade is 1/2 * 1/2 = 1/4

So from a probability point of view you only have a 1/4 chance of success?

looking for your view/s.

Entry point is king, a perfect entry is always in profit.
The exit point will determine how much.

What is actually meant by a Random Entry in traders parlence.
As i understand (i may be wrong) suppose a Long only System is being
tested & if we take Open as Entry or previous Bar's close as Entry,we
may find a difference in Final overall performance of the System.
Many people has tried Robust Tests by making Entry at any point between
H to L of next bar to find the varying performance band.
Now to boost the performance certain Risk & Money Mgmt principles are
tried & it is being found that it actually increase the performance by
limiting the Drawdown.
So after the adjustments now the System making an Entry at Random in
any price inbetween next bar's H to L ,with Risk & Money Mgmt in place
is giving a Fair result.
This bar may be an Hrly or Daily bar.Hence a generalization tendecy
creeps in & we try to generalize that with ONLY Money mgmt/Risk Mgmt
even a RANDOM entry can survive in the Mkt.

However there are also a breed of Excellent Traders who has Designed
A True Random Entry System,where AFTER the Entry the System sniffs out
whether Mkt can provide the necessary nutrients for the Entry to survive
& then it gradually SCALES-IN with additional positions (if there is
neccasary nutrients ) or Shuts the initial position or Reverses the Position.
As the premises is based more on Scaling-In or Exiting hence we try to
again Generalize ; that it is based more on Money Mgmt/Risk Mgmt/Exit.
forgetting the Sniffing part (knowledge input part)which actually decides
& directs the Excell sheet to prepeare its Money Mgmt.part.

Now a days a Fast computers can tabulate a Coin Toss experiment & over a
period of time can do it BILLION times,we actually do not need to do
it physically.
Statistics is the BACK BONE / SPINAL CORD on which the Brain resides.
In our society we have a tendency to Refute it without relalizing that NO
Planning / Descision can be undertaken without analyzing the past
& present scientifically.

you are a brave man.

Good one. Asishda, we had talked about it quite some time back.