Mathematical expectation

[xelite777]

No. Most TA is just ad hoc attempts to separate "significant" price moves from the random "noisy" ones but there is no explicit model involved like there is in QA.

Yes, but keep in mind that there are mathematical ways to prove/demonstrate that the market is absolutely not random.

Remove this non-randomness from it and the market becomes just another stupid casino with its usual negative mathematical expectancy (here the spread and/or commissions). Trading would then become no more different than betting on Black or Red at the roulette.

 

[ronblack]

A quote from a soap opera TV show, I suppose?

Call it anything you want but you will have to do the hard work yourself....

 

[ronblack]

Yes, but keep in mind that there are mathematical ways to prove/demonstrate that the market is absolutely not random.

Like for example? I also heard someone saying there are ways to prove there are unicorns....

Trading would then become no more different than betting on Black or Red at the roulette.

Trading is much harder than casino betting because the odds are unknown and can be much lower than what you think they are and usually are way lower... Any investor who saw his S&P 500 index tracking portfolio losing 50% in 2008 knows this. Do you?

The 2008 market collapse delivered a blow to investing and trading it will take many years to recover from, maybe one or two generations. This is another reason for the low participation in trading forums. There is actually very little going on compared to before 2008. Market crash, flash crash, HFT, dark pools, rising inequality, worldwide tensions and so many other negative things have contributed to people not trading and they care less whether you found the unicorn or not. Anyone who things I'm wrong please say so.

 

[Sergio77]

"The first problem is that the expectation E[T] is approximately equal to the average trade AvgT only for sufficiently large samples"

"The second even more important problem is that E[T] is not stationary in general but can vary as a function of trade count N."

Source

So limited samples and non-stationarity render expectation useless.

 

[xelite777]

Like for example?

You will have to do the hard work yourself....

Trading is much harder than casino betting because the odds are unknown

What kind of nonsense is that??

You buy a stock at $50. From that point there is a 50% chance of seeing a 20% move either up or down (or whatever X% move you like), end of story.

In fact, the odds of seeing a 20% move UP are slightly greater than 50% due to the upside nature of the stock market. That's why trading the stock market (from the long side) will always be mathematically more profitable than playing at the casino, in the long run.

The 2008 market collapse delivered a blow to investing and trading it will take many years to recover from, maybe one or two generations.

Nonsense, there is no such thing as a market "collapse", you are either on the right side of the market or you are not.

Traders who shorted the hell out of the stock indices in 2008 amassed a huge fortune during that time and are now living like kings.

And you are not, obviously, or you wouldn't make that kind of comments.

 

[ronblack]

You buy a stock at $50. From that point there is a 50% chance of seeing a 20% move either up or down (or whatever X% move you like), end of story.

The odds are not equal to the probability of a stock rising or falling by a certain amount but the expected gain for every dollar risked on the average. This is unknown is stock trading. You are seriously confused.

That's why trading the stock market (from the long side) will always be mathematically more profitable than playing at the casino, in the long run.

You are confusing long-term investing (where the bias kicks in) with trading. You are switching between the two at will to come up with strawman arguments.

Nonsense, there is no such thing as a market "collapse

Are you denying reality here?

Traders who shorted the hell out of the stock indices in 2008 amassed a huge fortune during that time and are now living like kings.

And you are not, obviously, or you wouldn't make that kind of comments.

Neither you are ovviously, FYI, most of the stock market bears that made money in the 2008 decline lost everything shorting the market persistently in the last two years. You are obviously looking for a fight because you diverting this to personal comments and attacks. I will not follow you in this dark path of yours. Bye.

 

[SIUYA]

From my quote -
"technical analysis is simply an input into a quant model."

No. Most TA is just ad hoc attempts to separate "significant" price moves from the random "noisy" ones but there is no explicit model involved like there is in QA.

I was referring to the fact that TA is just the starting point - you then have to do the quant stuff and work out if there is any real validity to the analysis.

I also think you are defining TA and quant models differently to me in saying there is no model -
example: what is the turtle trading system if not a quant model based on inputs from technical analysis?
That might explain more how I see it.....

 

[Sergio77]

Expectancy is too much of a stupid concept to have a fight over it.

 

[xelite777]

Expectancy is too much of a stupid concept to have a fight over it.

If trading system A and trading system B had the same maximum drawdown but the average profit per trade of system B was twice the size of the average profit per trade of system A, which system would you trade, A or B?
(Please note that the average profit per trade is not the average winning trade, those are two different metrics. The average profit per trade is the mathematical expectancy of the system, in other words what the trader would expect to earn in dollars and cents on each trade, on average).

 

[doggyfx]

If trading system A and trading system B had the same maximum drawdown but the average profit per trade of system B was twice the size of the average profit per trade of system A, which system would you trade, A or B?
(Please note that the average profit per trade is not the average winning trade, those are two different metrics. The average profit per trade is the mathematical expectancy of the system, in other words what the trader would expect to earn in dollars and cents on each trade, on average).

From the point of average distribution stable, long-run trading with fixed risk/reward ratio will eventially knock you out of game. The main idea is to get quick profit and quit game as soon as it's possible. But there won't be a grain of trading (it would be pure gambling) it also doesn't take into account low-capitalized traders with short trading lifetime. Strategy of fast risky game is wrongly turned down, though it considerably overweights others by winning chances.