Ok, this is what I meant by knowing it is correct and actually understanding it. Ten in a row and the actual tenth coin toss are separate events but what determines which one should control our bet? Intellectually I understand that the tenth toss is 50/50, but there is also a very low probability that the tenth toss will be heads. So which is the better bet? Isn't fading the tenth throw basically what selling options premium is all about? We can't know the outcome of any particular day ahead of time but we know the results over time form a distribution curve and we are prepared to take on the risk that price stays within that curve.
You shouldn't bet on the following .. let's say you have 10 consecutive losses with your trades..... because the probability of 11 consecutive losses is so small you load up all your money and go long. But now you missed the probability for the trade to be a winner is still only 50% .. and not something like 100% - 0,048% = 99,952% --- whow if that was the case i'd only wait for 10 consecutive losses =))
If it was the case, we should try to make 9 very small losses, then bet the 10th with all our money and made a fortune! It simply won't work!
tomf, I have read systems developers advocating something like that. Either wait for a drawdown to start trading the system or only take trades after ,eg, three losing trades or whatever. I tried backtesting that approach but could never make it work. Perhaps it is not statistically sound at all.
well, interesting approach ... but they miss the actual probabilities.. so I think this hardly will work out.. because the 10th trade can as well be a loser REMARK: afterall it has a chance of 50% to be a winner .. nothing more nothing less.
I saw a Dilbert once where ratbert called "Edge" on Dilberts next coin toss to prove he was psychic and it DID land on its edge... hilarious. peace axeman
They are equally likely since each is a unique probability series both consisting of 10 independent throws (where the probability of either heads or tails on any one throw was 50/50). The mind wants to believe that "b" is more likely, but it isn't. Here's another thought: If a friend and I each play one California super lotto ticket and we choose the numbers as follows: Friend: 23 12 7 19 29 39, Mega # 18 Me: 1 2 3 4 5 6, Mega # 7 Who is more likely to win?
one time I pick 1,2,3,4,5 at Keno. The waitress shakes her head and says, "I've been working here three years and I've never seen that come up." I say, "Then please tell me which 5 numbers come up often." (don't forget when you're working probabilities to consider the large number factor. I forget what mathematicians call it. It means what works for large numbers won't necessarily work for a series of 10 bets.)