That's an interesting question but I have to further wonder if it even matters. If you assume random prices in a systematic approach, then I don't see how a predictable time series would dramatically hurt you. Unless, of course, you believe in curses or "dark clouds".
Flip of a coin..but
- Thread starter hilmy83
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That's an interesting question but I have to further wonder if it even matters. If you assume random prices in a systematic approach, then I don't see how a predictable time series would dramatically hurt you. Unless, of course, you believe in curses or "dark clouds".
Why is selling option strategies have higher probability of succes than buying options? As an option seller you're basically trying to create a boundry for price movements. When price moves directionally, that's equivalent to consecutive hits on a dice. So you try to create a boundry where that doesn't happen MOST OF THE TIME.
Now remember the example I gave about consecutive occurence given a % rate? when you sell option you're betting that prices would not get directional moves consecutive times.
This is why trading is so hard. Even if you believe in random entry, prices can go against you.
So if you trade 1 position, it's impossible to be profitable. If you scale in, you're limited by your account and exchange limits, but sure is alot more probable to win.
BUT!..I didn't say you can't make money trading. At least from the retail side, there are few ways to increase your chances to profit:
1. scalp noise - you're basically in and out (can be both momentum and mean reverting)-
2. scale in - you're betting you can set your entries to be beyond the typical statistical anomalies.
3. using breakeven stops
4. trading high volume periods -see point 1.
Now remember the example I gave about consecutive occurence given a % rate? when you sell option you're betting that prices would not get directional moves consecutive times.
This is why trading is so hard. Even if you believe in random entry, prices can go against you.
So if you trade 1 position, it's impossible to be profitable. If you scale in, you're limited by your account and exchange limits, but sure is alot more probable to win.
BUT!..I didn't say you can't make money trading. At least from the retail side, there are few ways to increase your chances to profit:
1. scalp noise - you're basically in and out (can be both momentum and mean reverting)-
2. scale in - you're betting you can set your entries to be beyond the typical statistical anomalies.
3. using breakeven stops
4. trading high volume periods -see point 1.
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Also, if you approach this type of trading, you have to go all in. Best way to manage risk is to break up your capital like 5 ways for example.
Using this calculator, you can simulate your probability of gettign your capital back if you have high overall % win rate. (remember 2% risk will double your money in 36 tries).
http://www.beatingbonuses.com/calc_streak.htm
Any win rate of less than 85% would make it harder to do
https://www.elitetrader.com/et/threads/flip-of-a-coin-but.372081/page-4#post-5745267
This is live trading results i had last couple of months if i stuck with a certain period during the day (what if analysis). Not quite 85-90%, I didn't use b/e or scale in, so that might boost it a little bit
https://www.elitetrader.com/et/threads/flip-of-a-coin-but.372081/page-4#post-5745267
This is live trading results i had last couple of months if i stuck with a certain period during the day (what if analysis). Not quite 85-90%, I didn't use b/e or scale in, so that might boost it a little bit
Good Evening hilmy83,
Manual trading will take too long to prove your trading idea have an edge.
Even if you buy 10 years of bar data, you spend alot of time back testing by hand those 10 years.
100 trades should be easy enough to get started. But i usually don't look beyond 1-2 years backtest for scalping/daytrading.
I honestly don't think there is any real edge in daytrading. I just believe you trade a strategy just long enough before it fails. Hopefully you get multiples of your capital back before then.
What's the saying ,
On a long enough time line, the survival rate for everyone drops to zero.
OK Tyler Durden. You read Zerohedge, we get it, heh.
But to be truthful, all that matters is what is in the blue box below. All the shit in the red boxes? WHO CARES?!?!
Take the blue pill/box because that is reality. The red pill/boxes is nonsense unreality. Blue > Red.
Good Evening hilmy83,
I love your thread. You are absolutely right. If you are manual trading, it is all a coin flip and a good knowledgably guess. There is no way around it.
So it best we clear our mind and sleep well, just know being a good guesser. It does not matter what method you trade, Technical analysis or simply close your eyes when the bell opens at 8:30am , tails short, head long. It is just a best guess
What is important is to be consistent guessing and get out of drawdown.
Correct on your other statment as well, so best to make a million VERY quickly and hurry up.. "On a long enough time line, the survival rate for everyone drops to zero."
Hi hilmy83,
Thank you.
Have you ever asked yourself, why do you buy, or sell, or hold?
Hi spy,
Yes, very important.
If, for example, I have come to the conclusion that the market is truly random, what is the best possibility for me to do then?
Obviously, I would be out of the game. There's no point in trying to make money off the market by picking about what instrument I will trade next. Why?
Because the market is random. Everything I do is just in vain. Whatever I do is just a coincidence. Winning equals luck, losing equals unlucky.
But so far, I have based my decisions on the premise that market not really being random, there are anomalies in the market, but dark clouds or curses are part of the game.
One illustrative possibility is that what a company does today: mergers, acquisitions, building new plants, launching new products, can shape what the company looks like in the future. In the same way, today's stock price change will affect tomorrow's. But the market needs time to appreciate that information.
Also, a systematic or automated approach is nothing more than a manual approach based on repeatable rules. Only that. It has nothing to do with random or non-random prices with a systematic or manual approach. I personally trade manually, do manual execution, although my approach is systematic.
How about you? What would you do if, for example, you had come to the conclusion that the market is truly random?