Define a "
profitable order" as an order which either
lowers the buy average or
raises the selling average.
A
conceptual prerequisite (
necessary, but
not sufficient condition) for a long-term, profitable approach is that:
Prob(Order | set of profitable orders ) = Prob(Order)
Prob(Order | set of unprofitable orders) != Prob(Order)
(which we might call: the "principle of conservation of the trading information")
Instead, 99.9% of
gambling-addicted traders do the following:
Prob(Order | set of profitable orders ) = Prob(Order)
Prob(Order | set of unprofitable orders ) = Prob(Order)
This will
destroy any possibility of an
edge because, in effect, from a conceptual point of view, they are choosing
random points over a Geometric Brownian motion or a mix of these. And they
repeat the process
without incorporating the effects of the previous losses into the trading process.
They assume that through
repetition, they are "
learning". The problem is that there is actually
nothing to "
learn" from the market in terms of an
edge because the market (and the
algorithms of the market makers) is
not providing that information for your benefit.
That is also why
any trading technique based on "machine learning" will never have an edge. Nor any "
signal-based" trading process formed by "disjoint" (nonoverlapping) trades.
So they will have
occasional profits and
occasional losses but
on average, long-term
will not go anywhere. It's just
entertainment and a form of
addiction to gambling fueled by
desperate hope:
https://www.elitetrader.com/et/threads/dests-overwrite-journal.359397/page-56
They
need to do it. It's a
compulsion and a
drug.
It has
nothing to do with a long-term, consistent algorithmic approach, which is, instead, what I strive to demonstrate.
Gambling addicts have often their brains completely
fried and are
light years from any comprehension of what entails trading with a continuous flow of orders which is modulated to hedge, maintain a continuous long/short balance, and grab the price fluctuations. There is
no gambling in this process; it's just a continuous process that generates long-term returns, essentially stemming from market fluctuations and
past trading information use.
Reasoning in terms of "fixed bets" or "
fixed structures" (whatever one wishes to call them, but it should be clear what I mean) is
the same as gambling. It either makes a profit or a loss at each shot.
In a "good" algorithmic approach (that is not
just automating "gambles"), there is no fixed structure but a
continuous modulation of position through a
flow of orders. If the market goes down
10% or
25% or whatever (
circuit breakers would trigger, anyway) or volatility explodes, we do
not lose
4MM as the
poor clueless retarded suggested. Why?
Because the algorithm will simply immediately change the position. The short
may disappear completely (assuming we are trading PUTs, for instance), and the long may emerge. When the market rises, the short may be reopened, and so on, always
maintaining a balance.
That is why
our DD is relatively ridiculous (<5%)
, and it's not 3-4MM as expected by the poor
cowardly slanderer retard.
But that is way too difficult to understand for
gambling addicts, used to
Las Vegas trips, especially if their "
cups" are always full of overflowing
egos and they are
afflicted by narcissistic personality disorders.
For this reason, I only deal with
investors who can
understand what I am doing and have the brains and
insight to
penetrate the idea. These are not people who
trade with earbuds while
parroting some incomprehensible
jargon that even
institution professionals have a problem understanding, but
serious people who can sit down and
think deeply, and drive the platform like a plane.
There is
never any gain in dealing with stupidity, especially if coupled with the
Dunning-Krueger effect. That is a deadly combination that leads nowhere.
I have been
doing research all my life on this matter (besides other matters of course, closer to my profession) and these are bits of "
philosophy" I can share. If you do not want to believe it, it's fine, it
won't change anything for me. I am also pretty close to my final demise, so imagine how much I can care...
I envision that if I said the following sentence to many people:
"There is no matter as such"
most of them will think I am a
lunatic, right?
Make a search and tell me who he was
(This is the complete quote:
"As a man who has devoted his whole life to the most clear-headed science, to the study of matter, I can tell you as a result of my research about atoms this much: There is no matter as such" )
