Can random trading be profitable?

Discussion in 'Technical Analysis' started by Sergio77, Feb 3, 2014.

  1. Sergio77


    I remember a few years ago in a thread in tradingblox some people argued that random entries with appropriate stops technique turns out to be a very profitable method. Is this possible?
  2. kut2k2


    This is a foolish theory put forward by people who think you can prioritize the components of a trading plan. They rank money management as most important, followed by the exit strategy, with the entry strategy as the least important component or maybe even completely unimportant (aka randomizable).

    Of course the logical approach is to treat all three components as equally important and to neglect none of them.
  3. Intellectually, seems like it might be.

    There are 4 possibilities in a trade... small gain, small loss, big gain, big loss. If you trade with stops to eliminate the "big loss", who knows?
  4. there's quite a few posters on forums that I visit who claim to be long term profitable with random entry.

    I'm currently trying a random entry method on CL.
    Live account with only 1 contract.
    Today is day1.
  5. dbphoenix


    FWIW, this theory was advanced by a vendor who couldn't trade his way out of a paper bag.
  6. Redneck



    You talking random times to enter… or random direction to enter… or both

    There is always a random distribution between wins and losses – so yes it possible to enter randomly and be profitable – for a short.., yet unknowable period of time

    But…, and here is the real question

    You lookin to be profitable..., for some unknown period of time… or consistently profitable over a career

  7. I remember reading in one of Van Tharp's books where they did a back test with a random entry, trailing stop and small position size over several futures contracts and got an overall profitable result. There were some long drawdowns and the return was nothing compared to a real system, but it proved that it could be done.

    This was probably on markets from 10 years ago; who knows how good it would work now.

    I agree with the poster above - all components are very important and there is no reason to ignore the entry. I have found it to be a huge determinant of overall returnz, and smoothness of the equity curve.

  8. dbphoenix


    Depends on how one defines "prove". Unless this sort of thing is tested throughout an entire bull-bear cycle, the results will depend entirely on the context in which the movements take place. Ditto with Darvas Boxes, Trend-Following, etc.
  9. I don't think with just proper risk management you can be consistently profitable. It has to be a mix of skills.
  10. /./././.
    #10     Feb 3, 2014