Friday, November 23, 2012

Random "CoinFlip" Profitable Trading Strategy

Your market entry points are not as important as you might think. The more important thing is your money management. The point here is that you have to let your profits run and cut your losses soon. Or in other words, your win/loss ratio shoud be above 1. That means, your profits should be higher than losses.

The importance of money management can be shown on random coinflip trading strategy which is actualy in long run profitable. Why? Simply because you are long and short equal number of times, but your profits will be higher than losses.

For example: If your profitable trades are 20 pips and losing trades 10 pips you will make profit because thanks to coinflip you will have 50% winners and 50% losers, but with 2:1 ratio you only need 33% win trades to be in profit.  If your ratio is 3:1 you need only 25% winning trades.

So here is Random "Coinflip" Profitable Trading Strategy system:

Take a coin. One side will mean "BUY", another one "SELL".
Flip the coin and do what it says at the beginning of new candle of 4 hour chart. (you can use 1hour chart too)
Assume you got "BUY signal".
If the candle closes higher than the entry, keep the position open until the nex candle closes.
If the candle closes higher than preceding bar, again keep the position. Keep doing this until there is a candle that closes lower than preceding candle and than close your position.
If the first candle closes lower than the entry, cover immediately.

You will make money over time. Why? Because if you are wrong, you will lose 1 candle only, but if you are right you can get profit of 2-3-4 or more candles.

Just be patient, because losing streak occur and you can get 5 or 6 losing trades in a row and than 5 winning trades in a row or similar.

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