Hi, As far as I'm concerned, trading is all about placing bets when you know what the odds are (only morons bet when they don't know the odds). As I'm not a math guy, nor do I know anything about stats, odds, betting, gambling, blah blah blah, I know I'm at a huge disadvantage to the quants at timber hill and elsewhere who basically model everything they do on stats. Can somebody please set me in the right direction, and point out a book, coursework, a job at a casino, whatever would give me a good understanding of how professional handicappers and those crowds think? Thanks in advance, -b
you can actually learn all u want to know about stats and probabilities by going to Borders and buying one of those books that summarizes stats and prob theory...Then go into MS Excel and plug in numbers and chart them using the stats functions...It is much easier to understand the concepts once u have a visual indicator because it becomes less abstract...
That probably wouldn't do you much good since the market model is not the same as the models used by casinos and other "gambling" venues. For one thing, in the markets, you are in control. In casinos, you have very little control, if any (more in poker than anything else, somewhat in blackjack). Therefore, the nature of probability in the markets is such that trying to reduce a trade to a number or a ratio is not as productive as assessing the level of risk and the level of probability for each trade, i.e., low, medium, or high. If you have a low risk/high probability trade, then your tactics may be different than if you're looking at a high risk/low probability trade, which you may not want to take at all. The best book I've read so far in this realm is Taleb's Fooled By Randomness. If nothing else, it completely changed the way I looked at "losses", and made pulling the trigger much easier. Highly recommended. --Db
Ralph Vince spends a little time on it in "Portfolio Management Formulas." Not a comprehensive treatise but good for someone who isn't a quant.
dbphoenix, the best way to learn the odds is to "do it" i.e. gamble, trade, whatever. You have to differentiate between positive expectancy games (poker, sports, blackjack, trading) and negative expectancy games (roulette, slots, keno, craps). The house has an edge wherever you are. In trading it is the spread and the commissions. In Vegas it is the vig. Only by adding knowledge (information) whether it be skill in poker, skill in trading or counting in blackjack - can you have a positive expectation to overcome the vig. Many times the expectation is so small that you have to do it in large quantities (amounts) to make it worthwile. I don't know if you caught the interview on Cnbc today about the MIT blackjack counting team. They had a bankroll of $1million and the best expectation for the best counter in the world is 2% so you do the math. Biggest problem for both Gamblers and traders (and new businesses) is being undercapitalized.
I'm afraid you missed my point. The nature of probability is different in the markets than it is in a casino or other gambling venue and cannot be reduced to a mathematical ratio. As for "doing it", one can learn the odds in a casino without doing anything at all. But the only way of determining whether the probability of a trade is high, medium, or low is through paper or real experience in trading. --Db
You can go to a free game site like msn casino and play craps or roulette. That will cure you eventually of any doubling up schemes. It will also make you think a lot about edge. At times, the market is like a lopsided roulette wheel which favors a few numbers, but the repairman fixes it and it goes back to random, but it is not a very good wheel, so it quickly goes lopsided again, if it favors 3 black numbers you can then safely double up on black.