Registered: Jan 2002
08-14-03 02:15 PM
Quote from dbphoenix:
First, you're not making random entries. Second, why must it be a choice between random entry and carefully-managed exits, and carefully-managed entries and random exits?
If one is going to make random entries, he must be prepared for an unbroken string of losses. Each loss reduces the account. If the same percentage is applied to each trade, it becomes next to impossible for the trader ever to get back to breakeven.
Those who continue to insist that random entries can be profitable rely on "studies" or something they read somewhere or something that somebody demonstrated in class. The practical application is a different story. Until somebody can produce an actual system of random entries that, when applied, yields a greater profit than the same system with non-random entries, I'll continue to go with the lessons of experience.
For the sake of this example, I did define the entries to be random - just a regular coin flip, I said, meaning that you go long or short randomly. You can also do this by adding random times to enter, same thing. All I was trying to say is that random entries and carefully managed exits CAN make a profitable system.
As far as the value of theory vs experiment goes, it's an old argument, and I've lived through it intensely (I have a PhD in Theoretical Physics.) The idea is that theory allows one to scan though many possibilities rapidly and target the one or two juicy situations to experiment with in depth. The alternative, experimenting with all possibilities, is much less feasible.
What this teacher taught me is that exits are more important than entries. (This was a trading system designing workshop.) Therefore, as I design trading systems (which I like to do) I spend a good amount of time designing the entry and twice as much designing the exit management strategy. That's all. Actually, as I said in a previous post, (generalized) money management is very important to me. And, many of my systems trade in real life quite well.