Does Probability exist?

[pak]

Hi, once again, thank you for this very substantive question-- first some background--

I was initially trained in the financial markets by a WD Gann and cycles adherent, This guy turned $10k into several million using these tactics so I was rather intrigued-- used the methods and made money--( this is all ducumented in in the surf report 2002-plus)
Joined the MTA and learned lots about TA etc. Thought it was the holy grail--- then i met a certain hedge fund manager who didn't believe in TA and we would argue and chat about it numerous times --- obviously, i would take the TA side--- then I realized that any success I had in the markets was despite using TA, not because of it. That there really wasn't any testable edge to TA and it was basically intuition then stopping out losers and letting winners run

guessing on direction by using past price DOES NOT increase the odds that a move will continue or end. If it did it could be quantified, then exploited untill that past price movement no longer has any predictive properties ( if it ever did) . In addition, markets morph to eliminate any edges anyway, so these folks using the same patterns for multiple years and claiming success are not telling the truth.

In addition, i have read Wyckoff and it is the most convoluted market material since WD Gann and Nostradamus. ANYTHING can be read into the material and its "right". hence my issue with the preachers. In addition, these same folks use terms like "odds" and "statistics" to provide a phony scientific aura to the material. Not to mention the use of terms like "auction market" which is true but from the point of view of a retail trader knowing this has no relevance whatsoever. But it SOUNDS GOOD and makes sense until put into action hence my zeal in notifying others about the danger of these ideas.

I don't believe the markets are random from an epistemological point of view, but I do from our perspective.

Price is the result of things happening, it is not the cause of itself. That is the logical error of TA in general. If it was not, one could quantify how many moves or series of moves in one direction will increase the odds of a move or series in the same or changed direction---

Ta is useful for description but has zero value for prediction,

Probability exists but it has to be quantafied to exist. It is not quantified by looking at charts therefore chart readers who use this term are misusing it.

peace, surf

I think Surf’s got a GREAT point and I feel he’s right…its all about “how you Feel” and your preconceived bias about the market’s direction …then maybe what happens ( in my case) I use the TA to confirm my already biased point of view…which then gives me the confidence to “Just Do it”…knowing full well the outcome will be close to 50/50 if it’s a loser.

When I look at my favorite “patterns” I say to myself “ if this happens then this ‘should happen'…but i never assign a probability to it…or continue to look for an answer...

 

[marketsurfer]

So, DB. Are u going to provide your market background and why u believe what u believe per ETA's request???

surf

 

[romik]

I think Surf’s got a GREAT point and I feel he’s right…its all about “how you Feel” and your preconceived bias about the market’s direction …then maybe what happens ( in my case) I use the TA to confirm my already biased point of view…which then gives me the confidence to “Just Do it”…knowing full well the outcome will be close to 50/50 if it’s a loser.

When I look at my favorite “patterns” I say to myself “ if this happens then this ‘should happen'…but i never assign a probability to it…or continue to look for an answer...

I normally expect a low win rate, like 0.3, that way my mind is ready for consecutive losses, as I know that a time will come that I will catch that right wave, just like in surfing. People should accept that there is no such thing as high win rate, unless you are gunning for peanuts. To catch a big fish requires time and therefore patience.

 

[OddTrader]

I normally expect a low win rate, like 0.3, that way my mind is ready for consecutive losses, as I know that a time will come that I will catch that right wave, just like in surfing. People should accept that there is no such thing as high win rate, unless you are gunning for peanuts. To catch a big fish requires time and therefore patience.

Q

Generally, people would think that it's better to have more winning trades than losing trades but if there is a black swan, a single losing trade would kill.

To against this thought, we would like to catch the black swan by normalizing the losing trades. More losing trades mean the system is stable and we can control the (expected) loss. On the other hand, we just let the winning trades float.

UQ

Practically, Yes!

Perhaps two perspectives:

A. 95% traders in long run. http://www.elitetrader.com/et/index.php?threads/95-are-losers.265548/

B. 75% trades in long run. (no matter what back-test results historically.) Probably due to a combination of many complex issues/ causes!

 

[marketsurfer]

Q

Generally, people would think that it's better to have more winning trades than losing trades but if there is a black swan, a single losing trade would kill.

To against this thought, we would like to catch the black swan by normalizing the losing trades. More losing trades mean the system is stable and we can control the (expected) loss. On the other hand, we just let the winning trades float.

UQ

we have the hersheyites and wyckoff parrots who claim a much higher win ratio, etc. my experience tells me these folks are not telling the truth or are so deluded they think its true--In fact, market reality is thst what they claim in the way it is claimed is not possible for any practical period of time.

I was lookimg forward to one or more of them answering the question poised on this thread like i have.

I guess they have left the building after being outed for selling $5 ebooks and massive free marketing campaigns across multiple trading sites.

surf

 

[marketsurfer]

I think Surf’s got a GREAT point and I feel he’s right…its all about “how you Feel” and your preconceived bias about the market’s direction …then maybe what happens ( in my case) I use the TA to confirm my already biased point of view…which then gives me the confidence to “Just Do it”…knowing full well the outcome will be close to 50/50 if it’s a loser.

When I look at my favorite “patterns” I say to myself “ if this happens then this ‘should happen'…but i never assign a probability to it…or continue to look for an answer...

Thanks. Yeah, TA can give you an "outline". But assigning probabilities or thinking the odds are increased is just foolhardy-- surf

 

[i am nobody]

Thanks. Yeah, TA can give you an "outline". But assigning probabilities or thinking the odds are increased is just foolhardy-- surf

Surf,

if someone would tell you: the next hour (or the next 2 hours) you should stay short because we will not make a bottom.
And supposing these statements are correct for more than 75% of the time.
Can you then assign any probability to it or is it still random?
I think we would speak about probabilities watching the results as the odds are increased far over 50/50.

TA is feel-- intuitive at best-- and has nothing to do with probsbilities. If it did, you would not be staring at charts but rather programming strategies. surf

That is exactly what I do, I program strategies (scenario's), I am not interested in charts. So your statement confirms that probabilities exist.

 

[i am nobody]

In my country children go to school at the age of 6-7. In the first class they learn basic mathematics. They learn how to count from 1 to 10, to add and subtract. In the third year they learn to count till 100 and even higher. They also learn to multiply and divide.
Before students know very well the basics about math, they are already many years in school.

In trading the difficulty is rather exponentially bigger, so you need a lot of time to learn. But most people expect to be successful within a very short time. I meet people who found within 1-3 months a "good tradingsystem". None of them ever made real money. A learning curb is not necessary because they think they are (much) smarter than the average trader. On top of that trading looks very simple at first sight.
They have no idea how difficult it is to become a consistent profitable trader. That is already the first big problem: if you don't realize the difficulty of what you try to do, the results will be most of the time disappointing. On top of that most people over estimate their "trading capabilities". Many don't have even the required minimum abilities to achieve their goal. Because nobody is ever tested objectively they continu to think they are smart enough and that the problem lies somewhere else. Or, better for their ego: it is impossible ( so it is not me!).

Second remark:
When you finished school, did you never asked yourself: why was it so difficult years ago to do math will the same math looks now very easy?
The same can happen in trading: If you become successful you will say: how was it possible that I struggled for years even to be just above break even? The answer is very simple: because over the years you gathered the needed knowledge you did not have at the start.

Difficult things can become easy, not understandable things can become understandable, unpredictable things can be come predictable.
But I write very clearly CAN, so I don't say WILL.

 

[romik]

if someone would tell you: the next hour (or the next 2 hours) you should stay short because we will not make a bottom

I am nobody, why talk about it, just display this 10 times in a row and we will be able to judge this based on stats. You see many posters just state that they can do this and that with high win rate, yet not anyone seems to be willing to display this ability publicly using real time or advance calls using stops. The ones that do post real time confirm that price oscillations can not be predicted with high accuracy with stops being used.

 

[romik]

Probability does exist of course, that's why FX shops win in the end, just as casinos do.