You are correct. The only way that money can be made in coin flips is if the wins are larger than the losses. Then, there is a positive expected value. That's where the old saw about cutting losses short and letting your profits run comes in, ad nauseum. But I have no idea why people are using the random entry argument. That is my point. As I essentially noted in a prior post, it is complacent to assume "positive expectancy" (how I have grown to dislike that overused term) with random entries.
I wonder what the odds are if you have three upbars in a row that the next bar will be up or down? I would think it would be slightly better than 50/50 that it will be an upbar.
my backtest shows If you start on 3/11/03 and go short on tails and cut your losses short and go long on heads and let your profits ride you would come out ok and that's just flipping a coin! imagine what you could do with Magic Gann Squares!!!
This is a simple debate. If you're r/r is static, i.e. you will always risk x to make 2x ect., your expectancy is even. If your r/r is variable i.e. sometimes your r/r is 1/1, sometimes 5/1 ect. your results depending on either your skill at predicting trends or the more/less than random occurrence of trends will cause a possible fat tail distribution of profits and losses. To think that by risking x and letting your profits "run" is positive "expectancy" is fallacy. There is a mean reversion that will turn many 2x winners back to a loss before they reach your 5x profit goal. You all can argue as much as you like, but bottom line, random in, set rules out is never a statistical edge.
GG you already have proven you don't understand many things. We are talking about a coin toss. Unless you have a 3 sided coin the the payoff is exactly equal.
save the pathetic insults. the coin toss gives you the frequency of win/loss. the payoffs have not been defined. if the win:loss is 50:50 and the payoffs are equal, obviously this won't make money. however, if the win:loss is 50:50 and the average loss is 1 point and the average gain is 2 points, you make money. don't give me this, "you don't understand" BS.
well Pabst, It just requires a simple leap of faith. You must believe what goes up will keep going up and what goes down will keep going down. (there is a slight upward bias, because mkts don't go negative, and you have a huge sales force on Wall Street working for the bulls) But once we are trading a life of faith, statistics are simply a measure of the obstacles miracles will overcome. That's why the market is closed from the Sabbath all the way until Sunday services, so traders can learn this stuff. I think I read somewhere that 90% of all traders don't attend church regularly (they do however pray more on a daily basis than the other 10% of profitable traders.)