But i alo oen't mean that they o! (Inert miing letter, my keyboar nee help)
Can you pleae explain gravity to me. I have been wonering.
What are some mathematical misconceptions with regard to trading?
- Thread starter rin4et
- Start date
Can you pleae explain gravity to me. I have been wonering.
Seems that your d and s keys need rehab! Indeed, seek help for the poor bugger, hehe! Explain gravity? Just look it up! Easy.
Gravity is the same as being a one-way-road and realising you need to turn back because you've been on the path to nowhere. Gravity is good because it brings you back to reality.
It's better than moonshots which is the ticket of no return and sends bank acoount into orbit.
1. I've seen quite a few aspiring traders starting off with the impression that the relationship between time-frame and ATR is linear - for example believing that if they double their time-frame from M30 to H1 charts, the ATR is going to be about twice the size, other things being equal. [It's a square-root relationship, really: if you double the time-frame, the ATR "should" increase by a factor of about 1.4 (the square root of 2).]
2. I've seen quite a few aspiring traders starting off with the assumption that "the higher the win-rate the better". While there's obviously some truth in the observation that higher win-rates are easier for beginning traders to handle (regarding position-sizing and some other aspects of risk management), the belief that in the search for potentially viable trading methods they should in principle be looking for "as high a win-rate as possible" is equally obviously a really huge handicap to many.
3. Looking at the other side of that coin, I've also quite often seen (especially in forums) the "advice" that nobody should be trying to trade without a reward-to-risk ratio of at least 2:1 (I've sometimes even seen people saying 3:1, too) ... it makes you shudder to imagine how many potentially viable ideas might be being summarily rejected through this self-imposed and arbitrary limitation.
I think these are all fairly widespread mathematical misconceptions.
2. I've seen quite a few aspiring traders starting off with the assumption that "the higher the win-rate the better". While there's obviously some truth in the observation that higher win-rates are easier for beginning traders to handle (regarding position-sizing and some other aspects of risk management), the belief that in the search for potentially viable trading methods they should in principle be looking for "as high a win-rate as possible" is equally obviously a really huge handicap to many.
3. Looking at the other side of that coin, I've also quite often seen (especially in forums) the "advice" that nobody should be trying to trade without a reward-to-risk ratio of at least 2:1 (I've sometimes even seen people saying 3:1, too) ... it makes you shudder to imagine how many potentially viable ideas might be being summarily rejected through this self-imposed and arbitrary limitation.
I think these are all fairly widespread mathematical misconceptions.
By people you really mean fools!
Anyone with an analytical background, who understands basic mathematics and probabilities should not be susceptible to such misconceptions.
'Should' is the achilles heel for analytical math wizards....PhD math wizards are worse, because they actually believe their work is infallible, due to being a certified expert in their field of math, or statistics. It boils down to being a human being with emotions, feelings, and anything but logic when it comes to gambling on stocks. And testing all the time is so important. With or without a] computer trading software.....jmo.
what is the mathematical equation for traders' emotions like confusion, fear, irrationality? Emotions move the market not a maths equation.
Average return means that return every year.
Inee. It' off to Bet Buy for me.
That's a misconception right there!