aint that the way it always is. You figure out a way to beat the market, and somebody then goes and spolis it all by telling you nothing moves in a straight line. It's all in the head. The way people think differently about profits and losses. Oh man, here goes, just try to think of those BIG losses that you were spared because of your tight stops as little itty bitty miniscule (even negative) profits. For instance, if you are using 2 pt stops, you'd be better off just figuring an arbitrary amount of random trades you end at 2 pts, win or lose. Then figure how many big moves you need to breakeven. Then maybe you'd come up with a bell curve.
Not sure you'll make money with it. But with good money management you can sure your account wont be wiped out.
How would you determine the lowest 20% of random returns for a single vehicle, like es? Would it be the same as range? Or would you have to randomly go long or short and then check the return at x number of bars? Sounds like a very interesting rule of thumb for setting proper stops. Thanks again for another good post. I checked out that link. The only part that wasn't over my head stated (I think) that big money moves the market in it's favor. Perhaps in a very subtle way, but over time, money produces it's own slight edge.
For everyone interested in this subject; Gaming the Markets (Ron B. Sheldon) strongly deals with this subject on a game theoretic basis specifically (achieving the minimum payoff), but a well known trading-systems developer I once spoke to said it´s "not tradable" Also, chapters 11 & 12 from "Against the gods" (Peter L. Bernstein) cover this topic; stock markets appear to form a bell curve in the short run (daily - 3 monthly basis), but not in the long run. The author also basically concludes that one shouldn´t obey it without any doubt but rather "take different perspectives". BTW, isn´t Value@Risk based upon the bell curve?