Why Is The Obvious Not So Obvious?

smallfil said:
Trading is similar to gambling in a casino in that you are taking a risk to make monies. However, in a casino, the odds are fixed in favor of the casino and you are guaranteed to lose over time. In the stockmarket, you are taking a risk but, your risk can be controlled thru risk management and on top of that, you can put the odds of making monies highly in your favor. If each time you lose, you lose $100 but, each time you win, you win $700, what are the odds you will make monies assuming you have a 30% win rate only. That means you lose 7 times out of 10 trades. So you lose 7 times x $100 = $700, you win 3 times x $700 = $2100 for a net gain of $1,400. Nobody is forcing you to place trades and you can always be very selective and only trade when the reward is several multiples of your risk.
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Except in trading the odds of a given event occurring are never known with fixed certainty. Whereas in gambling they are fixed and known (largely.) Vanilla option delta is about the closest we can get to fixed odds, and even then it is only an approximation.

I'm not familiar with other derivatives like barrier options and knockouts, but I doubt they have fixed and known odds either.
 
panzerman said:
Except in trading the odds of a given event occurring are never known with fixed certainty. Whereas in gambling they are fixed and known (largely.) Vanilla option delta is about the closest we can get to fixed odds, and even then it is only an approximation.

I'm not familiar with other derivatives like barrier options and knockouts, but I doubt they have fixed and known odds either.
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Trade setups never work 100%. Most are 50/50 at best and Bulkowski already analyzed the different patterns. If you are in a casino playing slots, do you know when the slot jackpot will get hit? You could keep playing a long time and and lose all your monies in the process. Chart patterns are more predictable to a certain degree. Now, you do not know if your target price will get hit but, if it gets hit a number of times and your multiple reward is say 4 times your risk, does it really matter? At 30% win rate, you will make monies. Nobody is going to get 100% wins and not lose. Not even in a casino playing say both black and red in a roulette wheel. The 0 and 00 which is green will kill you.
 
fairvalue said:
I appreciate that simple and straight forward approach. It sometimes feels that an understanding is just in reach.
Where are traders trapped and thelike - at least not obvious to me ;)
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From "the other forum" : How To Trade: Full Stop, posted by The Expert Feb 19, 2010

"30 days or prices showing the running average 30 day price next to the daily price. This can be set up with live data feed or done at EOD. Same for 10 day and 5 day. This is a basic step and will just make a point that needs to be known by those who put their money at risk in the market. For clarity, we are only discussing US stocks, as Futures and Commodities behave differently, due to obvious reasons. I consider all non US stocks to be too risky, but that is my personal opinion."

So...... why is someone who is anti indicators relying on averages?

GO
 
nysestocks said:
Why Is The Obvious Not So Obvious?

I have read thru some of the recent and distant posts in this section, and have come to the conclusion that; the obvious is not so obvious to many!

There appears to be a lot of textbook information being thrown around, especially in relation to position sizing and risk management.

What every trader has to realise, is that all the risk management and position sizing techniques in the world are of no use what so ever, unless the trader is aware of the obvious pre-requisite to trading any market.

It will be very interesting to see what answers the many traders come up with for the obvious, those with little and lots of experience alike!
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I think this thread developed away from the original message, to suggest that a process or systematic method is needed rather than trading haphazardly, but as far as the clue in the original message is concerned then adequate price range seems to be the obvious pre-requisite.
 
I never noticed it was started in the "Risk Management" section.

Yet is has to be some method, closely connected to the price range.
 
The obvious pre-requisite to (successfully) trading any market is you first need to discover an approach which will actually make money.

Without that, all that risk management and position sizing do are slow the rate at which you bleed.
 
obvious pre-requisite to (successfully) trading any market is EXPERIENCE and CONTROL, without these there is no way to make money consistently.

I believe that once these pre-requisite are acquired all the rest (method, risk management, position sizing, etc.) will come into place fitting together easily.

I know I have acquired some of the former but I am still struggling with the latter:banghead:
 
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