Identifying an edge

xiaodre · May 16, 2011

Here are some threads which may be of value to you:

Gems: methods and systems

http://www.elitetrader.com/vb/showthread.php?s=&threadid=9722

ET Hall of Fame threads

http://www.elitetrader.com/vb/showthread.php?s=&threadid=204669&highlight=gems+II

Newbie FAQ thread

http://www.elitetrader.com/vb/showthread.php?s=&threadid=78244&highlight=newbies

Please keep in mind that there is much in the way of junk in these threads, and that every once in a while, you might find a jewel.

SteveH · May 16, 2011

Casinos do not participate in games which have a positive expectancy (for you). Regardless of the degree of discipline one may possess, you are 100% guaranteed to leave penniless if you stay at the table or machine long enough.

That's why they don't play poker. It's also why they don't allow card counting in Blackjack.

Handle123 · May 16, 2011

Quote from SteveH:

Casinos do not participate in games which have a positive expectancy (for you). Regardless of the degree of discipline one may possess, you are 100% guaranteed to leave penniless if you stay at the table or machine long enough.

That's why they don't play poker. It's also why they don't allow card counting in Blackjack.

Long ago I use to fly to Vegas each weekend for six months, conditions have to be perfect, I only played between 3-6am, and always just me against dealer at only one deck shoe casinos. But you are right, if you play long enough, your concentration will falter, just like in day trading, you have to remain totally into your business.

Casinos do count cards, they know the probabilities better than anyone, otherwise why did they go to a six deck shoe and often times changed out or reshuffled half way thru deck?

Some women, like NoDoji, have a gift of being able to subconsciously read probabilities well and trading is no different as she is a gifted trader. And many women are just plain better than men in trading cause lack of ego, too often inexperienced men traders have to be right and can't take a loss cause that is announcing they were wrong whereas women trade for money. Most of those I have mentored through my years have been men and on occasions if I could teach a gal it was very fun cause they don't have all the psychological bs I had to put up with dealing with men, women learned quicker and they wanted the money. Not all men day traders trade for money being the main purpose.

Visaria · May 16, 2011

Quote from kut2k2:

Yeah there was a guy who claimed to be a "consistent" casino craps winner; he even wrote a book. I choose to believe the math: if it's a negative expectation game, then it's a sucker bet and "consistent winners" are either miraculously lucky, suffering from selective memories or just BSing.

+ 100

Visaria · May 16, 2011

Quote from SteveH:

It's also why they don't allow card counting in Blackjack.

Nah, they don't care about card counters since they no longer deal to the bottom of the shoe (in fact , nowhere near it!) which negates any card counting advantage.

piezoe · May 16, 2011

Well, this discussion is all very nice, and more complicated then it needs to be. So at the risk of boring Y'all terribly and sounding like a broken record, I'll point out once more that all you have to do if you want to know if you have an edge is plot your equity curve. Of course it is meaningless unless plotted over a fairly long period of time, the longer the time the more reliable. Also, if you are so inclined, you can do a least squares fit and calculate the variance about the regression line (or curve) and that's a nice measure of the consistency of your trading.

I never played Blackjack in a casino, but aren't they using like six decks nowadays? How on earth do you count cards with six decks?
Oh, is that what Visaria is alluding to?

Visaria · May 16, 2011

yeah, a 6 deck would be rather hard to employ a card counting strategy. But you can play bj with less decks.

I still disagree with you that you know if you have an edge by simply looking at your equity curve over a (long) period of time. It may be evidence, but still not conclusive.

Visaria · May 16, 2011

Consider the strategy of selling naked options. A fund employing such a strategy could see monthly profits for years before a market crash finished them off. Would you really say they had an edge or were they just lucky for a while?

1a2b3cppp · May 16, 2011

Quote from Visaria:

Consider the strategy of selling naked options. A fund employing such a strategy could see monthly profits for years before a market crash finished them off. Would you really say they had an edge or were they just lucky for a while?

I can't wait to hear how people answer this question.

I'm betting they will say "they never had an edge; they were gambling."

lol

It goes back to my first reply in this thread:

Everyone on this forum throws that term around yet no one can define it or quantify theirs.

piezoe · May 16, 2011

Quote from 1a2b3cppp:

...

It goes back to my first reply in this thread:

"Everyone on this forum throws that term around yet no one can define it or quantify theirs."

Well I, apparently, am the one exception because I can quantify mine and define it. It is the least squares slope of my equity curve. It can change a little from time to time, depending on what I am trading and how good or bad I am at it. Unfortunately i can only guess at what my edge is due to. I have some ideas of course. But I really do not care what it is due to so long as it is positive by enough to make the time and trouble I go to worth while.