CoinFlipBot

Inspired by Tom Basso’s coin-flip experiment (with Van K. Tharp, 1990s): the edge can come from risk management, exits, and sizing—not clever entries. Instead of hunting for a perfect signal, the question is: what happens if entries are random but exits and position sizing are disciplined? In tests across diversified futures, combining ~1% risk per trade, a volatility-based trailing stop (e.g., 3× ATR), and consistent rules produced positive expectancy even when entry was decided by chance.

Equally important is diversification across low-correlated markets (currencies, rates, energies, metals, grains, livestock). Uncorrelated streams help:

• Dampen portfolio volatility
• Stabilize compounding (avoid big equity cliffs)
• Improve risk-adjusted performance

In short: profitability came not from prediction but from position sizing, volatility-aware exits, and cross-market diversification. This bot mirrors that setup: ~1% risk per trade, a 3× ATR trailing stop, and a diversified futures basket, so you can see the principles play out in your own results.

Overview

• What it demonstrates: Order flow, SL/TP, intrabar behavior, commissions/slippage/margins, and per-asset stats (win rate, expectancy, drawdown).
• Risk first: Fixed-fractional sizing (~1% of equity per trade) and 3× ATR trailing stops (ATR smoothed via a 10-day EMA).
• Environment-agnostic: Same bot runs in backtests and against live data.
• Diversified universe: A subset of Basso’s futures basket to keep portfolio variance in check.
• What you’ll see: Many small losses and a handful of outsized winners—the classic trend-following profile—compounding over time when sizing and exits are consistent.

How the experiment was conducted

• Universe: ~10 liquid futures spanning commodities, currencies, rates, energy (this page uses 8 of them).
• Entry: entirely random (coin flip: long/short) per market.
• Always in: when a position closed, the system stood ready to re-enter on the next bar with the same random logic.
• Evaluation: track results across all markets to observe combined equity and win/loss distribution.

The rules we reproduce here

• Risk per trade: ~1% of equity (fixed-fractional).
• Volatility measure: 10-day EMA of ATR (smoothed ATR).
• Initial stop: 3 × volatility from entry.
• Trailing exit: the same 3× ATR stop ratchets only in your favor (never loosens).
• Diversification: apply the identical rules across multiple, low-correlated futures.

Markets used in Basso’s test (10 futures)

• Gold
• Silver
• U.S. Bonds (long-term Treasury bond futures)
• Eurodollars (short-term interest rate futures)
• Crude Oil
• Soybeans
• Sugar
• Deutsche Mark (pre-euro currency future)
• British Pound
• Live Cattle

Notes: The Deutsche Mark was later replaced by the euro; Eurodollars have largely been superseded by SOFR futures in modern markets.

Mapping used on this site (8 of the original 10)

Open the notebook