Registered: Oct 2002
11-20-02 07:27 PM
Alright, I'm about to spew some dilettante statistical theory. It may be completely bunk, but what the hell, that's what forums are for!
Anyway, I'm going to posit that if you take a wide random sample of stocks, hold them for a set period of time, then plot their returns, the resulting chart would look like a bell curve. Few big losers/winners, the bulk of returns would be in the middle. (I'm assuming going long/short so that bull/bear markets won't skew the sample).
So in the middle of the curve, your little winners cancel out your little losers. Then your stop loses turn your few big losers into little losers. All you are left with is your big winners that you let run i.e. your final profit.
So if the markets were random and one trades a large enough sample of stocks, can we assume that one can still make a profit using proper money management?