Clueless money & risk management

[the hare]

LV

122 trades , loss 1634 pips (30 stop pips)
296 winners , profit 2960 (10 pip target)
59 % win rate
average profit 3.18 pips per trade

122 + 296 equaled 418 when I went to school

296 winners out of 418 is approximately 70 percent

You really ought to get your medication checked out

Regardless, you could double your profits with a couple of phone calls

 

[15 min tlb]

122 + 296 equaled 418 when I went to school

296 winners out of 418 is approximately 70 percent

You really ought to get your medication checked out

Regardless, you could double your profits with a couple of phone calls

I can triple them with a few of my own tweaks and turns.

Just a small typing error , so you still going to buy the trend trading illusion sold by gurus?

From 2 % we brought the forum pros down to 0.5 % , it is still lower :smart:

This was the boolox BSD followsTrend trading

http://en.wikipedia.org/wiki/Ed_Seykota:

 

[15 min tlb]

The 2 % has been around as an industry standard for decades .

http://www.guppytraders.com/handout Riskkl.pdf

1 % is better

Position Sizing as an Approach to Risk Management

I learned this from Jack Schwager's Market Wizard Books. The bigger the trader and the better the trader, the smaller the percentage they risked on any one trade. Give it some thought.

http://www.turtletrader.com/position_sizing.pdf

 

[15 min tlb]

It doesn't matter.
You are still giving away a massive chunk,
which is quite likely to be a game breaker at some point in the future,
even if its possible in the short term.
For that kind of trading, low costs, and earning the spread is the only way
anyone with an ounce of sense would do it.
If you can't see that, I'm baffled.

Let me show you by exampled who is baffled.

A cab driver rents a cab for a fixed weekly fee and a mileage charge excess , he burns diesel and drives around looking for work and also pays extra mileage charge.Some negative person tells him , he is wasting fuel and giving back all the profits in mileage.

What people don't understand about this taxi driver and trading , is the taxi driver makes a load more profits with marginal extra costs and traders also make more money with their extra edge systems.

Maybe most of you should stop reading books by failed traders , and come into the real trading world.

 

[BeginnerJoe]

296 winners out of 418 is approximately 70 percent

I concur. But where are these winners at ? Were they called out ahead of time, or a statement shown ? I did a quick scan and couldn't find them in this thread.

 

[Liquid validity]

Let me show you by exampled who is baffled.

A cab driver rents a cab for a fixed weekly fee and a mileage charge excess , he burns diesel and drives around looking for work and also pays extra mileage charge.Some negative person tells him , he is wasting fuel and giving back all the profits in mileage.

What people don't understand about this taxi driver and trading , is the taxi driver makes a load more profits with marginal extra costs and traders also make more money with their extra edge systems.

Maybe most of you should stop reading books by failed traders , and come into the real trading world.

So all those prop traders, treasuries and STIRS scalpers should all quit,
and scalp with retail costs at a bucket shop
The point is, if the opportunity to cut costs exists, only a moron would do otherwise...

 

[15 min tlb]

So all those prop traders, treasuries and STIRS scalpers should all quit,
and scalp with retail costs at a bucket shop
The point is, if the opportunity to cut costs exists, only a moron would do otherwise...

Even a bucket shop needs liquidity and pays a spread , often this is cheaper than going into the market to cover.A trade can pick and choose the high probability trades and only take the highest probability trades , and keep his stop away from buckets.

If your method has edge far greater than the spread , live and let live , there is plenty for all.There are ways to pinch spreads from buckets , but it is for skilled r pros.Buy high and sell higher , sell lows and and buy back even lower.

What is 1/2 pip when your edge is 6 pips , and your tax bill is 40 % of 6 pips = 2.4 pips?

Do you really know what an edge is?Hope you remain on t2w for another 30 years.

 

[barjon]

Perhaps you guys with a mathematical bent can answer a question for me.

If I toss a coin there's a 50% chance it'll come down heads and each time I toss it, whatever the previous results, it is 50%.

I lose 9 times on the trot but the probability table tells me I only have a 3.9% chance of a losing run of 10. So I've got a 96.1% chance of the losing run not extending to 10?

I know this is "gambler's fallacy" but I've never quite understood the maths.

 

[Liquid validity]

priceless

 

[barjon]

priceless

not talking about my question, I hope LV

 

[Liquid validity]

not talking about my question, I hope LV

No, I posted that without seeing your post
Although its a useful example, and me and the hare have mentioned it,
thats only in regard to trade entry.
Its a useful exercise all the same, but still theoretical.
Gambler's fallacy - Wikipedia, the free encyclopedia

Applying that to markets by definition means you must buy into random walk
theory, which I don't, which might cause a few raised eyebrows...
Random walk hypothesis - Wikipedia, the free encyclopedia

There are random elements in price, but it certainly is not completely random.
Price series and a distribution of trade results are not the same thing, even
though one is based on the other.
Also semi random / pure random trade entry is a different beast to a pure coin flip with a fixed payoff.
Simply down to the way the trade is managed once in.

To truly replicate a coin flip in a market, you would need zero costs,
and equal very tight targets, the end result being the same as the gamblers fallacy coin flip - random walk.

You can apply certain aspects of it to trading, but applying the whole thing in its
entirety is nothing other than a disaster waiting to happen.

 

[barjon]

LV

Aye - I was just trying get my head round the maths, not relate it to a trading style

 

[Shakone]

Barjon it is to do with conditional probability.

The probability that you lose ten on the trot is: 0.5 to the power 10

The probability that you lose the tenth conditional on the fact that you've already lost 9 is 0.5


Consider 3 coin tosses. There are 8 possibilities from those 3 coin tosses. Probability of 3 losses in a row is one of those, so it has probability 1/8

Conditional on the fact we've lost the first two, there are now only 2 possibilities (no longer 8), and of those 2, one has another loss, and the other has a win. So 3 losses in a row conditional on 2 already occuring is 1/2

 

[barjon]

Barjon it is to do with conditional probability.

The probability that you lose ten on the trot is: 0.5 to the power 10

The probability that you lose the tenth conditional on the fact that you've already lost 9 is 0.5


Consider 3 coin tosses. There are 8 possibilities from those 3 coin tosses. Probability of 3 losses in a row is one of those, so it has probability 1/8

Conditional on the fact we've lost the first two, there are now only 2 possibilities (no longer 8), and of those 2, one has another loss, and the other has a win. So 3 losses in a row conditional on 2 already occuring is 1/2

thx, shakey, I might get that if I concentrate hard

 

[VielGeld]

^ Well, if it helps, in Shakone's first example the probs are correlated (probability of X consecutive losers). So .5 * .5 * .5 * ... * etc.

The latter aren't correlated as each coin toss is independent. So it remains a .5 prob no matter what.

 

[Shakone]

thx, shakey, I might get that if I concentrate hard

Think how you calculate probability. If I asked what's the probability of getting two heads from two coin tosses, you'd probably know already that it's 1/4 from gut without calculation. If you wonder why it is 1/4, it's found by first looking at the possibilities {HH,HT,TH,TT} note there are 4 (H is shorthand for heads)

and then looking at the outcome you're interested in HH, note you're interested in only 1 outcome. Then one divided by the other gives that the probability is 1/4.

If instead I asked a separate question: Given that I've got a head on the first coin toss, what is the probability I'll get another, then the possibilites are {HH,HT}, note there are 2, and the outcome you're interested in in HH, so the probability is 1/2.

I can't explain it any clearer, lol.

 

[barjon]

thx again, guys - got it now

 

[BeginnerJoe]

Think how you calculate probability. If I asked what's the probability of getting two heads from two coin tosses, you'd probably know already that it's 1/4 from gut without calculation. If you wonder why it is 1/4, it's found by first looking at the possibilities {HH,HT,TH,TT} note there are 4 (H is shorthand for heads)

and then looking at the outcome you're interested in HH, note you're interested in only 1 outcome. Then one divided by the other gives that the probability is 1/4.

If instead I asked a separate question: Given that I've got a head on the first coin toss, what is the probability I'll get another, then the possibilites are {HH,HT}, note there are 2, and the outcome you're interested in in HH, so the probability is 1/2.

I can't explain it any clearer, lol.

Yes, this is very clear. What isn't clear to me is why some people believe tossing coins will cause the guy on the other side of the trade to be more willing to give you their money.

 

[Shakone]

Yes, this is very clear. What isn't clear to me is why some people believe tossing coins will cause the guy on the other side of the trade to be more willing to give you their money.

Well you'd have to show me someone who does actually believe that. I've not noticed anyone.

It's not that a random coin tossed trade can give you untold wealth. It's that if you can manage trades so well that you can make money from even a coin tossed trade, then think what you could do with a good entry too...

 

[the hare]

Yes, this is very clear. What isn't clear to me is why some people believe tossing coins will cause the guy on the other side of the trade to be more willing to give you their money.

Open a demo account so this isn't going to cost you anything, 10k balance will be enough. Open up a GBPUSD chart. Then toss a coin, buy if heads, sell if tails. I suggest trading maximum of one micro lot. Don't set a stop, or a target.

Post your entry price etc for prosperity at the zoo.

Then close the platform, and forget all about the trade, and we'll do the next bit tommorow.