Question for those who believe everything is 50/50 always...

[birzos]

Some people assert that the direction is always a 50/50 chance, completely random.
Some assert that it's pretty close to 50/50, but the "edge" is what lets you get a positive expectancy.

Under that assumption, if a trader has a system that commits many trades (so as to rule variance out), shouldn't he not be able to lose money faster than the bleedout of commissions? If people can lose money faster than loss from commissions, and its not due to variance, it should hold that the person can at least go the other way as well.

It all comes back to a simple normal distribution, knowledge is power.

At each timeframe you have different number of people, capital, direction, goals, risk profiles, all fighting among themselves to remove the others of their capital. Is it possible to unwind select parts of that complexity via algos with micro economics, yes. Supporting groups of various combinations you also have a foundation, some people understand those foundations, Buffet for example, and work on macro moves.

Psychology trends towards control of the many by the few, if you have the detail (0) you need the summary(-4) and the conclusion(+4) at each level to understand it. Control is having the knowledge or ability to close -4 at the same level as +4, controlling other people is making sure they don't match. As only very few have the summary and/or conclusion knowledge, the rest produce endless amounts of detail overloading the masses in the process, causing indirect censorship of the few that do. It's the "I don't have it you won't either" combined with "I am an expert with nothing to back it up", both psychological traits of this process.

So is it random, no, but to understand the complexity you either need the foundation knowledge on a macro level or the tools on a micro level. Have both of those and something interesting happens, you generate more out than you put in. Most don't have either so for them it's random, backed up by endless amounts of garbage by those who either don't want to or can't close the summary and conclusion on the same level, generating a self-fulfilling prophecy.

The key to all this, avoiding bureaucracy and red tape, the problem, around the detail that's all there is and hence no clarity. From the detail looking out it's random (focus on money not time), from the summary and conclusion looking in it's transparency (focus on time not money). It's all about perspective, for most the markets are random and they lose money, for a few the markets are perfection and they have the skills and tools to identify the patterns to make enormous wealth. And then you have the 2%/mth crowd in the middle working idiotic hours trying to understand both macro and micro in unison rather than distinct units.

*Or there's the abbreviated version, for 99% it's random. For the top 5% of the best they're neutral and not sure what it is, for the top 1% of the best it's maybe it is maybe it isn't for 2%/mth depending on factors only known to them, and for the top 0.1% of the best it's micro and/or macro level perfection for 20%/mth.

 

[trdes]

It all comes back to a simple normal distribution, knowledge is power.

At each timeframe you have different number of people, capital, direction, goals, risk profiles, all fighting among themselves to remove the others of their capital. Is it possible to unwind select parts of that complexity via algos with micro economics, yes. Supporting groups of various combinations you also have a foundation, some people understand those foundations, Buffet for example, and work on macro moves.

Psychology trends towards control of the many by the few, if you have the detail (0) you need the summary(-4) and the conclusion(+4) at each level to understand it. Control is having the knowledge or ability to close -4 at the same level as +4, controlling other people is making sure they don't match. As only very few have the summary and/or conclusion knowledge, the rest produce endless amounts of detail overloading the masses in the process, causing indirect censorship of the few that do. It's the "I don't have it you won't either" combined with "I am an expert with nothing to back it up", both psychological traits of this process.

So is it random, no, but to understand the complexity you either need the foundation knowledge on a macro level or the tools on a micro level. Have both of those and something interesting happens, you generate more out than you put in. Most don't have either so for them it's random, backed up by endless amounts of garbage by those who either don't want to or can't close the summary and conclusion on the same level, generating a self-fulfilling prophecy.

The key to all this, avoiding bureaucracy and red tape, the problem, around the detail that's all there is and hence no clarity. From the detail looking out it's random (focus on money not time), from the summary and conclusion looking in it's transparency (focus on time not money). It's all about perspective, for most the markets are random and they lose money, for a few the markets are perfection and they have the skills and tools to identify the patterns to make enormous wealth. And then you have the 2%/mth crowd in the middle working idiotic hours trying to understand both macro and micro in unison rather than distinct units.

Great post and well put, thank you for clear explanation. Just because it seems random to most people, doesn't make that a truth.

 

[Mtrader]

I am one of the biggest? lol, I was agreeing with you on about 90% of what you said if not more.

Read again what I posted and in reaction to WHOM it was. It was not adressed to you, but to Turveyd.
That idiot asked me to send him some statements. LOL.

 

[trdes]

Read again what I posted and in reaction to WHOM it was. It was not adressed to you, but to Turveyd.

ok, you quoted me and I thought you were asking me why should you send him a statement, but I understand now.

 

[Maverick74]

Guys, there is no anti-edge. If I could find a way to consistently lose money doing whatever it is I'm doing, that is actually "positive edge". Why? Because I found something in the market that can consistently be exploited. Just because I'm not personally making money on it does not mean it's anti-edge. Either a market inefficiency exists or it doesn't. At any given time there are people on both sides of the trade. The person who does not have the edge is the one who "can't exploit it" because they are not able to.

 

[Simples]

Guys, there is no anti-edge. If I could find a way to consistently lose money doing whatever it is I'm doing, that is actually "positive edge". Why? Because I found something in the market that can consistently be exploited. Just because I'm not personally making money on it does not mean it's anti-edge. Either a market inefficiency exists or it doesn't. At any given time there are people on both sides of the trade. The person who does not have the edge is the one who "can't exploit it" because they are not able to.

I stand corrected.

 

[trdes]

Guys, there is no anti-edge. If I could find a way to consistently lose money doing whatever it is I'm doing, that is actually "positive edge". Why? Because I found something in the market that can consistently be exploited. Just because I'm not personally making money on it does not mean it's anti-edge. Either a market inefficiency exists or it doesn't. At any given time there are people on both sides of the trade. The person who does not have the edge is the one who "can't exploit it" because they are not able to.

That's a good point, I see what you're saying. But I am saying the anti-edge would come from extremely emotional decisions, I know someone(not that well) but I know of their situation and they have traded for over 10+ years and lost literally all the money they ever put in the markets. They've had other ways to generate income during that time, that allowed them to constantly refund accounts, but always blow up.

So, not exactly what you said but similar that - there would be no real way to trade against him or exploit that anti- edge, because it's so irrational, he basically is self sabotaging himself.


I am not really trying to debate you on that, I am just still trying to wrap my ahead around the real example I gave. What would we call that?

 

[Maverick74]

That's a good point, I see what you're saying. But I am saying the anti-edge would come from extremely emotional decisions, I know someone(not that well) but I know of their situation and they have traded for over 10+ years and lost literally all the money they ever put in the markets. They've had other ways to generate income during that time, that allowed them to constantly refund accounts, but always blow up.

So, not exactly what you said but similar that - there would be no real way to trade against him or exploit that anti- edge, because it's so irrational, he basically is self sabotaging himself.


I am not really trying to debate you on that, I am just still trying to wrap my ahead around the real example I gave. What would we call that?

I would call that a constraint. All traders have some constraints. It could be capital, could be time, could be emotions. Say a guy is a daytrader and his constraint is time. He is short the ES today but HAS to get out at the close no matter what. His time constraint will FORCE him to cover at his max loss at the close not because he wants to but because he has to. This is not an edge though.

Let's use a casino example since you brought up emotions. Obviously casinos are full of emotional gamblers. Guys that go on tilt and go all in because they can't take it anymore, they have been losing all night and want to make all their losses back. What you are saying is, this guys emotions should over ride the basic math that casinos have about an 8% edge in blackjack. This guy's emotions will magically change the outcome of the game simply because he is a basket case and always loses. The fact is, whatever cards were going to come up on the table would have come up regardless of this guy's emotional condition. His behavior can't change the cards. What causes him to blow out is not magic, he simply runs out of money. In fact more often then not the guy that blows out at the table runs to the ATM machine, gets more money doubles down and then wins it all back. He had a capital constraint that caused him to run out of capital. His emotions are independent of the cards drawn on the table, meaning one does not affect the other even though it is so tempting to believe that all this guy does it lose, lose, lose. It's really an illusion because the irony is he might have made money on 80% of his hands that night but simply varied his bet size incorrectly and took his biggest beats on his largest wagers.

 

[birzos]

Great post and well put, thank you for clear explanation. Just because it seems random to most people, doesn't make that a truth.

No problem, you are correct and here's why. There are only 200,000 UHNWIs in the world with $30mn of assets and above. You need to compound at 5% per month with $10k starting capital over a generation to just break in to UHNWI status, most would be ecstatic with 5% per annum.

To generate 70-100% returns per year you need to understand micro technicals and macro fundamentals. Having spent time around UHNWIs, actually a lot of time being married in to an UHNW family and working with UHNWIs, the truth is it's not random. But to find the sequences you need some very special experience and/or tools, ideally both, but telling people this fact doesn't feed the markets, so everything these days is indirectly censored to make sure the summary and conclusions never see the light of day.

I can find micro perfection with retail tools, but in telling people how, which I have up to very recently, it goes against their training, is diluted by idiots, or more recently just deleted. So I stick to the macro knowledge, it takes less effort to explain so more time efficient. Even I find it odd that I can take UHNW knowledge and apply it with mass market tools to produce near enough the same output. Which means it's not the technology that's the problem but the inability for anyone to receive the summary and conclusion information to make informed decisions.

What then happens is that everyone between the low income and the UHNW put in their own 'value add' to create tools or services, that makes the complexity worse, not better, by further obscuring the summary and conclusion information, so even more people see the events as random. And to make money they have to not just unwind the markets, they also have to unwind the tools and service wrappers.

Which doesn't go down so well when my experience kicks in with, skip all that and either keep it simple learning from the ground up on your own or treat it as a hobby saving to buy the best of the best. Otherwise you'll have to understand that there's an upper limit of 2%/mth with public domain knowledge meaning a generation to hit $50k/yr profits from $10k starting capital.

 

[trdes]

No problem, this is what most don't understand. There are only 200,000 UHNWIs in the world with $30mn of assets and above. You need to compound at 5% per month with $10k starting capital over a generation to just break in to UHNWI status, most would be ecstatic with 5% per annum.

To generate 70-100% returns per year you need to understand micro technicals and macro fundamentals. Having spent time around UHNWIs, actually a lot of time being married in to an UHNW family and working with UHNWIs, the truth is it's not random. But to find the sequences you need some very special experience and/or tools, ideally both, but telling people this fact doesn't feed the markets, so everything is indirectly censored to make sure the summary and conclusions never see the light of day.

I can find micro perfection with retail tools, but in telling people how, which I have up to very recently, it goes against their training, is diluted by idiots, or more recently just deleted. So I stick to the macro knowledge, it takes less effort to explain so more time efficient. Even I find it odd that I can take UHNW knowledge and apply it with mass market tools to produce near enough the same output. Which means it's not the technology that's the problem but the inability for anyone to receive the summary and conclusion information to make informed decisions.

What then happens is that everyone between the low income and the UHNW put in their own 'value add' to create tools or services, that makes the complexity worse, not less, so even more people see the events as random. And to make money they have to not just unwind the markets, they also have to unwind the tools and service wrappers. Which doesn't go down so well when my experience kicks with, skip all that and either keep it simple learning from the ground up on your own or treat it as a hobby saving to buy the best of the best.

I agree with almost everything you said, even on how public indicators can be used a lot more efficiently, don't see much information on that though, maybe people don't want to give it out.

The only thing I don't agree on is that you need macro fundamentals, I am sure that helps. But if you're speaking of a massive edge, doesn't that edge come from being able to follow the actions of big money and the clues or prints they leave behind? This is what allows for the consistency and accuracy of the trading. Where as a macro fundamental view(I am assuming you're speaking of economic and policy effects on the markets?) is more trying to front run and predict where price will go, without an actual edge to back that up.


Hopefully I didn't misunderstand you and if I did please correct me.