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Strategies & Market Trends : The Great Coin Toss Experiment II
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To: Sojourner Smith who wrote (179)6/17/2003 5:43:37 PM
From: Sojourner Smith  Read Replies (1) of 188
 
I think it is humbling to think that even knowledgable traders can't beat a coin toss. So I am going to try and give up my ego and develop some ideas win both ways.

First lets talk about the coin toss:
My position sizing method I came up with is risker
than I would feel comfortable with, I had to double it to cover prior losses. However, I think there should be a limit the entries or way to do a different optimized ratio.
Lets look at comparing a coin toss to daily market direction like Jorge was using. He would use his TA to pick the daily move. He had a slight edge over the coin.
One could approach this several ways (1) heads is an up day and tails are a down day. or 2) one could use TA as the coin. For instance, the developer of the Cyclone system has a free Tradestation indicator that read the market during the start of the day and guesses the direction. It is claimed to be right 80% of the time better than a coin. So one could "bet" on it and if it fails then double the bet say no more than 2 times. The argument I had with WLD was really about that neural nets would be worthless if they are right only 50/50. I contend that such a indicator could still make money if position sizing is used. (or if
the payout favors the trader.) The difference between TA and a coin is the payout would be different unless a target as well as a stop loss were used.

So the goal is to have a high probability "coin" (80/20 funny coin) and position sizing to make up for mistakes and maybe stops and targets. (works better for daytrades than holding overnight.

My goal was the replace the stop and the target with a hedge strategy. Next post...
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