Let's say you toss a coin 10 times per day (10 trades per day) (The simulation contains 10 000 Days) These are the frequency of the daily P&L from -10 to 10 with mean 0.0158 Now you set a profit target of 5 per day and stop if it's reached These are the frequency of the daily P&L from -10 to 10 with mean -0.0763769 Now you set a loss restriction of -5 per day and stop if it's reached These are the frequency of the daily P&L from -10 to 10 with mean 0.121049 These are the three strategies accumulated SL Bounded, Unbounded, TP Bounded Edit : I had in mind Daily Tragets when I've done the Simulation but it applies to anything from trades to days, weeks ... This an element of Antifragile... =D
Cool stuff. I once did a simulated 100,000 coin flips. The longest streak I had in that entire test was 21 straight tails...
Oh ... Actually this is a bit flawed ! I went too fast. I still have to take into account the losses / profits in the bounded strategy that are bigger than the target whereas I simply dropped them from the original (unbounded) serie ... So there will be more 5 (-5) in the TP Bounded (SL Bounded). The idea is there and it still works but the differences are less than the current ones.
You've been lucky =P The probability of 21 consecutive tails or heads is (1-0.5)^21 which is 1/2097152 !
Bounded Upside. Finite Profit. Take Profit. Of course I am talking about synthetic ones. I am not against Taking Profit at the Top. Lol
nobody against that , the point is can trader correctly define the top (bottom) and should he even try to define it? in your OP i understand that you talking about the target as a number of the profitable trades and I agree with you that it should not be the goal of a trader to define it but the target price at which trader exits and reverses his position imho in many cases can be and should be defined