Big Ben on the FTSE100

tomorton said:
I don't know how long this situation will continue, but as long as there are riots in any oil-producing state, I think small position sizes should be my order of the day.

These things happen when they happen and stop when they stop. Are there any signs it will stop at any given time on any given day next week? - No.

It actually seems rational after two consecutive losses in a non-discretionary system like this to increase risk to the maximum tolerable, as a further consecutive loss is very unlikely (possibly as low as 6%, see above). But what would be irrational would be to go way beyond the customary 2% guidance and risk wipe-out.
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Hi Tomorton

sorry to P*** on your chips but this is not the nature of probability. A further consecutive loss in no more unlikely given the previous losses (or any given win/loss sequence for that matter), each trade is independent of the next. Think of it like this: what is the probability of me tossing 3 heads in a row with a fair coin, FROM OUTSET it is 0.5 x 0.5 x 0.5 = 0.125 or 1 in 8. However if I have ALREADY TOSSED 2 heads then the probability that I toss a 3rd head is 0.5 or 1 in 2. Yes this make me a ******!

The mind cannot help but think the bad luck run must turn around however a trader should resist thinking like this with a mechanical strategy.

do you get me:smart:
 
Yes, each one is independent of each other.

On each day there is a .5 chance of a coin being heads or tails.

But lets say you have a finite amount of flips, let’s say 250, which equates to around about the amount of trading days we have available.

Now out of that 250 the majority of it will be filled with T, H, TT, HH, TTT, HHH

But not so many 4 in a rows, 5, 6 and 7.

I haven’t got time to work out the maths but the odds of your next coin flip can be looked at in 2 ways, 50% or a much smaller amount just because streaks of five don’t happen often.

Although the above reasoning is how Martingale probably came about and you certainly shouldn’t double up as you could just get unlucky and hit a streak of 22 heads
 
Rugby Trader said:
Yes, each one is independent of each other.

On each day there is a .5 chance of a coin being heads or tails.

But lets say you have a finite amount of flips, let’s say 250, which equates to around about the amount of trading days we have available.

Now out of that 250 the majority of it will be filled with T, H, TT, HH, TTT, HHH

But not so many 4 in a rows, 5, 6 and 7.

I haven’t got time to work out the maths but the odds of your next coin flip can be looked at in 2 ways, 50% or a much smaller amount just because streaks of five don’t happen often.

Although the above reasoning is how Martingale probably came about and you certainly shouldn’t double up as you could just get unlucky and hit a streak of 22 heads
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sorry they cant be looked at in 2 ways, this is cast iron mathematics. If you doubled up just because streaks of 5 don't happen often then you have precisely 50% winning chance just the same as if you were on your first coin toss.

you could martingale so you bet 1 unit, if you lose then bet 2 units, if you lose bet 4 units and so on.... just bear in mind that if you hit a streak of 10 losers you will have bet and lost a total of 1023 units, a string of 10 loses would be expected 1 in every 1024 tosses so if you tossed once every trading day circa once every 4 years.

If we have a 60% true edge then the risk of 10 losses in a row is 1in every 9500 or once every 38 trading years with one trade a day.

I still think being able to withstand a losing run of 12 consecutive losses is vital to the long term profitability of these type of mechanical systems. so 2% of account size absolute max, 1% for safety.
 
i'm not saying to double up, i'm just saying there are two odds you can look at.
the odds of it being heads or tails tomorrow, 50%.
or the probability of hitting a streak of 5, considerably less.
 
Rugby Trader said:
i'm not saying to double up, i'm just saying there are two odds you can look at.
the odds of it being heads or tails tomorrow, 50%.
or the probability of hitting a streak of 5, considerably less.
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I wasnt saying that you were saying to double up. lol! In the current situation (4 straight losses) the probability of hitting a streak of 5 losses is exactly the same as it being a loss tomorrow. QED.
 
Rugby Trader said:
i'm not saying to double up, i'm just saying there are two odds you can look at.
the odds of it being heads or tails tomorrow, 50%.
or the probability of hitting a streak of 5, considerably less.
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Those 2 odds are completely seperate events.

The hypothetical probability of it being heads or tails tomorrow is 50%, thus the probability of hitting a streak of 5 tomorrow is precisely 50%.

The probability of hitting a streak of 5 starting from monday next week for example, is 1/2 to the power 5 (I dont know how to type this) = 1 in 32.

As sh5467 states, each event or trade is completely independant, "cast iron mathematics".

http://wizardofodds.com/askthewizard/fallacy.html - The whole site is absolutely amazing to be honest. I'm sure I was directed there from this site.
 
Good arguments.

In the situation we're in, geo-political forces of unusual potency are driving unusual behaviour in the markets, neutralising the edge that a system like ORBO or BB has - they rely on repeating patterns of market participant behaviour, and those participants have to be in a stable, free field, free to make their buy/sell, volume, time horizon and entry timing decisions free from extraordinary bias. As long as the situation in the Med / Middle East remains unstable, the 'predictability' of the system must be compromised and unusual runs of results, like 4 consecutive stopped out trades, must be much less improbable than otherwise. For that reason, I'm not doubling up - in fact, quite the reverse, having cut my BB positions to one third usual size, as per Post 826. They'll stay that way until everybody's drinking coffee together again around the Middle East: I will know the cups have just been poured out when I see the BB performance swing back to normal again.

However, at the further risk of being labelled arrogant -
But if we were in stable geo-political times, I would not be swayed by the evident logic of arguments here about the laws of probability. Don't misunderstand, I would not be doubling up, but not because I believe the logical arguments on probability, but because if the market behaves so oddly as to cause the system to fail so badly and so suddenly, the only logical explanation would be that there were extremely potent external forces which I could not yet discern. Until these forces calm again, the only rational thing to do would be reduce risk, and my way of doing that would be to reduce position size.

I agree we should keep the plane on the ground, I just disagree as to why.
 
I think the difference is that the system is taking advantage of patterns that appear in normal Market conditions, not a set outcome like a coin flip or roulette. At the moment those patterns are disturbed, hence risk is higher. Whether this is the equivalent of losing on 9 reds in a row and doubling your stake on a "guaranteed" black is a different question.
 
Hey thanks for this sh. I have been working on something like this for a few days, with the idea of doing more testing as you said, but my mql is very rusty. This is far more complex than anything I have seen, and very valuable, especially the 'more reliable' bits.

I actually found this one a few days ago but couldn't be bothered registering on yet another forum. Having done so now I'm very pleased and looking forward to having alook round. Thanks for spurring me on. (y)

sh5467 said:
yes 4 losses in a row for my EURUSD overnight breakout strategy also. Just goes to show that with strategies like this with relatively small edges should risk 2% account max. If the worst happened and 10,11,12 losses in a row occurred you will still have c. 80% of you capital left and you would ride out the storm. risking 5% of account could cause a total wipeout.

If anyone is interested an EA of the big ben is already available in a public forum, see link below:

http://www.fxfisherman.com/forums/forex-metatrader/trading-systems/2698-big-ben-meet-little-ben.html
:|
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how is the big ben today? 5 straight losses for me on the overnight breakout trade. to put this in perspective though I had 9 straight wins starting 17th Jan 2011 to 27 Jan 2011.
 
I didn't do it today as I was dying of a hangover from a work function last night.
but having a quick look at the chart, it looks like a win.
 
Yeah a win today. I have got a bit luckier though, I've broke the rules of the system and have trailed it all day. I called it to recover to 6000 and it has, currently still in it but my stop is close. Shame it's only a smaller stake though, I wouldn't have done it at higher levels.
 
Doh! I didn't trade it today - other things happening, but that's not really an excuse. The sooner I get this automated the better!
 
Had a look back over weekly results since starting BB trades, looking at trades that hit target against trades that were stopped out.

Of the 28 weeks in the series, 17 have had more winners than losers and 6 were a 'draw'. Just 5 had losing results: last week was just the second to have as big as a -3 difference.
 
Nearly forgot to put up the weely summary.

Over the week, 1 trade hit target, 0 expired +ve, 4 stopped out, 0 expired -ve. Equal worst week on record (the other was w/e 17/09, 0 for 3). First losing week since 05/11.

Over the last 4 weeks the picture is quite even, though bear in mind v2 rules applied to the first 2 weeks, then v3 for 1 week, then v4 this week - 7 trades hit target, 2 expired +ve, 7 stopped out, 3 expired -ve.
 
Thought about it brew, as you will probably have guessed from the debate on probability - but, no, not yet. Waiting for clarification of the Libyan situation through establishment of a recognisable and recognised regime. Will then ramp up positions to fulll size in installments.
 
The frustrating thing is that I only know BB trades are not working because they are not working. This makes it difficult to say what will make the resume 'normal' performance so I advocate scaling positions up to normal over a week or so rather than jumping in with a full commitment, even worse doubling up. There's no hurry.
 
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