Quiz

[Grey1]

barjon,

Quote "you consistently ignore the fact that your opening position
is three times more likely to reach its loss target (1%)
than its winning target (3%) "




The probability of getting 3:1 is 100% in my above quiz..

lets say you have a system of horse betting which works 50 % of the time and the BOOKI gives you 3:1.. He guarantees payment .. he pays 3:1 NO fuss NO argue NO probability .. He simply pays you 3:1

 

[bonsai]

grey


the reason we woudnt trade such a system is because it
isnt a system for the real world !

The toss of a coin in this universe does not provide a 3-1 ratio.

Now there may be another parallel univere where hindsight is foresight. Then you could choose your moment to toss your coin.

So I could be wrong.

Although I think the elliott wave function would collapse before I
could place my trade. Doh, you can't rely on anything these days !

Perhaps slippage works in reverse in such Carrollian adventures ?

 

[barjon]

grey

if you've got a system which guarantees 100% probability
of getting 3:1 you needn't bother trading it to get your million
- I'll buy it for that now.

it wouldn't be a 40% system, or a 50% one, but a 300% system
- lead me to it.

jon

 

[Grey1]

Well . we had the following agreements on the theory

A less than 50 % system can provide wealth if the reward / Risk ratio was greater than 1 and more than any thing else if the probability of occurance of this ratio was HIGH .. Which brings me to the rest of my conclusion ..


Stockmarket is an institutions very much like a casino with one major difference and that is.. THE ODDS OF REWARD LEVEL relative to RISK IS NOT DETERMINED BY THE HOUSE .. ..

This means a trader can have a Low hit system such as Coin, but by doing some kind of analysis to shift the odds to his favour..


By doing some kind of analysis I did not mean technical analysis but the most important kind of analysis which every single trader MUST learn and that is RISK ANALYSIS....



To answer the quiz, barjon was spot on .. it is the probability of occurance of Reward/Risk which finally determine the fate of our JOE and not his low out put strategy ...



"There are two times in a man's life when he should not speculate: when he can't afford it, and when he can."
- Mark Twain, 1897

 

[Mayfly]

Hi Paul,

The answer to the original question is A, here goes:

Capital = £10,000
Losing Trades = 60
Winning Trades = 40
Trades = 100

Loss on losing trades = 5.42853%
Gain on winning trades = 22%

Profit = £1,000,007

Spare Change = £7.00

Proof in Excel (pseudo code):

Profit = power (((100-loss on losing trades)/100)*losing trades) * power (((100+gain on winning trades)/100) * winning trades) * capital

I agree that it’s a bit artificial, but it’s still an answer (of sorts) to the original question?

HTH

Cheers

Mayfly

 

[FTSE Beater]

Quote " if you toss a coin for your entry, that doesn't guarantee a 3:1 Risk / Reward ratio. "

No it does not but Joe is not forced to close his position either.. So he can wait to take profit more than his risk level multiplied by 3..

Hi Grey1

What happens if the stock goes up by 2 only to fall back 3. In this example, you would have a winning trade with a 1:1 R/R ratio but a loss with the 3:1 This effects the % win

 

[bonsai]

I would suggest there is no such thing as risk analysis.

It's an illusion.

No hypothesis of what the risks might be can ever be proved to be 100%.

If you can't include all the risks then you are only looking at your own perceptions.

Perceptions change.

And we change with them.

usually too late.

 

[Trader333]

Bonsai,

I would suggest there is no such thing as risk analysis.

If that were true then there would never be any form of continuous improvements in life at all.

Risk analysis has shown that wearing a seat belt reduces the chance of death in a car crash, it doesnt eliminate it (so cannot be proved 100%) but it does reduce it as measured by statistical models. The same applies to thousands of innovations that have made life safer with the result that we now live longer than we did 100 years ago.

I dont see why it shouldnt apply to trading and it is something that I have got very much into in recent times. The result is that my trading losses have reduced significantly as a percentage of all trades that I take.

But by your definition I am probably deluding myself as this is only my perception. All I can say is that my perceived losses are less and my perceived profits are higher as measured by my perception of my P&L statements.


I hope your perception of my post is taken in the manner I perceived that you would do. If not then please accept an apology I am perceiving to give to you which I hope you perceive to be genuine. Of course this cannot be guaranteed 100% because no-one on these boards has any real perception of me and my perceived intentions.



Paul

 

[Mr. Charts]

Ah, Paul,
Now we are getting to the real core of trading - perception and its influence on price movement.
I've always thought that Heisenberg's ideas on uncertainty on a quantum level and their effects on causality and determinacy had close analogies to the reality of trading on a micro basis and their relationship with day to day trading.
I know we have at least two physicists who have specific knowledge of this area of quantum mechanics on t2w and it would be interesting to read what they think about this concept.
They know where I am if they want to discuss this off- board as we don't want the resident nasties spoiling yet another debate, but if anyone else would like to consider these matters and post their views, new ideas are invigorating to most of us.
Richard

 

[bonsai]

Paul, lol
am very pleased that your trading losses have reduced.
a wise man takes wise precautions. !

But as Mr Charts detected, I was thinking on a different plane.

I am biased of course, (it seems to be the human condition) but
I believe there is a strong relationship between (efficient) markets
and quantum events. I also suspect our brains are quantum computers although I dont like to use the computer analogy.

When we look at a chart, we see only one history, so we are at something of a disadvantage in trying to assess risk.
But there maybe many histories which cause the future to be what it seems to become ?

Its an interesting issue therefore to distinguish between the
illusion of risk and the delusion of safety ?