Could you trade this profitably?

Discussion in 'Strategy Development' started by frostengine, Aug 14, 2011.

  1. If you knew with absolute certainty in a given market that with 55% accuracy the next bar was going to be up, and with 60% accuracy the price will be higher than now at the end of 5 bars. But knew nothing else....

    Could you build a strategy that exceeded slippage/commission? How would you approach the problem? Would it matter if the accuracy was 60% and 65% respectively instead?
  2. Argent


    The accuracies are irrelevant. What counts is the statistical expectation after optimizing the stop loss for the cases that go against you. That's assuming that you exit at the close of the fifth bar and don't need to optimize for a profit stop.
  3. i`d grab this trade and and hide in my basement.after a while i`d try to repeat the same...

    until i get busted

  4. we are the pickpockets, god damn it!!!!
  5. It would depend on the value of the average trade (expectation). I have tested markets with 95% win rate for next bar but with negative profitability. It all depends. Your question is too vague. Please specify the market and timeframe. Keep in mind that % accuracy is meaningless statistic by itself. You need to also know the profit factor or avg. win to avg. loss ratio. These are dependent on one another. See this reference for details.
  6. What I am discussing is prior to building a strategy or an entry criteria. Lets say you were given the ability to know with 55% accuracy next bar is up, and 60% accuracy up in 5 bars. What are the ideas in how you would approach that problem to best utilize those slight percentages in your favor? It's not entering a trade and winning 55% of time, its knowing that next bar is higher than the current bar.
  7. Argent


    You don't get it. You defined a trade entry condition, one half of a system. All you have to do is define an exit condition and optimize for stop loss and take profit prices.
  8. You're wasting your valuable time...