Kelly Criterion & Risk Of Ruin As Risk Management Tool

MrScalper said:
If you see several small bars..then..there is a very good chance you will see a wide bar soon..and..when you see a wide bar..or..several wide bars in succession..there is a very good chance that you will soon see several small bars..the key is not predicting the direction..it is.. trading the action..for which you need..control
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Reread this paragraph a few more times.

What you are saying, boiling down to the very basic, is that stock movements are not random. Because if they are random, like coin toss, the probability would be 50/50.

So, you have just given me a homework assignment to look at movements. It is an easy back test exercise.

Thanks.
 
I haven't been following this thread super closely, so I hope I haven't interrupted some type of sarcasm, etc. :)

ironchef said:
...stock movements are not random. Because if they are random, like coin toss, the probability would be 50/50.

So, you have just given me a homework assignment to look at movements.
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Also consider the following hypothetical:

Suppose there exists a stock such that it only moves up six days, then down six days, then up six days, ..., etc., in that same pattern, continuously.

Such a stock would have an equal number of up and down days as the total number of days approaches infinity. And thusly, would indicate a "50/50" probability.

Now, ask and answer for yourself: Is the stock's movement random?

Conclusion:

Probability does not necessarily determine whether a series is random. :)
 
userque said:
Conclusion:

Probability does not necessarily determine whether a series is random. :)
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Very good points.

There are many mathematical ways to measure randomness and if after I use all of the known randomness measures, the outcome conclusion is a high probability they are random, then they are probably so. Yes, with a probabilistic problem, there is no one absolute answer.

Thanks for your comments.
 
Time = Money

Time can mean different things to different people..but..in financial trading it can only mean one of 3 things..ABC..or..123 :)
 
If you are willing to stay up tonight..you might make some nice money :)

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Gotcha said:
Exactly.. the range... but I thought maybe you would share your thoughts on which way it would break. My answer of course is that its too early to tell.
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It does not matter what way it breaks..this is why so many fools lose so much money..we are outa normal market hours so anything can happen before the open tomorrow..if you have the TIME..then there is no reason in the world why you shouldn't be on the right side of the open by tomorrow morning..if I say the gap will be filled..i might be right..but I also might be wrong..all that matters is that little box :)

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MrScalper said:
It does not matter what way it breaks..this is why so many fools lose so much money..we are outa normal market hours so anything can happen before the open tomorrow..if you have the TIME..then there is no reason in the world why you shouldn't be on the right side of the open by tomorrow morning..if I say the gap will be filled..i might be right..but I also might be wrong..all that matters is that little box :)

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You should teach... you sound like the experts who have lots to say but say nothing at all! :D

You can't say there is no reason why a person can't be on the right side of the trade by the open, but then also say that it might fill the gap or it might not. You're essentially covering all bases, hence not really saying anything at all, but trying to sound smart by saying its likely to be on the correct side of the trade.
 
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