What Bazooko was doing is flipping a coin every day. Heads he went long, tails he went short on a pair.
He had 3 different accounts:
one using a 0.5 - 1 risk/reward (so 13 t/p, 25 s/l)
one using a 1 - 1 risk/reward (25 tp, 25 sl)
one using a 1.5 - 1 risk/reward (37 tp, 25 sl)
The idea was the coin flip essentially gives you a 1 in 4 chance of winning (2 different chances from the coin, and the market can move 2 ways, up or down). This means to win over time, since your ‘system’ for entering trades won’t benefit you, you must win through money management.
Each account started with 2000 usd, and I think he was playing ~1 usd a pip, but to be honest I don’t remember
At the end of a 3 month period the account balances were:
0.5:1 - 1831.90
1:1 - 1632.82
1.5:1 - 1714.81
Before you yell at me for obviously being wrong stick with me.
The 0.5:1 account had about a 60% win ratio, to be profitable you’d need a 67% win ratio. So looking good there all you need to do is trade with the trend, instead of giving yourself a 1 in 4 chance of winning. The 1.5:1 didn’t fair as well, but this is decieving in my opinion. For the first 2 months the 1.5:1 account was out performing the other accounts, the market went sideways the last month, and that is where the majority of the losses were made. This is also what helped the 0.5:1 account pull ahead.
Now, I personally don’t like trading in a sideways moving market, its better to pick out the trends. However if you are going to pick out the trends, may as well grab those ‘extra’ profit pips.
On a complete side note. I had ran an experiement much like this, without knowledge of this thread when I was first getting into forex. I wrote an ea in mt4 that decided trends based off of 2 ema’s (much like the cowabunga system here). It would make a trade with a t/p of 5 and a s/l of 100 in the direction of the trend. I never was able to make it profitable over the long term. I tried most of the major currencies on 15 min to daily time frames. I couldn’t understand why it didn’t work until I stumbled upon risk/reward, I took it as my answer.
However, I didn’t try running this program with a t/p of 100 and a s/l of 5. So perhaps you are right.
I do trade only with 1.5:1 risk/reward ratios. I’m profitable so far, but that is only 2 months, so who knows maybe my downfall is coming
Oh and sorry for the wall of text.