Separating the entries from the exits can help improve system profitability. Over a large random sample of entries you can slowly improve your risk management rules as well as your exit rules. Then, you can work to improve entries by holding the exits to a single fixed rule (exit 15 bars after trade open) using the newly created and optimized entry method. Knowing how the importance of entries vs exits can be very valuable. Good luck
No it's not a belief of mine - it's bloody common sense. Over the fairly long term, a majority of market participants have gained through holding stocks or mutual funds or pension funds. Why? Because equity markets have exhibited a tendency to go up over the long term and those market participants identified a non random behavior by whatever means and exploited it. There is no law of nature that says equity markets have to go up and indeed they may not over the next 10 years, but the non-random behavior has been sufficiently enduring to increase the net worth of probably the majority of market participants significantly. Which is all a far cry from playing around with EL scripts trying to coerce them to show a profit from random entries. Anyway to respond to the original question, why would anybody in their right mind want to enter trades on the ES randomly? Far more rational is to short weak stocks and buy strong stocks. Which begs the question of what is a strong or weak stock - an exercise for the reader not centered on randomness.
Common sense does not seem to be very common, after all, a large majority insist on buying tops and selling bottoms, and performing all sort of other self-injuries. I know I did for a long time. I could not beat a random coin for years, and it is still very hard for me to beat it. In fact I still don't know if I'm beating it most of the time. But this thread is not about me, it's about what you can and what you can't prove to yourself and others as it regards improvement over a coin-tosser-bum-trading-method that is almost breakeven.
You will have to prove to yourself and others that your suggestions bring in at least 1 tic per day on average extra profit over the original method rules.
Well said. I'm with this guy. However, the OP does raise a good point - as noted by wutang - that is submerged by the OP then saying "prove it" to any and every response... If you can get to grips with some of the non-random aspects, put your stop and limit equidistant and LEAVE IT ALONE, you will soon be able to tell whether it is likely that you understand - and can act accordingly to - a non-random aspect. Christ, you could even adjust your stop and limit for the lognormal properties of equity markets and test the null hypothesis that you should only lose commissions. it is the LEAVING IT ALONE where most people fall over. All conjecture, of course.
You will have to prove to yourself and others that your suggestions bring in at least 1 tic per day on average extra profit over the original method rules.
Here is the sort of thing I mean, illustrated in the attached chart which is an unweighted index of 13 stocks from my watchlist of shorts selected a week ago. When the broad market is overbought(ish) you have to ask yourself where are these stocks going to go when the broad market has a bad day? They have fallen off the edge. This is another type of analysis altogether from trying to beat random on the ES. It's kind of like constructing a synthetic instrument that's more to your liking than the ES.
Nice start. Now you'll have to prove to yourself and others that you can actually make more than commissions and slippage trading whatever that chart is telling you to do. I'm all ears waiting for your objective entry, exit, and sizing rules.
I'm not here to deliver a packaged trading system for you. And in any case, exit rules need to adaptive. No it's not easy - it's damned difficult. For example, todays reaction to earnings and housing - what to infer from that? Just because it can't be packaged easily doesn't mean it's not important.