How predictable is random?
Everybody is looking for the perfect trade entry and the most predictable signal.
Some people trade trends and I like trend signals, because a trend is required to make profits anyhow.
Other folks like to trend waves, channels, outbreaks, pivot points or candle patterns.
And they are all convinced that their method can beat random entries. But none of them could tell me how much better “better” is. If I can make 100 Dollars with one of that systems, would that mean I could also make 100 Dollars with a random entry?
Or would a random entry result in a 50 Dollar Profit?
Or worse, would random always produce a loss?
I didn’t know and so I did a search on Google. Dr. Van Tharp and Tom Basso came up with a random system that is described as “being profitable” for several years.
And they said in that book (I will include a link in the shownotes: https://www.vantharp.com/products/develop-winning-trading-systems.asp) that it is all about money management.
I thought about that for a while and it still didn’t answer my question. If it was all about money management there should be still a way to find out if a special trade entry system can outperform random entries when I use the exact same money management for both entries.
I have that trend-based Golden Goose System up and running for over a year now and I took a big hit when the EURUSD went downhill from summer 2014 until spring in 2015.
And I was wondering how that system would perform with a random entry, so I simply build a new version of Golden Goose called Salt and another one that was called Pepper.
Today, three month and about 450 trades later SALT is profitable and that means that equity and account balance are higher than the amount of money I put in.
You can check out the system for yourself if you lookup my nickname called “justmyname” on MyFXbook.com.
Three month is almost nothing when it comes to predictable profits and I think when we have a full year of trading results it might be more meaningful, but for now it works – better than expected and even better than my trend-based approach.
Oh, did I mention that the also random-based Trading System Pepper did lose for three month on a consistent basis?
If both systems have the same random entry, how can one system win all the time while the other one loses?
Well, that is easy to explain. Do you know that advice “Let your profits run and keep your losses short?”. One of the systems did that. It closed every trade when it made a 2 Dollar loss.
The other one closed trades when there was a 2 Dollar profit. If you want to find out, which is which, you can go to Myfxbook and analyze all the statistics for the Salt system right away.
I promise you will not regret it…
So after I did that experiment random is predictable for me and I like that random entry system very much.
It is way cooler to tell people that you trade random entries and have good results than to follow any other system.
But I would strongly encourage you to make up your own mind and do your own experiments, because you will get smarter every time.
If you don’t know how to do it, you can join the Golden Goose Course and start to find out with precoded MQL4 modules today…