In theory discussion

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In theory discussion

Postby MarkD » Thu Jul 29, 2010 9:25 pm

If I role a dice, the chances of rolling an odd or even number are 50 / 50.
Supposing I ignore all indicators and strategies and on the hour I role a dice and will buy on an even number or sell on an odd number.
The SP and TP are both 10 pips. At the end of the hour I'm either 10 pips up or down ( it's 50 / 50 in theory) or I close the position as neither have been hit.
In theory, over a period of time wouldn't this strategy just break even? Wouldn't it?

So, what if I had a 20 pip TP and a 10 pip stop? In theory it would make more than it loses.

I suspect this isn't the case, but why isn't it?
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Re: In theory discussion

Postby Rom » Fri Jul 30, 2010 7:17 am

The SP and TP are both 10 pips. At the end of the hour I'm either 10 pips up or down ( it's 50 / 50 in theory) or I close the position as neither have been hit.


Better theory will be
50% profit = 10 pips - spread = like 7 pips
50% loss = 10 + spread = like 13 pips
----------------------------------------------------------

Average profit per trade = 0.5 * 7 - 0.5 * 13 = 0.5 * (-6) = -3 pips/trade

Here black line is gross pips per trade for profitable systems and green line is net pips per trade

scalping.jpg
scalping.jpg (20.59 KiB) Viewed 3556 times
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Re: In theory discussion

Postby muddeman » Tue Aug 10, 2010 11:45 am

Hi MarkD, in answer to your question about whether trading randomly using a 20 point profit target/10 point stop would be profitable long-term, just setting aside the spread for a moment which of course would reduce the 2:1 ratio anyway, you are not going to get anywhere near 50% wins over a period of time, probably more like 20%.
If it were that easy we would all be millionaires!
The profit/loss ratio of 2:1 is fine but you have to have a strategy which will stack the odds of winning heavily your way.
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Re: In theory discussion

Postby david100 » Sun Aug 02, 2015 8:29 pm

Good strategy to make profit in Forex trading. If you will follow the rules and regulations then it will be so easy to make good results in Foex. So always try to use your own strategy in forex and do not copy other pattern of trade.
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Re: In theory discussion

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