Could this simple formula be profitable?

Discussion in 'Trading' started by Risepoint1879, Feb 10, 2019.

  1. So hear me out on this. Not practically, but just for discussion's sake.

    Technically, if someone put on trades with a blindfold, and then put a stop at 1R, and held all winners until 3R, would they be profitable?

    Every trade can be viewed as a plot point on the chart. Every trade that you take will be SOMEWHERE in 20 minutes. Up, down, sideways, somewhere in between.

    So over the course of say, 500 trades, there would be a random distribution of plot points from -3R, up to +3R, and everywhere in between. (It could be farther out than 3R, I'm keeping it simple).

    So by placing a stop at -1R, you are ensuring that all plot points that would have landed from -1R down to -3R never materialize. While at the same time, you allow all of the plot points from ZeroR to +3R to fully actualize. Thoughts?

    I'm not suggesting anyone would do this, but it seems like an interesting discussion which has ramifications for risk management.
    Last edited: Feb 11, 2019
  2. RedDuke


    Just back test it and see for yourself. It will be a looser. You will have too many -1Rs and occasional +3Rs won’t help.
    VPhantom, bklrnr, wwatson1 and 2 others like this.
  3. fan27


    Pick any time frame (1 min, 5 min, 1 hour, etc), date range and your choice of NQ, ES or YM (or all) and I will show you how much of a loser this strategy would be.
    bklrnr and athlonmank8 like this.
  4. maxinger


    seems more like gambling and not trading.
    anyway go do demo trading and see the result for yourself.
  5. traider


    Run on daily time frame for all futures you have in your database please.
  6. This is obviously, analytically provably, breakeven before commissions and slippage, under any distributional assumption possible and small R.

    If you can't work this one out from first principles, you need to go back to school. A good 300-level stats course would do it, or slog your way through Epstein's Gambling & Statistical Logic.

    This nearly identical question/thread pops up every few years here on ET, and elicits the exact same uninformed responses.
    ironchef and yg10 like this.
  7. JSOP


    There is only one chance that this strategy might, just might work is if you martingale it. Each time when you lose, you double your trade size until you profit.
  8. CALLumbus


    Enjoy the game when the 10+ loosing streaks show up.
    murray t turtle likes this.
  9. JSOP


    Just saying. It will be enjoyable when the winning streak shows up with 2^10+ profit potential after the 10+ losing streaks. :)
  10. DevBru


    You better have extremely deep pockets ...
    What are you going to do when after your 10th losing trade you need to trade more then 1000 contracts? Even then, good luck on executing an order of this size without too much slippage on most futures contracts.
    #10     Feb 11, 2019