Ok everybody I keep seeing all of these post asking what time frame to use, what indicators to use, what system to buy? And all of these answers that say I dont use charts, dont buy systems, dont use too many indicators.
Well I have decided to do an experiment Starting On Monday June 4th I will place 1 trade per day at around 9:00pm est. I wll not add to a trade. I will use only proper “money management” technicis. My profit goal will be 1.5 times my risk. I will only trade pairs that have a 4 pip spread or less. As for the amount of risk, you guys tell me how I should detremine that. As for the experiment to decide to buy or sell I will flip a coin. Yes heads for buy and tails for sell. As for the rest of the “system” give me some input and ideas.
How will you decide which pair to trade?
Will you flip a coin also? 
it would be like gambling then isn’t it ?
Only pairs with a spread of 4 or less. Should I stick with the same pair, as long as it has been closed from the previous night or rotate pairs every night? Not gambling because we are testing “money management”. And Hobbit I hope your not using your middle finger.
You can do quite well with this kind of strategy if you are smart in your trade management, and money management, which are two different but interrelated skills.
In a trading course I took some years ago, I recall being told about a very successful “big name” trader who set out a challenge: in the average, he could beat almost everyone by simply looking at the chart at midnight Eastern US time, making a quick decision (less than a minute), and placing a trade at that moment with a reasonable stop. He would not look again until the next midnight. Anyone accepting the challenge was free to use any ‘complicated’ technical method they liked, and study the chart as much as they liked. Unfortunately I can’t remember the name of the trader. (Does anyone reading this happen to know?) The key to his success was of course: 1) having some intuition about the ‘personality’ of the currency he was trading and 2) making sure to achieve a larger-than-unity ratio of reward:risk compared to win:loss rate.
Many successful traders will tell you that “mechanical systems don’t work” in the long run; that intuition (‘reading’ the market) is just as important as any analysis. The reason is: once a move starts, you never really know just how far it might go. It’s all probabilities, not certainties.
George Soros’ son is famously quoted for saying that his father would “go on and on about this technical reason or that fundamental reason”, but in the end, his son knew it was mostly BS. He observed over time that his father would often get out of a position “when his back started to hurt him”. Sometimes, you just have a gut feel that something isn’t right. Trade long enough and look at enough charts and you’ll experience this feeling quite a lot, and be able to bank on it. Bank traders certainly do (see a few posts by james in the Holy Grail forum).
Linda Raschke (www.lbrgroup.com) did a comprehensive study and proved that you would make decent money in the long term by entering the market completely at random, provided you use appropriate entry and exit points. In her study, they used the average true range (if I recall) and showed that if you used a 1 ATR stop with a 3 ATR take-profit, you could enter the market at random and make consistent single-digit returns with drawdowns typical of “sophisticated” methods. The point: a random method, properly applied, does no worse than a typical trader, and often better.
There are lots of other examples as well. It’s all about discipline and keeping good track of your decision-making process to make small adjustments along the way.
WoW really ? I Thought that system was out of date ?
I use the 4BM (4 Bean Method)
I put 4 beans in a cup to represent the pairs i trade.
Then i shake em-shake-em-shake-em-shake-em like im having a seizure and swoooosh… i throw them be on the table letting the natural chaos of the world determine their positional destination.
If more beanse-s is closer to each other than further away i short… if not i long.
Its important to buy a new set of beans each time though or the universal energy will start to conflict with ur mana and you could backfire; (normaly in the form of a stinky fart) - but the odor stabilization curve is pretty fast so normaly people don’t complain seeing as to the profits i bring in.
Yeh, thats been working for meee! And don’t think its easy!!
Its very difficult to guage the angle of the beans in relation to the moons gravitational pull. - Sometimes i need to use the migration patterns of Antarctic pengiuins to filter the fake outs in the bean formation :Pppp
Regards,
Senor e.Lang
Bunch of Mexican jumping beans, you lot are.
bazooko: I hope your experiment is purely for [U]demo[/U]nstration purposes.
As other posters have suggested, similar experiments have been performed with very homogeneous results. Go ahead and try it.
Take detailed notes.
Hey Fractal, nice input. I’ll get to hobbit and elang later. You offer some good input but no help on how to set up this experiment. I’m sorry but can you explain what ATR is I never heard of it.
Elang I like your 4 beans method. Do you use Navy, Kindney or Baked beans. Do you know that there are over 136 different kinds of beans in the world? So does it matter what kind you use.
Hobbit I think two fingers might be better than one.
[QUOTE=bazooko;11694] My profit goal will be 1.5 times my risk.[QUOTE]
hum…well I hate to be a bugger about that one so I’ll leave it alone. As for the risk, I’m thinking a stop because ur out most of the time and can’t get to it and you may let those losses get out of control eh! Let me give you an example. let’s say you had 11 winning trades and 8 losing trades whatever you risked you should have made over double, otherwise your money management is not working. so I’m thinking with the exit part do whatever you like but make sure that it will always be 1.5 times the average stop. now the stop doesn’t have to be concrete, but you should have a rough idea of where it could be so after say 100 trades it may have the same average or a similar one as 2000 trades. But I agree with fractal on many levels. The ATR is an indicator called Average True Range. That’s all eh, alright take it easy!
O.K. guys Monday June 4th is just around the corner and I see that the only positive response I got was from a newbie. So shame on you senior members. This is just purly for fun and to prove how well money management works. So I guess the newbies will be the most form this.
So onto the experiment. I will have decided to go with the babypips school recommenditations and only risk %5 of my DEMO accont per trade. So I will start with the EUR/USD pair buy or sell 2 mini lots so my risk will be 125 pips and my profit will be 187 pips.
O.K. everyone I know that you cannot wait for my experiment to start. Sorry I’m late. I had to take my kid to soccer pratice.
So I started my demo with $5,000 USD and the coin told me to sell eur/usd. 1 full lot. Stop loss is at 1.3521 and my Take profit is at 1.3461 I sold at 1.3498. See ya all tommrow.
I think this will be a great example on how powerful money management and proper position sizing techniques can be. Just to show contrast, could you possibly keep track of what would happen if you risked 5% of your account and if you risked only 1% on each trade?
O.K. Guys last night we ate it. The sell position went against us and got stopped out for a loss of 23 pips for a $230 loss. So tonight we will sell eur/usd again. Stop loss is at 1.3552 Take profit is at 1.3487. I know that this is outside of my 5% risk but only buy $28 or 3 pips. I will accept this added risk because that is where the current resistance line is. Wish us luck.
2nd day of the experiment and we have our first win. Yesterdays trade made us $276.00. So after 1 win and 1 loss we are up $56.00 up 1.2% not bad for 2 days. So tonight we will stick with the same pair and the coin says We have our first buy. This is good because babypips says it will go up. O.K. we bought at 1.3501, Take Profit at 1.3536 ans Stop Loss at 1.3476.
Well our first buy did not go our way we ended up losing $270.00 putting us at 1-2 for a $14.00 loss I guess that part is not so bad. So for tonight we are still sticking with the same pair and I lost my nickel so I will have to get a new one. O.K. tonight the penny says Buy. We bought at 1.3424 stop loss at 1.3397 and a take profit of 1.3455.
Thanks for the input Hobbit, for awhile there I thought I was by myself. Well Fridays trade was not kind to us we lost $270 USD. That puts us at 1-3 down $483USD.
Tonight the lucky nickle (gave up on the penny) told us to buy. Bought 1 standard lot at 1.3359 s/l at 1.3333 and a t/p at 1.3395.
well guys the lucky nickle let us down again for a loss of $260. So far we are 1-4 down $744. It hard to do an experiment on money management with no wins.
O.K. Today our lucky nickle is lost so we are switching to a lucky canadian dollar. But that is not real money so does it count? Anyway the duck came up so I think that is tails and that would mean a sell at 1.3299 s/l 1.3324 and a t/p at1.3264. Lets hope our luck turns around.
I operate from Australia and because we are on the other side of the planet the trades are upside down. When you go short, we go long and when you go long we go short.
Regards, Tymen Wortel, Perth, Western Australia.
Well guys we had a good day yesterday. Yes we recorded our second win for a profit of $320 The bad news is I did my math wrong and shorted our win buy $50. However the trend reversed 8 pips after our exit.
So our record is 2-4 and we are down $424 not bad for losing 50% of the time.
Well I guess tonight we will stick with the lucky loonie. Still havent decided if that is real money or not. And we got the duck again tonight, so I still think that is a sell at 1.3312 with a s/l of 1.3337 and a t/p of 1.3275
Eh chief, it’s a loon not a duck that’s why it’s called the loonie. Although I don’t know why we call the other one a toonie, cuz it has a bear on it.
Oh and u missed calculated it, u’ve lost 75% of the time(Unless u were being theoretical about it). Hum…is it real money? Have u checked the USD/CAD lately?
haha…alright later eh, take er easy.