OK that is my last post today. If I post again, someone please bitch slap me. Those of you who have TradeStation might find this attachment amusing. It is a completely random system. If you optimize it you can get it to be profitable. However, when you run it again the results will be completely different. The reason? Well, it is completely random.
50/50 ?
- Thread starter easyrider
- Start date
Just noticed this friendly challenge Jem (skimmed it before).
I agree w/ you that conventional wisdom is frequently bogus or useless and should be looked at with an Extremely skeptical eye. However I think the Pareto Principle is not so much a case of shallow thinking run amok as much as a genuinely widespread phenomenon that has credible arguments for why it is real.
I agree w/ you regarding your skepticism of fibonacci because I have never come across a grounded, rational argument for why fibonacci is supposed to work. Those who use fibonacci generally tend to say they see it everywhere but do not have a deeper explanation for why it is valid. I believe the universe is ordered and rational on an ultimate level but that reality is far too elegantly chaotic and beautifully complex to fit into a simplistic fibonacci box. My basic judgement of why fibonacci appears to work is this: markets are retracing constantly, all the time. Every second of every trading day, some market is retracing somewhere and another market is bouncing back from a retracement somewhere. The levels of 50%, 31.8%, 62% or whatever, are so generic that they will frequently be hit during these constant retracement and bounce back periods. Add the traders' habit of filling in the blanks with his eye and seeing patterns where none truly exist due to the reconstructive capabilities of the brain, and voila- you get eye confirmation of a theory that doesn't have substance behind it, other than that retracements happen a lot and they have to bounce back somewhere so why not frequently at fib levels. If you put a three percent band around each popular fib level to account for the trader's willingness to fudge it, you have roughly a 9% window where he can 'see' fibonacci in action when in reality he is seeing nothing in action.
The reason I DO give credit to the Pareto Principle, though, is because it has something that fib does not: a rationally structured argument behind why it is probably valid and not just perceptual illusion. You can wrap your mind around the building blocks of it. There are valid chains of reasoning based on the principles of how reality works- how things affect each other and build on each other and derive feedback from each other- that support the notion of the pareto principle as a legitimate observation of 'how things work'. Ironically, much of the theory behind trend development serves equally well in defense of the PP. This is all just my foolheaded liberal arts opinion of course.
someone answer this..because i'm interested..but i don't know the answer.
Just one thought on a 50/50 trade. Lets say it's at 50 and there is a 50% chance it will go to 40 and a 50% chance it will go to 60. If you guess long and your wrong, you aint gonna let it go to 40 with you on board. Maybe you will just ride it down to 48. But if you guess right and it goes up, you ride it the full expectency of the 50/50 trade you started out with.
So it's 10r to 2r on a 50/50 trade.
So it's 10r to 2r on a 50/50 trade.
It was a 50/50 trade with risk:reward of 1:1 till you started meddling with it. Your "premature" exit at 48 doesn't fool the Numbers Deity and will occur with a frequency that is 5 times larger than your exit at 60, putting you back to square one with your original 1:1 risk:reward.
Now see here Mr. S., I am not talking about real life. We all know how it's gonna turn out in real life. I am talking about some security other than I trade which is sitiing at 50 and going either stright down to 40 or straight up to 60.
Following the path that in real life it takes to get there is a road I would rather not fall down.
Following the path that in real life it takes to get there is a road I would rather not fall down.
this sounds right to me.
i've always thought the stock market worked like this. correct me if i'm wrong..
say you're right 90% of the time, the 10% losses will be large enough to bring you back to even.
if you're right 10% of the time, your 90% losses will be large enough to bring you back to even.
throw in commissions and the bid ask spread and you lose money.
unless...
Well then, profitseer, the answer is obvious - don't just exit at 48, reverse also
well, If I can find somebody who will give me even odds on an evenly matched game and allow me to lose 25% certain if I want to take the other 75% of my bet off after the first quarter, could I make money then?
Cause I'm not gonna wait around for the Numbers Deity to show up and make things right if my team is down by 27 after the first quarter.
Cause I'm not gonna wait around for the Numbers Deity to show up and make things right if my team is down by 27 after the first quarter.