Do You Think Trading is Gambling?

[Dackster]

Quote from c.chugani:

the problem is that you are assuming that there aren't enough buyers coming in for price x.

and you are also assuming that the market wants to trade below price x.

these two beliefs are conditioning you to sell at price x.

but the market is dynamic, and it could very well be that sentiment changes suddenly, thereby producing buyers at price x and even above it..

there is no certainty. that is why its akin to gambling.

Understand what you are saying, and you are correct, but only up to a point. You mention 'dynamics', great, there are times to sell 'price x', because there are times when the market has made up it's mind and the dynamics are not going to change, at least for price x, because the dynamics that gave price x it's identity in the first place have been exhausted or changed.




Dackster.

 

[ssss]

From strong scientific point of view Game theory
Puancara,Morgenstern, Shannon,Kelly


All acitivities -1000 operation per day or one per year, with risk 0.1% of capita lor 100 % of capital related to game theory .

Author support point of view ,that reatail sector have not any advantge .

As example in Montecarlo Casino roullete
edge of casino is 51.60 to 48.40 (with event game)

In this case best strategy to meet objective
good/very good win is very limitied quantity
of operations with heavy bet ( as example
100% of capital 3 times in row on black)


If exist true advantage ,as example by market maker -each day take spread 1000 time#s
that risk can be calculated through Kelly formul


By trading on exchange propaganda stated
fundamental,technical, news ,market santiment

But exist multiple professional agio
as " buy on rumour ,sell on news" ,which
are contrarian to strategy based on mentioned
indicators .


By spot forex average retail account life expectancy 60 days , 90% would loss to end of the year ,5 % going to 0 ,4.9 would have average win ,
and only 0.1 % good win .

This statistic very correlated to lotto ,casino

 

[JSSPMK]

Quote from ssss:

From strong scientific point of view Game theory
Puancara,Morgenstern, Shannon,Kelly


All acitivities -1000 operation per day or one per year, with risk 0.1% of capita lor 100 % of capital related to game theory .

Author support point of view ,that reatail sector have not any advantge .

As example in Montecarlo Casino roullete
edge of casino is 51.60 to 48.40 (with event game)

In this case best strategy to meet objective
good/very good win is very limitied quantity
of operations with heavy bet ( as example
100% of capital 3 times in row on black)


If exist true advantage ,as example by market maker -each day take spread 1000 time#s
that risk can be calculated through Kelly formul


By trading on exchange propaganda stated
fundamental,technical, news ,market santiment

But exist multiple professional agio
as " buy on rumour ,sell on news" ,which
are contrarian to strategy based on mentioned
indicators .


By spot forex average retail account life expectancy 60 days , 90% would loss to end of the year ,5 % going to 0 ,4.9 would have average win ,
and only 0.1 % good win .

This statistic very correlated to lotto ,casino

If you follow a trend on a monthly chart, providing one knows what a trend is, & you set stops above/below reaction levels, how would that effect the stats?

It's all about a learning curve, l would imagine lots of retail market participants have no idea how to follow a longer term trend, though they are ready to jump in deep waters trading intraday with high leverage, no idea of risk management, etc. The list of cons is massive, I know because I've been there & done that & had enough drive to learn from mistakes & do a total 'reboot & re-install'. Now imagine if intraday market participation required regulation in form of you had to prove that you do know how to trade? I bet those stats would be way different. Of course markets would be different as well as. Another matter is of course greed, as others have already mentioned, if allowed to take advantage of a trader's discipline, then trading easily may become gambling of course, hence all these problems we are experiencing in the financial sector.

 

[ssss]

If you follow a trend on a monthly chart, providing one knows what a trend is, & you set stops above/below reaction levels, how would that effect the stats?


Game theory -In case of insider Boetsky
he knew that one company would take over another with 50% + over price .

But he#s edge in this case very high ,but not 1
######################################

Was multiple cae's ,that in last minute company avoided merger .

How great is chance in your case -" trend on a monthly chart" ,that you are right after 1000 attempts ( if exist not spread ,commission ,tax)
with high chance 480-520 winning and 520-480
lossing

After only 100 attmepts can be 70 -30 or 30 to 70

but with growth quantity of operations
relation would go to 0.5

trend on a monthly char
#####################


Multiple professional bet against that what stated from fundamental,technical ,news and market santiment indicators .

It all propaganda .Best case -to be market maker
take small profit from spread 1000+ time's
per day .1 mln time's per years

As example in spot forex ,that make quanda




It's all about a learning curve, ..
---. Another matter is of course greed,
#################################

That is all propaganda from book#s for mass ,not scientific point of view

 

[ivanbaj]

Quote from Dackster:

Some interesting posts here, but a lot of them are about coin tossing and statistics and not trading. I'll give an example.

Price x has held previously to a certain amount of contracts traded, the market has now sold back into price x, and there are not enough buyers comming in for price x to hold again, so the market wants to trade below price x.

I'm selling price x, right? What is gambling about this?





Dackster.

I agree that coin tossing game is to simple to compare to trading. With trading it gets even worst.

Your example is very good. There are many trades using this.

If you add the money management aspect to it you will find the difficulties of having an edge. Let say you go for 5 ticks profit five ticks stop. Also let's say you want to be right 60% of the time. This will give you a PF of 1.5.

Now how will you know that the 5 tick profit/stop will work with 60% win rate?

You will have to gamble on that believe and monitor it.

Guys the first step is to acknowledge that it is a gamble. Then it is easier to work.

 

[ivanbaj]

Quote from JSSPMK:

If you follow a trend on a monthly chart, providing one knows what a trend is, & you set stops above/below reaction levels, how would that effect the stats?

It's all about a learning curve, l would imagine lots of retail market participants have no idea how to follow a longer term trend, though they are ready to jump in deep waters trading intraday with high leverage, no idea of risk management, etc. The list of cons is massive, I know because I've been there & done that & had enough drive to learn from mistakes & do a total 'reboot & re-install'. Now imagine if intraday market participation required regulation in form of you had to prove that you do know how to trade? I bet those stats would be way different. Of course markets would be different as well as. Another matter is of course greed, as others have already mentioned, if allowed to take advantage of a trader's discipline, then trading easily may become gambling of course, hence all these problems we are experiencing in the financial sector.

Going back to the coin tossing. How will you know that there is a trend? You will use math to find that after N tosses it seems that the coin is unfair. There is a trend.

But you can not be 100% sure. There is no way to be sure that your trend is real. You will have to gamble to that believe and monitor.

But as I said before you have another problem. Even if you are correct about the trend you also have to be correct about the money management part of the trade. The profit/stop levels and the win% rate. You can only base this on a past history and gamble forward.

 

[JSSPMK]

Quote from ivanbaj:

Going back to the coin tossing. How will you know that there is a trend? You will use math to find that after N tosses it seems that the coin is unfair. There is a trend.

But you can not be 100% sure. There is no way to be sure that your trend is real. You will have to gamble to that believe and monitor.

But as I said before you have another problem. Even if you are correct about the trend you also have to be correct about the money management part of the trade. The profit/stop levels and the win% rate. You can only base this on a past history and gamble forward.

Coin tossing trends have nothing to do with stock/commodity trends, there is simply no comparison, it's pointless to continue with them sort of comparisons. According to your logic, there are no certain outcomes in anything in life, so everything is a gamble.

Support/Resistance, hello?!

 

[ivanbaj]

Quote from JSSPMK:

Coin tossing trends have nothing to do with stock/commodity trends, there is simply no comparison, it's pointless to continue with them sort of comparisons. According to your logic, there are no certain outcomes in anything in life, so everything is a gamble.

Support/Resistance, hello?!

Let's drop the coin tossing.

Price has hit 100 from above for a 3td time.

Price now drops to 99. 100 did not hold.

You sell at 99.

Let's just use this: 5 tick target/5tick stop with 60% win rate. (PF of 1.5)

In a random market. There is 50% chance that the price will hit 94 before it hits 104.

In your case you have found an edge. You believe that there is 60% chance it will hit 94 before it hits 104.

You believe this because the price hit 100 2 previous times and held bit this time it did not.

Tell me how this is not a gamble. What in the world can guarantee you 100% chance that your above expectations will work?

P.S. I mean this for the long run. I am not asking you to prove that one trade will succeed. The question is how will you know that the above will work for the long run? And how many trades do you need to count to monitor that the edge is still there? And what will you say your activity is between this tests?

 

[JSSPMK]

Quote from ivanbaj:

Let's drop the coin tossing.

Price has hit 100 from above for a 3td time.

Price now drops to 99. 100 did not hold.

You sell at 99.

Let's just use this: 5 tick target/5tick stop with 60% win rate. (PF of 1.5)

In a random market. There is 50% chance that the price will hit 94 before it hits 104.

In your case you have found an edge. You believe that there is 60% chance it will hit 94 before it hits 104.

You believe this because the price hit 100 2 previous times and held bit this time it did not.

Tell me how this is not a gamble. What in the world can guarantee you 100% chance that your above expectations will work?

The fallacy of positive expectations is in your risk/reward, it's simply inappropriate, 1/1 is gambling (as far as I am concerned)

Please don't get offended, but your posts indicate a lack of experience & knowledge. Again, I don't mean to offend.

 

[ivanbaj]

Quote from JSSPMK:

The fallacy of positive expectations is in your risk/reward, it's simply inappropriate, 1/1 is gambling (as far as I am concerned)

OK lets use the mighty 3 to 1. We all love 3 to 1. I am not sure why.

So we go from 1 to 1 with 60% win rate to 3 to 1 with 33.33%

Both will give you a profit factor of 1.5. For me they are the same but if you like the magic of 1 to 3 let's use it.

So. In my original post replace 5 tick profit/5 tick loss with 15 tick profit / 5 tick loss. with 33.33% win rate.

The price must hit 84 33.33% of the time before it hits 104.

It is the same.