What's luck got to do with it?...

[Splitlink]

Well, I'm glad we've cleared up that little issue.

Nothing like an unrelated empirical statement to stifle discussion.

Except that that statement is wrong. I defy anyone to say that his trading decisions were not influenced by unknown factors, some of which can be known and others that will never be known.

This reminds me of a thread, a few years ago, where it was required of the posters to forecast the progress of a share's price for three months ahead. There is no way that that can be done, I said it then and I say it now, because no one could possible tell when something similar to 9/11, or an earthquake, tsusami or plague would happen.

 

[cr6196]

yeh i think there might be a small misunderstanding.
just reading to over a few times, it seems counter intuitive to apply it to trading, in trading to maximize your edge you need to be in every time it occurs and applying a fixed number to the amount you trade in a day/month whatever doesn't work...the problem might be you know the 2.10 @ Newmarket will happen but you don't know how many times you will trade in a day...i dunno, it just doesn't feel like it fits in with trading...but it is a very interesting idea.

 

[Splitlink]

yeh i think there might be a small misunderstanding.
just reading to over a few times, it seems counter intuitive to apply it to trading, in trading to maximize your edge you need to be in every time it occurs and applying a fixed number to the amount you trade in a day/month whatever doesn't work...the problem might be you know the 2.10 @ Newmarket will happen but you don't know how many times you will trade in a day...i dunno, it just doesn't feel like it fits in with trading...but it is a very interesting idea.

Why must you be in it every time? Because the time that you miss might make
your day unlucky! Or would it?

 

[cr6196]

hmmm i suppose it would depend on your edge and how discretionary etc etc...ill expand, i meant an edge like an MA cross, clear and defined, it happens you enter, no questions.

The reason why you should be in every time is because that is what you backtested and you have defined as a moment when X happens, then Y happens and i can make a profit out of this happening, due either to the hit rate or the risk reward etc etc.
It wouldn't make any difference if you missed one or not, what i meant was if you bother to define the edge and then you miss one or two then you cant say your using the edge in your trading because to work it properly you have to take every setup that you have deemed profitable. If you missed one or two, then that brings a discretionary element that will skew your results, if you see what i mean?
I understand what your saying, i didn't mean to imply that by missing an entry that you somehow effect the other trades, in some weird superstitious way.

 

[Xeno]

I agree. But psychology cannot be left out, because, as humans we find comfort in the fact that , the same as a cat has nine lives, so do we have more opportunities. No one knows when, or how many times luck will strike , nor whether it will be good or bad, because what is good for one is, equally, bad for others. How many battles have been won and lost on an unknown quantity that the generals did not foresee?

Yes, but for the purposes of this discussion it should be left out. What I said was, there's no difference. So, if your psychology is such that you're better off having a cut off point, by all means, use this as that will help - but it doesn't maximise your profit, edge or anything else, which was the original question. It would simply mean that it takes longer to reach a particular amount of profit.

 

[Xeno]

Now, what if after your 7th trade (that's 20 / e = 20 / 2,72 ~= 7.35 ~= 7) you stop trading (for the rest of the month at least) after your next winner that is larger than your largest winner of the previous 7 trades.

This next winner has a 37% chance of being the largest winner of the 20 trades in the month.

It's just not that useful, because of the probabilities implied. If your system generates a 10-20% win rate for big winners, you've got a fairly reasonable chances of getting any of 0,1,2,3,4,5,6 big winners in a month.

Your system doesn't work for 0 and 1. For 2, it works perfectly, and you save the time and losses for the rest of that month (which may be none at all if the second big win is at the end of the month) for 3,4,5,6 you miss out on various numbers of winning trades depending on how many winning ones occured in the first 7.

It doesn't seem useful to me - it appears to reduce your profit overall, although the caveat again is that my stats may be flawed to an expert's eye.

 

[Splitlink]

I can see what you are all getting down to but Luck is the joker in the pack, no matter what you do. Just do the best that you can with the statistical equation, You have to use every way you know to increase the probabilities of success. My rule is that to get lucky you have to be where luck is.

My son won a good prize in the state lottery a few years ago. He was driving north and his car broke down in a provincial town. Kicking his heels for a couple of hours he bought a ticket. He was in the right place at the right time. But, as he said to me (who never buys lottery tickets), if you don't buy the thing you are certain to never win.

So, Good Luck to all of you.

 

[tomorton]

There is no luck in trading. What I mean is you can't be lucky and win big and retire, because you would never risk enough in one trade to equate to a lottery win, and you would never be blown out of the business by a string of bad trades, because you would manage your cash so that the worst you ever lose is 2% per trade, no matter how many went against you. If you don't trade like this you're gambling and this is a business, not a casino.

That said, I was very very lucky this year when I found an overlooked position had gone my way by 300 FTSE100 points. But that wasn't trading, that was a pure accident.

 

[Splitlink]

It was luck, mate! I realise that it is not a good policy to rely on luck, that is a different attitude and one that will result in serious trouble. The luck of which I am referring is always present in some degree or other and is good or bad. It is the factor over which we have no control and is present everywhere, not only in trading.

 

[tenbobtrader]

I agree. But psychology cannot be left out, because, as humans we find comfort in the fact that , the same as a cat has nine lives, so do we have more opportunities. No one knows when, or how many times luck will strike , nor whether it will be good or bad, because what is good for one is, equally, bad for others. How many battles have been won and lost on an unknown quantity that the generals did not foresee?

name one

 

[tenbobtrader]

"Gary Player, golfer laureate

5 June 2003
Gary Player, one of the greatest golfers of all time and one of only five professionals to have won golf's grand slam of all four major championships, was presented with the Laureus Lifetime Achievement Award at the fourth annual Laureus World Sports Awards Ceremony, held in Monaco on 20 May 2003.

The Award was presented to Player by his fellow Laureus World Sports Academy member, England football legend Sir Bobby Charlton, who said: "The person the Academy is honouring this evening with the treasured Lifetime Achievement Award started out in his sport exactly 50 years ago. I have followed his career from his first major victory, and it's astonishing that he is still going strong.

"He has admitted that he was not naturally gifted at the sport, which was to become his life, but nobody in any profession has worked harder to first of all conquer his sport, and then conquer the world. I cannot think of anyone who has been more disciplined and dedicated over such a long stretch of time, and even now, 50 years on, he is still playing a mean and magnificent game."

The annual Laureus World Sports Awards, established in 2000, is the only worldwide awards ceremony to honour the world's best sportsmen and women for their achievements across all disciplines. Its charitable arm, the Laureus Sport for Good Foundation, funds and promotes sport as a tool for social change around the world.

A true legend of golf, Player has won over 160 titles worldwide, including three British Opens, three US Masters, two US PGA championships and the US Open. He is the only modern player to win the British Open in three different decades. He joined the Senior PGA Tour in 1985 and has since won 23 times worldwide.


Player overheard a spectator comment on his luck ...... his 2nd hole in 1 on the same round

he wandered over ........ "the more I practice the luckier I get"........



Andy

 

[tenbobtrader]

I can see what you are all getting down to but Luck is the joker in the pack, no matter what you do. Just do the best that you can with the statistical equation, You have to use every way you know to increase the probabilities of success. My rule is that to get lucky you have to be where luck is.

My son won a good prize in the state lottery a few years ago. He was driving north and his car broke down in a provincial town. Kicking his heels for a couple of hours he bought a ticket. He was in the right place at the right time. But, as he said to me (who never buys lottery tickets), if you don't buy the thing you are certain to never win.

So, Good Luck to all of you.

"My rule is that to get lucky you have to be where luck is."


good point Split

tell your lad he is one lucky .........

Andy

 

[Splitlink]

Why did I mention battles when history is one of my weak points?

The weather factor has decided the fate of many battles. The Armada; both Napoleon's and Hitler's invasions of Russia. Battle accounts are full of sentences using "if".

The word "if" is synonymous with **** ups and incredible successes due to unforeseen circumstances and , probably, crops up time again on this site.

"If" = good or bad luck.

 

[Calinor]

I don't think this applies to when you should stop trading because it is looking at a completely different problem. In trading you are not just looking for the best trade (as you might be with the wife). You don't have to take just one trade. Also which is preferable on a trading day, 5 trades where you get 1,000 in each, or one trade where you get 2,000? There is a cumulative factor in trading profitability that isn't there in the problem of choosing one wife.

If your aim was to find the best trade out of a series of 100 and then stop there, then what you mentioned in your opening post still wouldn't apply. You would have to take each trade, some of them losing and then stop after the best result. But that has nothing to do with how profitable you are. So you could lose every trade, and then you would stop after the best one (least loser). This strategy doesn't seem in any way optimal. An optimal strategy would be to have some info on your expectation on each trade, probabilities of winning etc., and then adjust bet size accordingly.

 

[Splitlink]

I think that you are right and that "luck", is not something to be sought for in our concept of trading.
Everything should be considered, except luck. It will crop up from time to time and we don't know whether it will be good or bad and there is little that we can do about it, anyway, except if it presents itself as an opportunity.

 

[Hotch]

just a second hand emotion.


Oh! Luck, whoops.

 

[Yuppie]

I don't think this applies to when you should stop trading because it is looking at a completely different problem. In trading you are not just looking for the best trade (as you might be with the wife). You don't have to take just one trade. Also which is preferable on a trading day, 5 trades where you get 1,000 in each, or one trade where you get 2,000? There is a cumulative factor in trading profitability that isn't there in the problem of choosing one wife.

If your aim was to find the best trade out of a series of 100 and then stop there, then what you mentioned in your opening post still wouldn't apply. You would have to take each trade, some of them losing and then stop after the best result. But that has nothing to do with how profitable you are. So you could lose every trade, and then you would stop after the best one (least loser). This strategy doesn't seem in any way optimal. An optimal strategy would be to have some info on your expectation on each trade, probabilities of winning etc., and then adjust bet size accordingly.

Ah, yes Calinor, I am seeing what you are saying.

You can't pick and choose which trade to take. You have to keep taking them... Hmmm...

I shall muse further about this.

Thanks for the reply...


Magnus

 

[tenbobtrader]

"The Armada; both Napoleon's and Hitler's invasions of Russia"

"Why did I mention battles when history is one of my weak points? "

put paragraph in the correct order for you Split

Andy

 

[Yuppie]

Why did I mention battles when history is one of my weak points?

The weather factor has decided the fate of many battles. The Armada; both Napoleon's and Hitler's invasions of Russia. Battle accounts are full of sentences using "if".

The word "if" is synonymous with **** ups and incredible successes due to unforeseen circumstances and , probably, crops up time again on this site.

"If" = good or bad luck.

Just to join in, in the semi-derailment of my own thread...

I'm not sure luck (good or bad) is right.

I mean, you could put it down to luck, but it's really just lack of information.

If a General had a vast knowledge of meteorology or perhaps assembled a team of the best meteorologists of the time and, as a result, could leverage the weather factor(s) into his favour.

That doesn't seem like luck to me, seems more like astute General-ship... but, no doubt, I could see how it would seem like "luck" (well, unluckiness) to the disadvantaged side.


Magnus

 

[tenbobtrader]

no luck involved in any of Split examples

one was not even a general


"if a General had a vast knowledge of meteorology or perhaps assembled a team of the best meteorologists of the time"

don"t think you required above to work out the Russian winter arrives early and is pretty extreme and must give huge advantage to the home team when your lines of supply are stretched

Napoleon's usual tactic of foraging was not suitable in those extremes ... an oversight / error

Hitler's invasion of Russia, no winter cloths or oil, no listen to generals = idiot

Armada = unprepared, met advanced superior forces and were unable to follow their own plan, the weather was not really a factor

Drake was already assured victory and was busy looting when the storm hit forcing him to port and cutting is wages for the year


Andy