Is it possible to increase the mathematical expectation?

Gazillionaire said:
What about using volatility swings to create a bias...
Since your win rate is high, balance will tend to swing more often upside even though the expectation(upper gain=lower maxDD limits) is zero...
Put your funds into 2 partitions ...cash pot and trading pot.
Rebalance whenever trading pot balance increases/decreases by 15% .i.e divide just the total net profit only(or loss) by 2 and reinvest in both pots equally such that in the long run the equity curve is bias upwards...
https://rsharat.substack.com/p/shannons-demon-parrandos-paradox
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This is actually interesting and insightful, Thanks. I would check out that link.


Gazillionaire said:
reinvest in both pots equally
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By reinvest, you mean put in external(new) funds in both pots? Or try moving money between both pots?
 
MrAgi1 said:
I believe every randomly entered trade(buy or sell) of an asset or option is objectively a zero expected value trade(fair pricing). If that’s not the case, why would anyone enter the market and take the opposite side of your trade?

Ofcourse, we can say some form of technical/fundamental analysis gives us an edge by timing our entry(instead of random) but that is just subjective. Simply put, I see the market as an almost complete random walk. It’s hard to prove that timed market entry is any better than a random coin flip.

Example: I buy eurusd(randomly) with a take profit of 25pips and Stop loss of 75pips. Are you telling my win-rate would still be 50/50? Well someone might say that based on TA that by not entering randomly, but again that’s subjective.

Now imagine I have a coin that heads have a 75% chance of showing up, I bet on heads and every time I loose $1 or make $1, why would anyone take the other side of that bet? I am looking at the market from same perspective .

I don’t know if you understand my point?
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Price movement in financial markets can be considered as continuous random variable which is different from the fixed losing odds at the casino (gambling). Some traders believe they are not gambling because even though the probability of up or down is 50-50, their price target they set is more than the stop loss through some chart pattern or stock valuation analysis...risk/reward overwrites randomness to create an "edge". However, the pattern could turn out to be just a mirage and news/earnings outlook could change the sentiment of a stock...past performance is no indicator of future outcome because the market is a continuous random environment...
and thus not completely measurable using expectancy, RRR or winrate (also changing variable). These are just guidelines...
Bankroll management/withdrawal strategy is key to capital preservation..how much/fast can you optimally transfer to your cash pot with least compromising effect on compounding rate in the trading pot is the ultimate formula to find...
 
MrAgi1 said:
This is actually interesting and insightful, Thanks. I would check out that link.
By reinvest, you mean put in external(new) funds in both pots? Or try moving money between both pots?
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No new funds. Just moving the profits or loss only.
 
The example given on that website: 100% win or 50% loss on a coin toss. Is positive expectation.

You would just risk a fixed amount on each trade. Like $1,000, or $10,000. No need to do the rebalancing stuff.

Rebalancing wont work with zero expectation anyway.
 
Businessman said:
The example given on that website: 100% win or 50% loss on a coin toss. Is positive expectation.

You would just risk a fixed amount on each trade. Like $1,000, or $10,000. No need to do the rebalancing stuff.

Rebalancing wont work with zero expectation anyway.
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Yes, the example is a positive expected value bet. That got me confused.
 
i used math for my arbitrage betting in trading the stonk market and sports betting...and i'm green so far.
 

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MrAgi1 said:
@earth_imperator You mean the idea/my question is BS or his reply?
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Sorry, my bad.I already have deleted that posting. Of course his reply.
I found it "silly" wanting to explain price movements with the said anecdote of the Heisenberg Uncertainty Principle (electron position cannot be determined 100%) of quantum mechanics... Ie. so far fetched to use that physical phenomenon for the markets. Forget it please. :)
 
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