Mathemagician
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Actually, based on the strength of your assertions it sounds like you have some pretty specific ideas and research of your own and I was hoping I might learn a bit.
jj
Actually, based on the strength of your assertions it sounds like you have some pretty specific ideas and research of your own and I was hoping I might learn a bit.
jj
temptrader
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I can only offer you what I've perceived and experienced. The theory of probability is one of the subtlest - and sometimes the nastiest - of things to get your head around. Even great mathematicians have been caught out by it.
There are a few issues as I see it:
1) if you offer a system and you claim such and such a percentage drawdown (on average) or such and such a losing run, how can you, as a vendor, give any confidence - or guarantee for that matter - that it cannot possibly get worse? Martingales are the worse offenders because when it does get worse, getting worse just a little more is all it takes to make things very uncomfortable. I suppose you can claim that you have a 90% success rate or something. But even that is a probabilistic statement and offers no guarantee
2) in periods of strong trends I'm almost certain that systems and mechanical methods work like a charm. But is that because they confirm the sentiment, rather than understand any of it? To be blunt, no matter how sophisticated the programming that go into certain blackbox systems, they are basically set to tune to fixed sequences of behaviours, and there is no leeway with them at all - unless you intervene and invalidate their use for the time. And this template of sequences of behaviours that the system captures is therefore only a probabilistic fit onto what is a very complex animal
3) when you are on a losing run, how do you know that it won't get worse? We've all heard tales of systems being on losing runs and eventually the next few trades made it all back. Now, is that advertising speak done by people with their own agendas, or it it genuine? And if it were genuine, why would you want to subject your own money to such treatment.
Then there is the probabilistic consideration when on a losing run. For example a coin toss experiment: Suppose we have 6 heads in a roll already. Because it is stochastic the probability of the next being a head, GIVEN the we've had 6 heads already, is still one half, although getting 7 heads in a row is 1 in 128. As you probably say, there is no reason for a losing run to get worse, but it CAN get worse...
Mathemagician
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Thanks.
jj
jj
TheBramble
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But what if they felt thay had to "give something back?".
fifty2aces
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Well what better way than with a martingale betting system?
FXSCALPER2
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With unlimted resources, he will never lose, so he will never give anything back.
temptrader
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But you don't know when those losing runs ends or if they will just make you more cautious and hence you'll bet less and then gradually you lose money further still down the line. The problem with losing runs is if you ever will recover from them. Most mechanical methods and systems with their money management I've backtested (with over 420,000 races) have losing runs that eventually zero the account. Not worth your time at all.
You don't ever want to use Martingales since each lose you have to get the lose back plus profit and each losing race will grow the lose at a factor of at least a power of 2 - not good at all.
What usually happens is someone starts making money from a system, they think they got it made, they start having plans, get cocky, and then they encounter their first losing run, where they might wipe out nearly a third of their bank. The cockiness comes into it because they feel that their method/system will ALWAYS end up positive for the day for them, when it doesn't they pile on the pain. So there is a psychological factor to it. But psychology and proper emotional conduct does NOT guarantee that the system/method will work in the long run. And that's my point, people empathize the psychological factor way too much when they should be looking at the method/system at hand and its short comings.
I don't know any mechanical system/method that works. They are sold all the time because their sellers cannot make money out of them IN THE LONG TERM. There's nothing to stop people buying such systems and have intermittent success with them - and that's always the case unfortunately with some people who eventually lose even more money than they started with because they blame money management or that they didn't follow the system properly.
The only major disturbing psychological factor that people need to get over in horse racing (not trading or arbing on the exchanges mind) is that there is NO system out there, and the hard work in form analysis gives you very little in return for effort (which is why tipsters runs services even if they were profitable, because they need the extra money on the side to sustain their losing runs).
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