forgotten friday, page-7

I am having one of those weeks when I am getting stopped out all the time and nothing is working. Why volatility - urrrggh just discovered tomato sauce on my V key - dumb luck whatever, so in my quest to improve the odds I have worked out a trading plan that takes my luck out of the picture.

In the morning toss a coin and long or short accordingly. Use a stop loss. In theory the losses and the wins should be randomly distributed so that over a sequence of tosses you should have about equal numbers of ups as downs.

Now if you have a stop loss the loss days are limited to say 10 points while your gains are unlimited.

If N is the number of coin tosses theory says your net return over time will be

N/2*Average Daily Move-N/2*Stop Loss Level

= N/2*(Average Daily Move-Stop Loss Level)

So provided your stop loss level is smaller than the average daily move it is profitable. No brains involved.


Am I gonna trade it? Nope - because with me the coin would roll under the skirting board.