Here is the complete chart for the day up to that point. It was ES thursday. It was my third short of the day. The first two worked very well. ADX was over 30. This one cost me a small loss. My stop was over the high of the entry bar but I did not wait for it to get hit when we started moving sideways. I will short this setup every time I see it as my experience is that it is about a 66% chance of going down at least enough to turn a profit so I do not believe all entries are random..
'The Random Entry' opening .. giving it a title as in chess. This one does get thrashed to death as a topic. Can random entry be profitable? Yes. This assumes you know all the other elements of successful play apart from an initial random entry opening (eg YM). But why do it? With signaled entry you can and will do better. One backdrop advantage you can have is a detailed predictive model for the day ahead .. which is what I also have.
Has anyone here witnessed live random entry trading that worked? I would sure like to see someone do this. I have read this same proposition in a number of books but I have never read an authenticated journal of anybody doing it. Anyone have any links to such proof?
I don't know how one can implement a mathematically defined completely random entry, I personally think completely random is not mathematically possible given the time component (time is linear) involved in trading. What I mean by this is one's definition of the random component -Is it price based or time based? You really need both to fit the definition and in any all cases (can someone prove me wrong about this - this is more of a hypothetical guess on my part) you will still have to define time based boundary conditions. Allowing the choice of boundary conditions therefore does not make entries random, each entry is then the result of a solution of a PDE (partial differential equation) with non random boundary conditions. Also, assuming you do not use a time based parameter (like day or candle range), there exists a fixed probability you will never make an entry .
Search threads for: Random Such as: "Nearly Random Entry vs a High Probability Entry" http://www.elitetrader.com/vb/showthread.php?s=&threadid=21733&highlight=random
Some kind of a monkey once got started on this. Whether this still qualifies as "random", I'm not sure.
Sure, but for what time and price limits? If its a time interval then over what period of time do you limit the "random" entry to? We know actual volatility does not remain constant and there are time intervals that statistically have greater volatility than other time intervals - thats not random so you cannot structure your entry around time of day... So, do you sturcture random entries on random 1 hour timeframes or on random 10 year time frames? The finer the time scale the less random your entry... the PDE in either case has to have limits imposed otherwise it will not have a solution - i.e. no entry... I am having trouble getting my thinking past the fact that an entry can even be random - the decision to go long or short can be random but the time at which to do it is where I am having issues.
I guess most people would have the same/ similar assumptions as follows: http://www.elitetrader.com/vb/showthread.php?s=&threadid=70794&perpage=6&pagenumber=12
Here are some distributions of results for a totally random EOD system. I ran it over 250 bars of data to yesterday, for 800 stocks 200 times. The results and some dostribution data are shown below. I think it shows conclusively that a long side, random entry system, will make money if the hold period is long enough to beat commissions. In this case the hold period was a straight 60 bars. <a href="http://www.pichotel.com/pic/2717Fj6uT/40621.jpg"><img src="http://www.pichotel.com/pic/2717Fj6uT/40621.jpg" border="0"></a> Code: // WealthScript code for Weath-Lab var Bar: integer; InstallTimeBasedExit(60); for Bar := 20 to BarCount - 1 do begin ApplyAutoStops(Bar); if Random < 0.01 Then // Random number between 0 and 1 BuyAtMarket(Bar+1,'RandomEntry'); end;