Rhody Trader
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Isn't that the theme of a rather lengthy thread initiated by a notorious former member.
Isn't that the theme of a rather lengthy thread initiated by a notorious former member.
'Don't try this at home' would be a more appropriate title.
TheBramble
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Oh no, now you've done it.
When the dust settles we'll all remember who to point the finger at....
When the dust settles we'll all remember who to point the finger at....
Isn't that the theme of a rather lengthy thread initiated by a notorious former member.
Yes, i believe it is.
searchlight
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Unfortunately I dont have the time or inclination to write such a book at the moment
LOL
Even you don't know everything in advance.Otherwise you would have made some fathers use a condom.:clover:
searchlight
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TheBramble
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No. But I wouldn't get too SNAGged on it if I were you.
I shouldn't worry old son, you're no merchant. You'd need more equipment than you currently posses for that to be a possibility.
Maybe one of your boyfriends could show you?
if you have time i think it would be useful for newbies (me included) if you could expand on this point slightly.
I'm not sure if i understand this fully. Does this mean if you have an edge in your system of 70% wins and 30% losses, so for example your edge normally produces results of say;
-10 points
+10 points
-10 points
+10 points
+10 points
+10 points
+10 points
-10 points
+10 points
+10 points
70% wins 30% losses ratio over 10 trades
on a ongoing bases... Even if you have got an average of these results over a long period of time in the past, there will still be a random distribution going forward i.e. if you had a infinite number of trades going forward you would definitely get a series of results looking like this;
+10 points
+10 points
+10 points
+10 points
+10 points
+10 points
+10 points
+10 points
+10 points
+10 points
100% win 0% loss ratio over 10 trades
and more importantly a set of results that would look like this:
-10 points
-10 points
-10 points
-10 points
-10 points
-10 points
-10 points
-10 points
-10 points
-10 points
0% win 100% loss ratio over 10 trades
sorry if this is a real newbie question (I'm just trying to get it straight in my tiny little brain)
thanks
belflan
nine
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Yes that's exactly what it means.
In practical terms it means you don't know whether the next trade will be a winner or a losers SO don't fall into the trap of trying to make it a winner by breaking your rules (cut winners short for example).
Also it means "don't change systems just because you had 10 losers in a row."
In practical terms it means you don't know whether the next trade will be a winner or a losers SO don't fall into the trap of trying to make it a winner by breaking your rules (cut winners short for example).
Also it means "don't change systems just because you had 10 losers in a row."
nkruger
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True.
Although I would add, if I have 3 losers in a row (last occasion was a few months ago now) I stop trading and have a BIG review of the strat (not changing it mind) making sure I was doing everything exactly to the rules.
I do screen shots of every single trade I enter, so I am able to go back over months worth of charts. This helps when you have had a few losers in a row.
Belflan,
This is one of the problems with distributions/statistical analysis. As you pointed out, the 10 losers in a row is valid. Further, 100 losers in a row does not necessarily invalidate the distribution.
This may be a better example. If the frequency of a crash like ’87 was determined to be once every 50 years, it wouldn’t be invalid if it occurred twice in one year (although waiting 100 years to see if it pans out seems a bit of a pain). This is one of the problems with VAR (value-at-risk) and contributed to the collapse of LTCM.
Nasim Taleb has absolutely nothing to say on this subject.
Grant.
This is one of the problems with distributions/statistical analysis. As you pointed out, the 10 losers in a row is valid. Further, 100 losers in a row does not necessarily invalidate the distribution.
This may be a better example. If the frequency of a crash like ’87 was determined to be once every 50 years, it wouldn’t be invalid if it occurred twice in one year (although waiting 100 years to see if it pans out seems a bit of a pain). This is one of the problems with VAR (value-at-risk) and contributed to the collapse of LTCM.
Nasim Taleb has absolutely nothing to say on this subject.
Grant.
TheBramble
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As Grant mentions the “50 years” in his post above (unless he pulls it out of embarrassment or a sudden attack of good taste) the normal distribution thing is pretty much unusable as a long-term statistical measure for our line of work.
You only have to consider that 50% of stock market gains (DJ) over the last 50 years were made in just TEN trading days during that period to show you how useful Gaussian thinking is to us. Not.
You only have to consider that 50% of stock market gains (DJ) over the last 50 years were made in just TEN trading days during that period to show you how useful Gaussian thinking is to us. Not.
TheBramble
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LOL. I was being quite factual though. Can't remember whether is was Taleb's "Black Swan" or Norden's "Technical Analysis and the Active Trader", but definitely one of them.
In the last 50 years, just 10 trading days have accounted for 50% of the total gains over that period.
Until I get a chance to check my recollection of the data, I stand to be corrected on the detail, but it was that order of magnitude.
In the last 50 years, just 10 trading days have accounted for 50% of the total gains over that period.
Until I get a chance to check my recollection of the data, I stand to be corrected on the detail, but it was that order of magnitude.
Don,
Norden as in "It'll be alright on the night" fame?
I've always maintained that one should assume the biggest one day loss will be exceeded at any time. Of course, this will really stunt profits and herein lies the conflict - statistics vs earnings.
Grant.
Norden as in "It'll be alright on the night" fame?
I've always maintained that one should assume the biggest one day loss will be exceeded at any time. Of course, this will really stunt profits and herein lies the conflict - statistics vs earnings.
Grant.
timsk
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Hi Nine,I do it differently. I rate my entries 1-3, my initial exit positioning 1-3 and my trade management 1-3 (adds to
If I get two trades with a 1 in them (like 133) in a row THEN I stop. FWIW.
I like the idea of this and am considering adding it to my trade evaluation process. The obvious difficulty is having a very precise definition of each of the three areas and what constitutes a good (entry for example) with a score of 3, average 2 or poor 1? Yesterday I suffered appalling slippage on one particular (short) trade and was filled at a much lower price than I wanted. (It was a market order). Is that my fault and therefore I'd only score 1 according to your system? Or, is it just 'one of those things' that happens to the best of us and, therefore, isn't really my fault as such, in which case I would score 2?
The scoring system needs, I think, to be objective and mechanical in nature rather than subjective and discretionary to overcome this problem. Hope this makes sense!
Tim.
nine
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Subjective isn't bad timsk.
The test is:
3 - by the book and nice (slippage would be ok if the book said market order in this situation although I never use market except my worst case stop --- learnt that with the HSI and 39 points slippage once at 6.40 per contract per point).
2 - technically by the book but in some way flawed (maybe my judgement doesnt look so good in retrospect)
1 - you xxxxxx idiot, that was against the plan
So, whatever the market does, you judge it by how well you executed your plan. A winning trade can include 1s and those are the most dangerous aberrations as they are more likely to create bad habits. You will find that it forces you to improve your plan. Mine initially became more complex as I filled in gaps and then became less complex as I eliminated the weaker elements (I now do half as many trades).
The test is:
3 - by the book and nice (slippage would be ok if the book said market order in this situation although I never use market except my worst case stop --- learnt that with the HSI and 39 points slippage once at 6.40 per contract per point).
2 - technically by the book but in some way flawed (maybe my judgement doesnt look so good in retrospect)
1 - you xxxxxx idiot, that was against the plan
So, whatever the market does, you judge it by how well you executed your plan. A winning trade can include 1s and those are the most dangerous aberrations as they are more likely to create bad habits. You will find that it forces you to improve your plan. Mine initially became more complex as I filled in gaps and then became less complex as I eliminated the weaker elements (I now do half as many trades).
Rhody Trader
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This assumes that the result of each trade is independent of all other trades. That may or may not be the case. Actually, even if it is the case from a purely mechanical application of a system, it may not be when the trader's application of the system comes into play.
The latter case, though, should be readily visible if one has a well defined plan and can make a judgement as to whether he's been properly following the plan or not. All the more reason for having one.
