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A profitable system that is durable and robust, by Linda Rashcke


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A profitable system that is durable and robust, by Linda Rashcke

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xplorer's Avatar
 xplorer 
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I've come across the following PowerPoint set of slides on Linda Rashcke's website.

https://www.lbrgroup.com/images/Linda%20Paris%20on%20Trade%20Management/TradeManagement.ppt

It describes a system that she calls "A profitable system that is durable and robust based off random entries".

The rationale of the system is basically entering at random (long in an uptrend and short in a downtrend) with certain stops and target criteria - resulting in a profitable system.


It sounds interesting and something I'd like to consider for me in the future.


Has anyone tried it?

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 Okina 
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when I click on the link I have that and I don't like it ?


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Okina View Post
when I click on the link I have that and I don't like it ?

The website apparently has a problem with the https certificate.

Anyway, I have updated the link in the original post. If you try it now you should not get that error anymore.

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xplorer View Post
It describes a system that she calls "A profitable system that is durable and robust based off random entries".

That's what she describes as what she's seeking, anyway.

They're not really "random entries", if you read the detail.

The ideas behind the methods presented there are still probably far too random in their outcomes to be of much value to independent traders. When they're successful, they're successful only over a percentage of markets in any given year.

Many of her subsidiary points (e.g. trailing stops making performance deteriorate, overall) are clearly both right and provable, though.

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DinkyMcAllister
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Interesting....thanks for the link...other good stuff on her site as well...

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Tymbeline View Post
That's what she describes as what she's seeking, anyway.

They're not really "random entries", if you read the detail.

The ideas behind the methods presented there are still probably far too random in their outcomes to be of much value to independent traders. When they're successful, they're successful only over a percentage of markets in any given year.

Many of her subsidiary points (e.g. trailing stops making performance deteriorate, overall) are clearly both right and provable, though.

Well, they are random in that you don't wait to be in a general area of support/resistance, or wait for a retracement... you simply enter the market at random but with the idea of going with the general trend.

As for the success rate, the slides state

This system was run 100 times on each market with randomly generated trade entries each time. The time period tested was from 1995 to 2005 on 22 domestic futures markets that included currencies, bonds, index futures, metals, agricultural products, and softs.

In the next slide it is further stated

The system was profitable between 92 100% of the time on all markets with the exception of live cows and hogs, (which tend not to trend for extended periods of time), as well as silver and natural gas (probably due to its extreme spiky nature in recent years). All index futures were profitable 100% of the time over 100 randomly generated runs over 10 years of daily data!

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I think that this slide covers her key message - its all about the exit ( for this experiment she ran), which she cautions as "not the way to trade". I like Linda as she uses some of the techniques I relate to such as chart patterns.

---
"the larger the target the lower the percentage win rate."
This would definitely be true if the target range to stop range is increased.

Of course a systems profitability is not just a measure of win rate.

With multiple targets and multiple contracts a system can be tailored to reduce contracts can lessor targets (getting a higher win rate on smaller amounts for these)
and on condition set x
with a smaller percentage of contracts use the larger targets - probability moving the stop to BE on these


Condition set x could include
Target 1 is met
ADR has increased
Mom has increased
no S/R is blocking
and
placement in H-L range is not > 80% (uptrend) <20% downtrend


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 romus 
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xplorer View Post
I've come across the following PowerPoint set of slides on Linda Rashcke's website.

https://www.lbrgroup.com/images/Linda%20Paris%20on%20Trade%20Management/TradeManagement.ppt

It describes a system that she calls "A profitable system that is durable and robust based off random entries".

The rationale of the system is basically entering at random (long in an uptrend and short in a downtrend) with certain stops and target criteria - resulting in a profitable system.


It sounds interesting and something I'd like to consider for me in the future.


Has anyone tried it?

Hmmm, this is the problem with the links - after a while they do not work (at least I could not make it working on 3 attempts)

Is it possible to load the file?

Cheers,

When nothing goes right... go left
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 iantg 
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I have designed systems on a similar principal that worked great and produced strong results.

The key is this: If you take away any variability in your entry system being overly bias and wrong (Meaning you call short on 80% of the trades and the market is going long that day), and you give equal chances to both sides (long and short = 50% / 50% split) then you remove any possibility that the actual direction of the market is the force driving your success or failure.

By doing this, then the success or failure of your system becomes solely a function of of your exit system. When testing new exit systems I always start with this type of entry system because it removes any possible edge that may be baked into my results due to the entry system. There are two types that I use:

1. Random entries: Code enclosed: int rando = rnd.Next(1, 10); // creates a number between 1 and 10


#region FirstTrade
if (SystemPerformance.AllTrades.Count <1)

{
// Trade lastTrade = SystemPerformance.AllTrades[SystemPerformance.AllTrades.Count - 1];
SetProfitTarget("", CalculationMode.Ticks,5);
SetStopLoss("", CalculationMode.Ticks, 5, false);


// Long
if ( rando ==1 || rando ==3 || rando ==6 || rando ==8 || rando ==9 &&

Position.MarketPosition == MarketPosition.Flat)
{
EnterLongLimit(DefaultQuantity,GetCurrentBid(), "Long");

}

// Short
if ( rando ==2 || rando ==4 || rando ==5 || rando ==7 || rando ==10
&& Position.MarketPosition == MarketPosition.Flat )
{
EnterShortLimit(DefaultQuantity,GetCurrentAsk(), "Short");

}


In theory after N number of trades you should average out to 50% long trades and 50% short trades but due to the random nature of it, you may end up with pockets of congestion with a high bias on a given day to one side or the other. But over time it will average out.

2. The alternating entries: This one works better to immediately get a 50% / 50% split. You just create a variable to hold the position of the last trade and on the next trade call it. If the variable was long, then go short or vice versa.


Now, once you have this type of entry system in hand here is what you will statistically end up with.

A: You will get on the right side of the action just as much as the wrong side because over time flipping will average out and you will get a flat edge. Though I will say using limit orders with getcurrent (Bid / Ask) may put you in the back of the queue and get you down 1 tick from a price passthrough trade around 50% of the time. If you want a slightly better edge on entries try coming off of close + /- 1 to 2 ticks. Fewer trades, but you will start flat more often.

B: The success of your system will be solely based on how well you can create an intelligent exit system. I won't give too much away here on this thread but for those interested I may post more about exit systems with a definitive edge on my journal.


Happy Trading!

Ian

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Last Updated on January 16, 2018


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