If the distribution of returns in symmetric, why not use a coin toss, small risk & high reward?

Question

If the distribution of returns is symmetric then why not

use a coin toss to decide whether to buy or sell
Calculate the average velocity of the market (ATR - in technical analysis)
Place a stop loss on 0.5 ATR away from current price and take a profit 2 ATR away from the current price?

I tried it in FOREX and it doesn't seem to work. Why is this so?

Your strategy seems equivalent to the following: the price $X_t$ is a standard random walk, you buy at $t=0$ and sell when it reaches -1/2 or 2 (whichever comes first). In this case, the expected profit is zero.

edouard · Answer 1 · 2012-03-30 17:28:31Z

up vote 1 down vote

could this strategy be applied for real trading ?

i mean, whatever a trade makes or loses money, trading incurs transaction-costs.

thus, you cannot stand on that (perfect) bell-shaped distribution to trade profitably with any certainty.

edited Mar 30 '12 at 17:28

answered Mar 30 '12 at 16:53

edouard
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1 Answer