Reality based coin-tosser method that beats 95% of traders in the world.
- Thread starter Whisky
- Start date
Quote from cfd_trader:
Hey All!
my first post here, after countless hours of reading, enjoying, learning, and laughing at times.
In answer to Mike's post below:
at first look at the numbers an obvious "YES" comes to mind.
Wayyy to obvious.
On second thoughts, and that's probably what you were aiming at, the answer is actually NO.
Why?
The answer lies in this simple question:
how many runs of this strategy over the same set of historical data did it take to get this neat Net Profit?
Busted!
Ding ding ding! We have a winner! It took 3 runs, all of which were quite profitable.
Now, can anyone explain what happens when I remove the random(2) and random(3) conditions in the 3rd run?
Mike
You still are confusing something. Small example:
End of..............1 2 3 4 5 6 7 8
Day 1 Price 100 H H H H T T T T
Day 2 Price 104 H H T T H H T T
Day 3 Price 103 H T H T H T H T
Day 4 Price 105
Coin is tossed by the disadvantaged gentleman at the end of Day 1, 2 and 3. We close all positions at the end of Day 4. Above are all the possibilities of the possible outcomes of the three tosses. Please note that each column of coin tosses has the same probability of occurring than any other column. Also note that we have 2 up days and only 1 down day and each up day is greater in magnitude than the down day.
Below are the results for each column of tosses:
1. +5
2. +1
3. +7
4. +3
5. -3
6. -7
7. -1
8. -5
When each of the above 8 equally likely outcomes are totaled, the result is 0. 0 is the expectation of performing this experiment over and over again and it does not matter what the mix of up to down days is or the magnitude of those up and down days. Note that not a single outcome above was exactly 0. 0 is just what is expected in the long-term for this experiment.
The above is all that the OP is stating for his "system".
Hope this helps. And why the anger?
Also note that column 1 (Buy and Hold) had a good result in this scenario but column 3 showed the best result by "predicting" the market's movement. I think most traders are trying to find column 3 in their trading.
Joe.
The first conclusion is that a random strategy with costs or without them does not cut it in the long term for the purpose of making money and keeping it.
The second conclusion is that a minor positive edge strategy needs a very large account to allow the "long run" to manifest the edge without going bust in the short term, as the runs of "good luck" and "bad luck" happen in reality. The smaller the edge, the bigger the account must be to avoid ruin.
The third conclusion is that all these losers, that lose more than a random strategy would suggest, are doing something to their accounts that is much worse than random betting, and/or the winners of the game are doing something to their accounts and/or the price that traps all the losers in the wrong side time after time, and therein somewhere lie the two biggest edges of them all, as this is a zero sum game minus commissions: Giving liquidity to losers and/or taking liquidity from winners. Liquidity is a volume function that happens in all timeframes.
The first 2 conclusions are easy to prove mathematically. Maybe someone can do it and offer the proof here.
The third...well...it's not so easy to prove.