What are some mathematical misconceptions with regard to trading?

Visaria said:
That's a misconception right there!
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A simplification (hence my use of inverted commas around "should"), rather than a misconception ... you're a little slower, at weekends, perhaps, to be argumentative for the sake of it? My post has already been on the board for about 18 hours ... :D
 
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Xela said:
you're a little slower, at weekends, perhaps, to be argumentative for the sake of it? My post has already been on the board for about 18 hours ..
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I have better things to do on the weekend :D

But point taken.
 
Mysteron said:
By people you really mean fools!

Anyone with an analytical background, who understands basic mathematics and probabilities should not be susceptible to such misconceptions.
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Actually there are just TWO reasons that apply to all of: FEAR and GREED
 
Lawrence77 said:
'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.
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Yes, this sounds exactly like someone in this forum starting with S...get's a kick out of assuming a massive amount of knowledge and believes he has everything covered and nothing is possible that he doesnt already know about.

...and even if you did blow him away with enlightenment, he'd run off and obsess over it and never admit that he learned anything from you. You have to love people like that.
 
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Lawrence77 said:
Actually there are just TWO reasons that apply to all of: FEAR and GREED
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That's basically very true on the surface level of many things -- but collectively, things are usually very complicated and encompass way more than just those two variables in consideration.

And besides, those two things are only good for and in realization for hindsight armchair chart reading and trading.

If you were blindly asked to apply Fear and Greed variables to real-time and future charts...things and results would look weird. I bet.
 
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My view is greed (at all levels high to low) keeps people coming back day after day to gamble in the market, and fear keeps them from getting close to what they would like to achieve. I am clueless about your "hindsight armchair reading" as related to fear and greed. However, if you mean 'everything makes sense after the market closes, then I understand'. It never really makes sense though, due to all the moving parts and emotional conflicts of thousands of traders.

"It seems as though we must use sometimes the one theory and sometimes the other, while at times we may use either. We are faced with a new kind of difficulty. We have two contradictory pictures of reality" - Albert Einstein (on Wave–particle duality)

Good trading to you Lawrence.
 
This post of mine talks about the misconception around RR ratio, probability and stop loss:
https://www.elitetrader.com/et/threads/your-strategy-has-33-33-success-rate.311251/

Trading, a semi art, is more about skill than maths. And not everyone is upto art. So never mind my post if the word "art" irks you. :)

Majority of traders across the globe are common people who have no idea about the nature of trading. This is basically a business which is a game of market psychology. Since common man is not equipped with such a sophisticated business mindset it is believed less than 1% of the traders make decent and consistent profits.

Trading is an art of business psychology. Maths and statistics are secondary aspects of any kind of business. To tap the common man's ignorance there are innumerable companies that provide useless services to traders in the form of automation platforms, tips, training, etc. Internet and trading blogs (including ET) are flooded with trading related stuff which are very knowledgeable and intelligent yet useless because trading is a creative skill than intelligence.

Running any business (including trading) purely based on intelligence is like trying to take the darkness out of a room using a vacuum cleaner. Just turn on the lights ! Trading is a business and its more of an art than science. Just turn on the intuition !

My recent post on the nature of stock trading :
https://www.elitetrader.com/et/thre...ofits-from-trading.314478/page-5#post-4536894
 
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I think the biggest misconception is statistical, not mathematical. Forecasting with classical technical analysis assumes that prices (the time series of price) are sufficiently deterministic to be predicted. This is false.
 
Trader13 said:
I think the biggest misconception is statistical, not mathematical. Forecasting with classical technical analysis assumes that prices (the time series of price) are sufficiently deterministic to be predicted. This is false.
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ROFLMAO its not stats nor math that may be deduced to be in the picture drawn but it is the picture drawn and what to do about it.
 
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