Random es 1 pt scalp or stop test

Discussion in 'Strategy Development' started by profitseer, Dec 3, 2002.

  1. I just did a random test on es (the old fashioned way, by going over some old charts)

    rules:

    1. enter random long 1 tick above current candle on 5 min chrt

    or enter short one tick below current candle on 5 min chrt

    2. scalp for 1 point with no stops

    results: 24 straight wins for 1 pt or 24 points per contract

    the last trade has me long at 949.00 so that is about a 29 point paper loss (only 5 if you count the previous wins), but I'm sure it will come back and take out 950.25 to give me my 1 pt.

    But here's the thing. You turn that random entry into a 1 point stop loss instead of a 1 pt scalping profit target, and there were my friend some fairly awesome moves. Like 20 or 30 points easy.

    So, I'm just wondering, I'm pretty sure that eventually you will get wiped out scalping with no stops, not to mention there were days where you were down 20 points with nothing to do but sit around waiting for your 1 point profit, but is turning it around feasable? I mean a very tight stop 1 or 1.5 and a very large target like 20 minimum. I think 20 would net you about 5 (that is, after the 15 stop outs) and probably take about 15 r/ts so that's hmmm more like 3.5 net.

    Either way, what I'm talking about is radical risk to reward, either 1 to 25 (which when you think about it, after all the probable stops it's more like 15 to 25), or infinity to 1.

    And after the day I had, they both look pretty good.
     
  2. "the last trade has me long at 949.00 so that is about a 29 point paper loss (only 5 if you count the previous wins), but I'm sure it will come back and take out 950.25 to give me my 1 pt."

    famous last words.
     
  3. I believe Profitseer is making a very good point. The more I observe this game, the more I am realizing that money management is crucial -- not being right with each trade.

    Did you come up with any other observations profit?
     
  4. heehe

    i tried this very thing about a year ago. it was a stock trade and it was REAL. i would buy a stock and immediately enter an order to sell 1% away from my entry. this worked for a few trades....but then this one trade just wouldn't go my way. it started going further and further away. i kept saying to myself that it would come back, especially since i only wanted a 1% gain. surely i would get it, i thought. i eventually closed out this trade a few days later for about a 30% loss. :eek:

    i remember the stock was SCSS.

    p.s. no, i didn't do this again. it was just an idea i had to try...
     
  5. WarEagle

    WarEagle Moderator

    profitseer,

    I tested a similar system and posted about it awhile back. I wanted to take advantage of the fact that the ES rarely opened at the exact high or low of the day without trading at least one point in the opposite direction from how it would end the day. With that in mind I wanted to buy or sell (didn't matter which) on the open and exit with a 1 point target, no stops. The results were similar to yours. Over 90% winners. But the one loser was always a doozie and wiped out all gains plus some. Then I thought about stops the way you have. No matter what I tried, it lost. If the stops were too tight, the accuracy fell so much that the smaller losers were offset by having more of them. It was proportional to the stop size. I also tried biasing the trade, whether to go long or short, based on premarket activity. Didn't seem to matter.

    Good luck with your test, maybe you'll figure out how to do it.
     
  6. Was this just random entry or using some strategy for entering?
     
  7. gordon, didn't they teach you anything at trading school? THAT'S when you average down.

    Good traders don't use stops and they average down. They just keep doing this until they have enough money then they quit before they get wiped out.

    Bad traders try it and get wiped out. Most of them go on to write books warning other traders not to try it.
     
  8. yeah, I think I can beat random at the 1 point scalping game. I'm beginning to think the market is random and I can tell what a random distribution is supposed to look like. It's like I say, "If this market is random, then the next move should be up. See, it moved up. I told you it was random."
     

  9. If it never worked.. why dont you just do the reverse.. and fade the system.
     
  10. always + never = sometimes

    black + white = gray

    all + none = some

    up + down = sideways

    That's why you cannot just fade a method that doesn't work. Because it is not necessarily an "either or" scenario.

    :)
     
    #10     Dec 4, 2002