Which is easier - a steady 500 pips a month or just 20? - page 11
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I think you should approach the question from the beginning, that is, from the laws and nature of the market, rather than looking for the answer at the end of an 8th grade algebra textbook.
The "laws and characters" of the market are, imho, from the evil one, i.e. collective psychology (from Human science). Psychology can only be effectively traded manually.
The task of bot writers is to have a statistical advantage, and many of the tools for this are in the 8th grade algebra textbook.
The "laws and characters" of the market, imho, are from the evil one, i.e. collective psychology (from human science). Psychology can only be effectively traded manually.
And the job of bot writers is to have statistical advantage, and many of the tools for this are "sewn up" in an 8th grade algebra textbook.
Holy... Where in my post did I describe human psychology? You clearly didn't understand what I said there. IMHO.
Well... Where in my post did I describe human psychology? You clearly did not understand what I wrote there. >> IMHO.
Yes, perhaps I didn't understand exactly what you meant by the phrase "the laws and nature of the market"? Initially subjecƟve notions regarding the market.
At the DC where I once took a "young fighter's course", there was a charming character who worked there. His character was epochal and his ideas about markets were also very unconventional. But that's not the story. His monthly goal was to earn as much as 1,200 points! To achieve this goal, he set a goal to earn 100 points per day. He always entered the market with one lot. To achieve this goal he caught strong market movements and set take profit for 100 points (he did not use stops). When he managed to take 100 points off the market, he sat in BCs and we knew at first hand that he took the market today for... But there were many other days when he was pensive and sad.
For some reason everyone started to discuss problems of MM, break-even entry points, TC elements and other things, though this had nothing to do with the initial question. Well, what about the MM if the question was: What is easier - a stable 500 points a month or only 20? Money management is applied to capital, not to the management of pips. In addition, the TS does not matter at all. Whether it will be profitable or unprofitable is a separate question on the TS.
1. 20 pips is faster to gain than 500 because it is easier for the price to pass 20 pips than 500, I think it is obvious.
2. 20 pips is much more profitable than 500 because it is more probable that take profit at 20 pips will be executed than take profit at 500 pips.
If by "simplicity" we mean points 1 and 2, then of course it is easier to make 20 pips than 500.
But for some reason there is no one among the public, among which there are some regular "gurus", who would notice that playing at the exchange market is a game with a negative mathematical result. In other words, the broker will take a commission from each executed transaction. Now let's just calculate what is what: suppose the trader has a goal to earn 3000 pound a year (I think it is a realistic figure). Let's also assume for simplicity that all the trades of this trader are profitable. The commission for this instrument is fixed and amounts to 2 points. If the profit limit is 500 points, we have 3 000-(3 000/500*2)=2 988 points with the total commission of 12 points. Now we have a profit limit of 20 pips: 3 000-(3 000/20*2)=2 700 pips, with the cumulative commission of 300 pips paid. In the first case, the commission was only 0.4% of profit, in the second case it was 10%(!), although the profitability level in both approaches was the same. And if the commission is doubled and makes 4 points? If the profit limit is 500 points, the commission pressure will be only 0.8%, but if the profit limit is 20 pips, we will have to pay 20% of the earned profit!
Let's see if our theoretical study is correct. For this purpose I just came across my favourite Expert Advisor "CoinToFlip" - it tosses a coin and if heads fall, it buys, if tails fall, it gives. (I'm probably boring everyone with my coin flip, because I mention it quite often, but what can you do if you can't find a more unbiased and neutral strategy). Since the strategy is losing, and it is subject to the laws of probability theory, which states that with an increase in the number of transactions probability of failure approaches 1, and besides the time factor in the question, I introduced a limit on the total number of transactions - 200 pieces (the fact that at different levels of profitability number of transactions varies greatly, and this is a very important factor in determining the profitability of TS and we should not let it down). So let's take a series of 191 passes of the system (using the optimization method) and introduce 20 points profit limit at 50 points stop. The obtained chart of the system optimization:
I don't know about you, but I see a clear shift to the negative profitability zone (the boundary is the red line). Results: Max gain: 779 pips; Max loss: -1380 pips; Winning passes: 63
Now let's try to optimize the same system with a profit level of 500 pips and a loss limit of 50:
Already better, there is a slight shift towards positive values. The numbers speak for themselves. Results: Max win: 5234 pips; Max loss: -4468 pips; Winning passes: 89
The third variant is out of the race (because of the very high profit level the number of trades was much less than 200 in some iterations, which may seriously affect the chart):
Wow, the shift to the positive yield zone is now visible to the naked eye! Results: Max Profit: 7748 pips; Max Loss: -7078 pips; Winning Passes:129(!)
Testing was conducted on EURUSD from 2000.01 to 2008.06. Each deal was opened at the current price at the opening of the day. The commission is 2 points. The code of expert is attached.
I, for one, haven't heard the "right" answer. And it's quite obvious.
20 or 500 is not important, both figures are meaningless. You have to base it on the currency trend, then you won't ask about the pips. The nature of the market in 2006 and 2008 from the third quarter and the beginning of 2009 should convince you of that. In one case it was easier to take 20-30-40-50-100, but not 500 in a month. In the other it was easier to take 100-200-300 and even 500 like EURUSD 18.03.2009 in ONE DAY !!!
I think you should approach the question from the beginning, that is, start from the laws and the nature of the market, and not look for an answer in the end of the 8th grade algebra textbook.
I agree.
I, for one, haven't heard the "right" answer. And it's quite obvious.
20 or 500 is not important, both figures are meaningless. You have to base it on the currency trend, then you won't ask about points. The nature of the market in 2006 and 2008 from the third quarter and the beginning of 2009 should convince you of that. In one case it was easier to take 20-30-40-50-100, but not 500 in a month. In the other it was easier to take 100-200-300 and even 500 like EURUSD 18.03.2009 in ONE DAY !!!
I think you should approach the question from the beginning, that is, start from the laws and the nature of the market, and not look for an answer at the end of an 8th grade algebra textbook.
"Easier for whom? It depends on the specific trading method, time frame, etc. It was easier for someone to lose 20-30 points a day during these periods, and so on. The question was about stable earning, but not about "where on average they earn/withdraw more". Of course, the greater the market volatility, the greater the number of points you can gain or lose. The higher the trendiness of the frame, the more profit will be earned by those who traded in it and the more loss will be incurred by those who traded in the flat. The word stability in the market is synonymous with statistical advantage. Even in manual trading by gut feeling, not to mention systematic trading. imha
C-4, of course with negative MO the more trades you make the worse. The same applies to system fitting plus the added fact that it is easier to fit a system with a smaller number of trades. Of course, spread influence when trading smaller moves is more significant than larger ones, but take and stop levels depend on system logic, and are not selected on the principle of commission minimization. The costs of trading are taken into account when calculating the statistical advantage. A system with smaller targets may or may not be more profitable and robust than a system with larger targets. If there is a statistical advantage, the more trades the better, as opposed to the opposite case - negative MO from the spread/commission.
The conclusion is not unambiguous, but quite logical: a stable profit stream of 500 pips a month is no more difficult, but even "statistically sustainable", than 20 pips. .....
Mathemat. Have you not retrained? A trader's ranking depends on the number of pips/day. If he reaches at least 20 pips/day trading 5-10 pairs after a year of work, it is already a good indicator. But to reach the 200 pips/day level !!!!!!! :) That is unrealistic. It may be realistic for 10 good traders, but not for one. You don't have to know higher mathematics to understand it.
Something I don't understand, coaster. No one was talking about 200 points a day. There was only 20 or 500 a month.
P.S. And who says that a trader's ranking depends specifically on pips per day?
P.P.S. Here's what occurred to me, while I was pondering the problem. Let's imagine such a situation. I personally do not have "elementary" system, which allows making more or less stable 500 points per month (let me measure my trading efficiency in pips, and I will try to solve the MM myself). But there are a few ideas of "atomic" systems, which may make 20-50 points per month.
First, a simple definition: system selectivity S is the ratio of time passed in the market to the time the system is in the market. For a flip system S = 1 (it is always in the market). For systems with filtered inputs and outputs, S is usually of the order of units or 10-20.
The "atomic" systems I mentioned have S ~ hundreds (i.e. only an hour or two of a full trading month in the market). We cannot deal with 500 points per month with such selectivity, because currencies do not trade that much. But these systems may be easily combined in one complicated one, because we have dozens of currency pairs. So we get a new system that makes about 500 or even more points per month. But it's not just because of high selectivity and reliability of the "atomic" system.
Does anyone have similar experience of building complex systems out of atomic systems?
I have no experience in building complex systems from atomic ones, but I have had ideas similar to yours for a long time. The optimizer in the strategy tester is not suitable for this purpose (it has no possibility to set an arbitrary user-defined target function). I am currently working on developing my own strategy tester with the ability to optimize.
P.S. Perhaps, the existence of this possibility will parade us in MT5.