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etile

Registered: Mar 2007
Posts: 134

04-23-12 08:02 PM

Go for the doubles to tithe you over until the fat pitch comes. The doubles keep you in the game. The home-runs make you a winner.

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Swan Noir

Registered: Jun 2009
Posts: 1705

04-24-12 04:01 AM

Not holding overnight means that I am going for more singles than even doubles. For me the fat pitch has more to do with finding trades that generate a high enough W/L ratio in addition to the expectancy so that I can be comfortable increasing size.

Lots of this stuff relates to personality. some guys could be comfortable with a 25% win rate to generate the expectancy they need. I have found out that waiting to long between winning trades makes me uncomfortable even when I know intellectually that it is all part of the plan. I need a different plan.

Quote from etile:

Go for the doubles to tithe you over until the fat pitch comes. The doubles keep you in the game. The home-runs make you a winner.

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Ghost of Cutten

Registered: Aug 2009
Posts: 2633

06-21-12 04:17 PM

Quote from Martinghoul:

There's a case to be made for being very selective, but there's also a case to be made for being less selective, if you have capacity. Sometimes it's optimal to accept a lower Sharpe to generate a better gross return.

Wouldn't it be optimal to allocate more size to the higher Sharpe strategy? CAGR to max DD is after all the main measure of trading performance. The only way I can see this not being possible is if you run out of liquidity in the high Sharpe strategies. If you have too much size and not enough opportunity, then yes I agree you need to be less picky almost by definition.

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Ghost of Cutten

Registered: Aug 2009
Posts: 2633

06-21-12 04:21 PM

Quote from Swan Noir:

I think the poker analogy is not correct. .

Poker analogies are rarely correct on anything other than the most simple and trivial truths, because trading is meaningfully different to poker. In fact, analogies have no logical validity whatsoever, they are only useful as blunt tools to explain to people who don't understand the subject at hand (e.g. non-traders, novices). For some reason people seem to love arguing by analogy, I guess it saves having to write down a proper explanation. But, the market doesn't reward those with the cutest analogy, it rewards those with the most accurate model of the nature of future market behaviour.

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Ghost of Cutten

Registered: Aug 2009
Posts: 2633

06-21-12 04:41 PM

Quote from etile:

Go for the doubles to tithe you over until the fat pitch comes. The doubles keep you in the game. The home-runs make you a winner.

Bad analogy. In baseball, 3 strikes and you're out. Not in trading, rather the opposite - 'doubles' are much more likely to turn into bad trades, which are the type that strike you out.

People really need to stop with the sport & game analogies.

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Ghost of Cutten

Registered: Aug 2009
Posts: 2633

06-21-12 04:44 PM

Quote from Martinghoul:

I was only trying to use mkt-making as an illustration of a principle that being not selective at all in a higher frequency context can work too.

That's why I described a certain type of trading in the initial post, I assumed it would be obvious I wasn't talking about market-making, HFT, daytrading and other approaches where you just grind out an edge.

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