The coin flip trading;
- Get your list of stocks, more the better, try at least 1000 but more the better.
- Now get "supercool random number generator" or a similar generator. Limit the selection from 1 to the max stocks you have chosen. The "supercool random number generator" is the best I've seen, they have a demo that will work for this test. Here is the link
http://www.supercoolbookmark.com/random/
- There are different ways to configure the number of stocks to trade, you can come up with your own or if you have 1000 stock list then trade no more than 10-20 per day. These 10-20 you will get according to the output of the random number generator. You need to have a numbered list of the stocks in a spreadsheet.
- You do this 2 to 3 times a week. You are not trading every day. Else you won't have time to do anything else. Trade anywhere from 100-500 shares.
- Now that you have your selection, use the generator to output head (0) and tails (1) for each of the stocks on your list. This takes about 3 seconds, saves a lot of time over coin flips. So if you have 20, the generator will output 0s and 1s randomly 20 times. 0 = buy
- Open a demo account and put the trades on buying on the close or the open next day. Make sure you have enough funding, so add about 500K to 1000K.
- If the market is near a swing high or a swing low, then stop goes below the high or the low.
- If the market is trending, stop goes below the 50% retracement of the swing.
- If it's breaking out of a consolidation the stop goes below the consolidation.
- When profits equal your risk, we take 50% off or 100% depending on where the market is. We used a few simple tools to help us manage the trade, trendlines, retracements and market action or pattern it's working out. For example if we went long on a downtrending market and the market rallies up to the descending trendline, we would exit 75-100%, moving stops to break even. If the market rallies in to a previous consolidation area we would exit 75-100% and move stops to break even. If the market breaks out we would look for an equal price move to exit/cover or the 50% method above. I hope you get the idea by now. We have to be alert to the management part. We are trying to get to breakeven as fast as possible while allowing the market to have some room to move.
- After the initial 50% we would exit the rest in 50% sections, so ideally it was in 3rds. If the market is moving very fast, as in a 3rd wave, then we would simply move the stop to break even and let it run as much as it can w/o taking our prev days high or low. As soon as momentum slows we would go to the normal profit taking rules above.
- Use the adx or something similar to monitor markets that are running strong, and trail your stop near 50% of the entire move. If you see resistance or a pattern completion on daily or weekly, exit or bank more profits and move stop closer.
- try to keep .20-.33 or less for as long as you can. Use basic structure of the market to help with stops and targets.
- If the market starts going against you and you see that your entry was at a completion of a pattern or some other major s/r area then exit before stop is hit on a reversal bar of any type. If you are stopped and then market goes your way there is no re-entry.
- As you can see the entry is 100% random but the management is 100% hands on. So to do this correctly you need to have a pretty good understanding of price behavior and market structure.
- One last point. If you have more than 2-5 stocks from the same sector, specially small to medium sectors then throw the rest out and run the generator again to pick another.
- I think I covered all the steps and details, if I left something out, please feel free to ask.
- Speaking of market structure, one of the best ways to understand the price movement is by using some of Gann's tools. In the January Seminar we will cover this area and look at some unique and reliable ways to understand the true vibration of the market. If you go back and study Gann's trades and charts you will see that he always looked at the market vibration first, how it has been vibrating - which gives you a good idea of how it will unfold. After that he considered the astro and other esoteric methods - not in that order but in importance.
- After writing the first post on this topic I have spent many hours pondering why I/we never got around to trading it with real money. I have some insights to share and will do it later today or tomorrow.
Have a great Thanksgiving!
Barrie
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On 11/25/2009 10:47:47 AM Xkn wrote:
Hi Barrie,
Any chance you would share the coin flip trade management strategy you had your friend use? The entry/profit taking/trailing stop rules you had him use?
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Posted: 11/15/2009 2:08:14 PM
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