How to keep in faith with a statistically profitable system?

Dear fellow traders, I have a query stuck and still can't figure it out by myself, maybe I did not learn enough.
This query is made for any quants, please help me with this

Here we go:
Let's say we've test our platform for after, say it 100 transactions, and we have 90 winning transactions and 10 losing transactions (so we've simply 90% winning and 10% shedding in percentage terms)
Then, we run the system at the account, and suddenlywe have like 30 consecutive losses. In accordance with our system it was 10 percent of failures, therefore we must theoretically stick with our platform and expecting that we shall at least have other 270 winners (when we're planning to make a 300 commerce in a year), am I correct? Please fix if anything wrong

Nah, the inquiry is, how can we know the next trades will be 270 consecutive winning trades? It may be 100 consecutive losing trades then 900 winning trades in a row, and it'll still be 10 and a 90% winning.
If so, how can we simply apply what we have analyzed systems, even it's a 99% winning platform, it also could be a 10 consecutive losing trades and 990 winning transactions, how can we maintain in religion with our platform which generates large numbers of losing trades in a row while it was statistically a profitable systems?

Please help me with This Issue

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We don't. After dropping 30 trades in a row, we are still only 90 percent likely to win our trade. The numbers won't ever balance (i.e. experience 30 losses, but don't anticipate 270 winners to compensate for it), but the bigger our sample develops, the more likely it will begin to reflect our edge. Over time, those 30 losses will get a memory.

That said, losing 30 in a row is beyond horribly unfortunate, and it is much easier for a 50% method to do it than the usual 90% method.

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Oh I don't understand, if it dropped 30 days in a row I wouldn't wager on the 31st one being a winner!

There are just two possibilities -

1. It really has a 90% chance of success and the rarest occasion ever has happened - i.e. something with a 10% chance of occurring (in this instance a loss) has just happened 30 times in a row.

Or...

2. It does not really have a 90% likelihood of a trade that is successful and you believe it will due to curve matching, not analyzing it the market whatever or changing.


I would say option 2 is millions of times more likely to be the true instance

If a roulette wheel came up with the number 27, twenty five times in a row exactly what could you believe? The wheel or what a coincidence is rigged or broken in some manner? If a coin came up heads 200 days in a row could you believe it was a fair coin?

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You can replie much of live's plogy in demo, with practice. Invoke taxes? There's a world of room in paper, simulator and demo before studying with pennies, to hone the technical advantage of one.

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I do not mean plogy. And no thats not the exact same.

I mean no matter what a broker tells you that the feeds from demo to reside don't wind up with the very same results.

The charts may seem the same in retrospect however, the results will wind up different. I have tested demo against reside trades side by side, with results that were different.

The demo trade magically works out and just a stop being hardly missed and the transaction functioning, although the live account always suffers more from a badly placed entry or simply does not have the exact same chance.

Demo is a game without a traders or big boys playing and moving price. Nobody is stop hunting demo accounts.

I'm throughly convinced that all brokers that offer free demonstration's rig them to create live trading appear easier than it is to sucker in as many new tiny accounts as possible.

Look over any FX trading forum and you will discover skads of new traders that do amazing in demo and post something to the effect of, is it really this easy.

Forward and backward testing at Demo to establish a W/L ratio is a COMPLETE waste of time. At best its good to work out the nuts and bolts of could be.

Interesing thread, comparing coin moves with no memory to trading is not entirly fair, possibly in a 100% mechanical system but lose 30 transactions in a row and pyschology wise your screwed and can expect to make more and more losses or reduce your profits so brief they might aswell be declines because there tiny compared to a losing trade.

A platform which might use 90% accuracy in some market conditions can quickly reverse to 90% losers in other market conditions, so as others have stated take 2-3 declines in a row then lower your size or back to demonstration and reevaluate your system to be certain it's still performing at the current problems.

The likelihood on 30losers at a row in a 90% win rate can also be billions to 1 likely 10^30 = 1E 30

Even at 50/50 to 1 the odds on 30 are 1,073,741,824

Do not get me wrong I have had 30losers in a row, so it's cause I SUCKED and my system had a 99% failure rate, the poster using 34 losers in a row that the terms didn't package his system for a while, but he kept going until it returned to normal I suppose.

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Thanks for the table, what was the formula you used to calculate it?

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Formula is currently in attached XLS.
https://forexintuitive.com/attachmen...1375102563.xls

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What you may control occasionally depends partially on the results

You can control your position dimensions, but the next few bars (The result ) can lead you to modify your position size so.

So in a feeling, you have to care about both.

Regards,

Nader

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yes, my place dimensions may change based on what happens next. But that has no bearing how I come back to make a desicion.

Grkfx strikes the nail on the head.

You need to get an edge that's somehow grounded in either a comprehension of the hows and whys that induce price movement, and/or the price patterns that are created as an outcome; or some other method based on strong abstracts, e.g. trend, S/R, momentum, volatility, significance, economic trends and motorists.

Anything else, more than a big enough sample size, is just a workout hit or miss, and the transaction costs will eventually defeat you. Therefore I agree with. I haven't been able to invent a profitable method from (only ) data mining/optimization; I'm not saying that it can not be done, but I feel it's not a trivial task. So methods are based on this type of strategy, and the vast majority of these, given time, neglect. It's so simple to compose an EA that enters based on a combo of indys, and scales out with X pip TPs and/or Y pip trailing stops, not one of which bears any relation to how the heavyweight players are driving price.

Many other EAs employ MM methods that do simply re-balance yield and risk, and/or redistribute wins and losses.

And it's all too easy to be fooled by randomness: fluctuations can be such that a platform that returned an 80% win rate over a 500 trade evaluation, can easily yield a 40% win rate over the next 500 trades.

Marv recently started an interesting thread about how randomly generated charts apparently exhibit exactly the exact same kind of trends, channels, double tops, pin bars, the respecting of trendlines and fibo amounts etc, and so on, just as real price charts do. Given that a generated chart can't be defeated by ANY system, this demones that to be profitable, a system must exploit inefficiences on price charts that are in some way qualitatively different from similar patterns on generated charts.


Here's a horse racing analogy. The savvy punter knows that studying factors like the track state, weight carried, obstruction draw, and jockey's expertise can give him a real edge. That equates to what grkfx calls skill. The uninformed punter may (for example) run a historical evaluation on saddle color, and during a large data sample detect that the horse that wears a yellow saddle blanket wins more frequently on Thursdays, while one sporting a green saddle blanket wins more frequently on Tuesdays. The outcomes of the evaluation, whatever the error, are insignificant, simply because the underlying assumption has no real bearing on the outcome.

Much the Exact Same applies to FX. Either the factors that are being tested reflect the market drivers, or they do not. When they don't, then - no matter how big or representative the sample size is - the trader is effectively creating random entries and exits, and the spread will eventually defeat him, just like the zeros on the roulette wheel ensure that the house always defeats the punter if the latter plays for long enough.

And on top of all this, the trader still has to receive his plogy right.

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Formula is in attached XLS.

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Thanks very much

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Interesing thread, comparing coin moves with no memory to trading isn't entirly honest, maybe in a 100% mechanical system but shed 30 transactions in a row and pyschology wise your screwed and can expect to make an increasing number of losses or reduce your profits so short they may aswell be losses as there tiny in comparison to a losing trade.

A system which may work with 90% accuracy in some market conditions can quickly flip to 90% losers in additional market conditions, so as others have stated take 2-3 losses in a row subsequently reduce your size or back to demonstration and reevaluate...

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You managed to find a system with a 99% failure rate? Awesome, please share it. Be great to take the other side of those transactions

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Be good to take the other side of these transactions

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Perhaps; not (see myth #1 ).

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You were able to obtain a system with a 99% failure rate? Please share it. Be good to take the opposite side of these trades

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I can provide you a simple system with 99% failure rate: click buy, then click market IMMEDIATELY

Replace market with close at a non-FIFO account.

However, You're correct in principle: any 99% failure rate system which doesn't lose strictly because of the spread could be a gold mine, at least until the market changes back and it starts losing just 50% of the time

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So I like to have a trading system that works in all markets, OR I will spot when the market is going to go into the market conditions that produce losses so that I can stay out during this time. Develop a means to ascertain when the market will input the conditions that produce profits. It can be tough, but attainable.

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I must agree with grkfx. Tdion, you are stating you have a system which works in some market conditions and not others. Well, you need to incorporate rules in your own system which make sure when conditions are great for whatever kind of system you are using, you are only trading.

I've a completely systematic means of trading; I consider each and every trade that meets all my principles, and a few of these rules keep me out during certain periods or when conditions (volatility, etc.) exist which have demonstrated bad for my platform in the past.

Of course market conditions can always change with time, but you want to think about what never changes, what always happens in the market. My system is based and have never changed, unless of course the entire world adopts one currency and trading entirely becomes nonexistent. Anyhow, I'm not here to discuss my personal egy, but I'm just tired of people saying you can not successfully trade the place fx market, or that it is just gaming, because advice like this was discouraging to me once I began, I know it is possible to be successful.

Anyhow, all I'm saying is you're able to embrace the mindset that it's all a crap-shoot and random, and no one can win, but I believe that is a self-limiting mindset which will hurt your ability to become open-minded and find profitable ways to trade the markets. Of course a mentality like that makes you feel great that you are aware that it's impossible. . But wouldn't you rather have a complete bank account?

I respect your comments and am not trying to party, I just want to offer a distinct perspective.

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You were able to find a system with a 99% failure rate? Awesome, please share it. Be good to take the other side of those trades

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It is a fairly easy system, however impossible to reverse.

Basically, get in, place a tight SL and greedily drama for 200 pips, 99% of the time your SL will hit or your money back.

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grkfx strikes the nail on the head, IMO.

You need to get an edge that's somehow grounded in a comprehension of the hows and whys that drive price movement, or the price patterns which are made as a consequence; or another method based on robust abstracts, e.g. trend, S/R, momentum, volatility, significance, economic trends and motorists.

Anything else, over a large enough sample size, is nothing more than an exercise hit or miss, and the transaction costs will eventually defeat you. Hence I agree with: it is no better than gaming....

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I enjoy your horse racing analogy. I've spent years of effort on historical evaluation on blanket color, which we were told it is important and vital to the profitability. Until I notice I was leaded into some direction I found nothing. Information mining/optimization is helpful, provided that if you're doing it weight carried, jockey's experience, and barrier draw.

All the horse analogy and I disagree, it assumes that data-mining has to be dumb and can have no insights. You can be successful with a pure data-mining strategy (I have 15 years of experience doing so )

The dilemma is that you will need to find methods to distinguish correlation from causality. You will find systematic and definite means of doing this you generate.

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I disagree with all the horse racing analogy, it supposes that data-mining needs to be idiotic and can have no insights to causality. You can be successful with a pure data-mining approach (I have 15 years of experience doing this) The problem is that you will need to figure out ways to distinguish correlation from causality. You will find systematic and clear ways of doing this you generate.

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Oh yea. This is something that I would prefer a lot to know about! [The clear and systematic ways of doing this...]

Would you suggest some reading?

Interesting posts you are spreading around, BTW!

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Would you suggest some reading?

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If you already have good knowledge about basic data I would suggest researching about data-mining on artificial data (artificial information created with all the statistical qualities of a given financial time series), that should keep you occupied for a couple of decades. Good luck.

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quote If you already have good understanding about basic data I would suggest exploring about data-mining on synthetic data (artificial data generated with the statistical qualities of a specified financial time series), that should keep you busy for a few years. Good luck.

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Thanks, partner, to have pointed to the ideal direction.
I think I absolutely know what you mean, and, if your best whishes don't recognize as simple as you describe them out, I believe it could take a bit under a few years.

Bye

BL

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Dear fellow traders, I have a question adhered and still can not figure it out by myself, perhaps I did not learn enough about probability math. This question is made for any quants, please help me with this we go: Let us say we've test our system for once, say it 100 trades, and we got 90 winning trades and 10 losing trades (so we've simply 90% winning and 10% shedding in percent terms) Then, we run the machine from the live account, and unexpectedly ,we have like 30 successive losses. In accordance with our system it had been 10% of failures,...

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The way to maintain the faith when there are large number of losing trades in a row using a mathematically profitable system?

As soon as the losing trade's losses are merely a small fraction of their winning trade's profits. For example your 100 straight losing trades shed 5 pips each time but your 1 trades win 1000 pips or more. That's the way you maintain the faith. As soon as you can work out how to make money with win rates and high losses you're in a high degree of trading. Focus on making money not win rates.

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