Kaufmann Risk of Ruin

Quote from virtualmoney:

You can try that experiment yourself.:)
Point was, if the prob(m consecutive H or T) increases with sample size, just like prob(ruin)->1 as trials approaches infinity, what is optimal Nth trial to halt?
Basic cases of prob(for m=2 & 3) changes as no. of trials increases, i.e.1-prob(formula given for Not).
http://www.bjmath.com/bjmath/probable/flips.htm
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V money
Thanks but no thanks on any kind of roulette:D

Coin flip probability is helpful, for sure , i clicked many of your links..
But in order to more resemble trading;
a] add a comission to each flip,
Z ]use silver & or gold coins.

My comments are educational only;
i prefer to trend trade cash silver ..... rather than flip silver coins.
Hope this helps.
 
Quote from kut2k2:

Check this out :cool:

http://www.nuclearphynance.com/Show Post.aspx?PostIDKey=156954

Intradaybill went forum shopping for validation and was told in no unclear terms that his ridiculous assertion of certain ruin for any trading system without limits regardless of performance is JUST PLAIN WRONG. :D :p :D
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That forum is dead. There are only a handfull of active mebers each pretending to be a quant expert but that's about it. No substance at all.

The first guy who replied although he claimed statement 1 was not true he finally agreed some version of it is true.

The second poster agreed with statement 2.

The third poster mentioned Kelly for statement 1, showing he didn't understand the problem. Statement 2 he did not even understand.

Do you understand what you read after all? I'm starting just like DontMissThe Bus to think you are a crank or something.

The questions intrabill asked are too serious for you to think you have a solution.
 
Quote from tim888:

That forum is dead. There are only a handfull of active mebers each pretending to be a quant expert but that's about it. No substance at all.
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That's just your uninformed opinion. I see plenty of activity and substance.
Quote from tim888:

The first guy who replied although he claimed statement 1 was not true he finally agreed some version of it is true.
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LIAR! What he stated was that some weird version of gambler's ruin was true, not that statement 1 was true.
Quote from tim888:

The second poster agreed with statement 2.
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So what? My post had nothing to do with statement 2. Having trouble keeping up, I see.
Quote from tim888:

The third poster mentioned Kelly for statement 1, showing he didn't understand the problem. Statement 2 he did not even understand.
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Kelly proves that statement 1 is wrong. If you truly understood the problem, you'd know that.
Quote from tim888:

Do you understand what you read after all?
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My thought about YOU exactly.

If you can prove statement 1 without resorting to any of the nonsense "proofs" posted elsewhere, do so. Otherwise you're just blowing smoke like Bill and ShortBus.
 
Quote from intradaybill:

Let p be the probability that the event {Ruin} will occur (according to some stupid formulas you wrote down). 0 < p <1.

The probability that the event does not occur in n trials is equal to

p^n
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This looks wrong to me.

Consider 1 trial only. The prob of the event not occuring is (1-p)^1, not p^1 .

If i'm right, i just invalidated Bill's entire arguments.

:cool:
 
Quote from Visaria:

This looks wrong to me.

Consider 1 trial only. The prob of the event not occurring is (1-p)^1, not p^1 .

If i'm right, i just invalidated Bill's entire arguments.

:cool:
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You're right. See how easy it is to make these math dilettantes look as foolish as they truly are? :D
 
Quote from murray t turtle:

=======================
Coin flip probability is helpful, for sure , i clicked many of your links..
But in order to more resemble trading;
a] add a comission to each flip,
Z ]use silver & or gold coins.
My comments are educational only;
i prefer to trend trade cash silver ..... rather than flip silver coins.
Hope this helps.
More...

Ideally if it is always trending smoothly, there isnt much need to trade & pay comission
http://www.elitetrader.com/vb/showthread.php?threadid=231347
but market behaviour changes frequently which is why performance continuity & price action are different topics which some cannot differentiate...but what do I know,I do not handle...
B i l l i o n s of dollars.:p
 
Quote from Visaria:

This looks wrong to me.

Consider 1 trial only. The prob of the event not occuring is (1-p)^1, not p^1 .

If i'm right, i just invalidated Bill's entire arguments.

:cool:
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Obviously I wanted to say that p is the probability for the event not occurring.

Regardless, if (1-p) is the probability ruin does not occur, (1-p) ^n --> 0 as n --> inf, for (1-p) < 1

Then, the probability of the event occurring goes to 1. Ruin is certain as time grows large and this is a very simple proof.

Are you happy now? Thanks for spotting this. You got the crank Kubkatuka2 all excited for a moment. he is jumbing like a monkey all over the place.
 
I read the thread and wrote the comment above near midnight after a drink (or two).

Bill is right in that, given enough trials (infinite) , the probability of ruin tends to 1 i.e. certainty. At some point, you would have a streak of losses that would wipe you out.

In practical terms however, no one is going to be doing an infinite number of trades in an infinite time period.
 
Quote from Visaria:

I read the thread and wrote the comment above near midnight after a drink (or two).

Bill is right in that, given enough trials (infinite) , the probability of ruin tends to 1 i.e. certainty. At some point, you would have a streak of losses that would wipe you out.

In practical terms however, no one is going to be doing an infinite number of trades in an infinite time period.
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Visaria, it doesn't have to be an infinite time. It depends on the path and how fast that makes the probability of ruin converge to 1. For some systems and markets, it may take only 1 year. It also depends on commissions. I found this example in the price action lab blog. It worths reading it. It shows how ruin depends on starting capital and commission for a simple system with positive expectancy in theory: http://tinyurl.com/cn4fa8o
 
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