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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Keith Monahan who wrote (7376)	3/12/2000 11:09:00 PM
From: Mama Bear	Respond to of 18137

One can gamble on a random event such as a roulette wheel or a lottery ticket and be assured of losing given enough time. Then there is gambling where one can turn the odds to ones favor. Horse races, poker, and blackjack are three such games. All have long term pros who make their living from playing. I believe that trading stocks is in the latter category rather than the former. What some folks fail to remember is that people buy and sell stocks for a reason. It's sanctimonious arrogance as well as completely inaccurate to believe that stocks trade in a random fashion at all times. But I also don't think those who choose to believe it will realize the folly of their thinking. Regards, Barb

To: Keith Monahan who wrote (7376)	3/13/2000 3:26:00 AM
From: ahhaha	Read Replies (3) \| Respond to of 18137

To keep the 50% rate you are assuming you can get out with no loss if the decision to take fails. A little here, a little there, pretty soon you're talking about real money. Then psychology makes you take more risk to get it back. In a translating market the return is biased, so you should earn at the average rate which is approximately the translation slope. This is independent of decision method used to enter or exit. Entering and exiting yields a lower return than simply holding. You have to make the a priori assumption that the trend will persist for any trading decision procedure to be effective, but the procedure reduces the return through the friction of entry and exit. If you have to make the assumption you might as well hold because it yields more or realizes the translation more efficiently. All other market regimes are too randomized to expect anything but a more rapid loss rate. The deterioration of your capital and the ruination rate of a group of traders are adequately modelled by radioactive decay: dn/dt = -a*n where n is units of money or number of traders busted. The characteristic, a, is actually a function of inverse trend slope, but we can set a(t) = a for simplicity. When you sell by trading decision you lose your position and chase something else. Repeating this activity makes you hostage to the a priori expectation which is negative. How do you know it is negative? The statistics show the majority of traders over the last several years have been losers. The bust rate is about 85% which is lower than in previous decades, but the variance is higher. The trend has made the bust rate slower, the characteristic is smaller, and so squanders people's lives more insidiously. Everyone assumes they are the one whose techniques will beat the system. The results of all systems are randomly distributed so the a priori expectation doesn't change because of technique. Wall Street is the worst odds casino in the world.