Can somone explain to me what horse betting and trading have in common?

what was your business in Louisville?

 

It was pleasure. I had no business in Louisville.

 

all righty
not that you care
but your status in my book has just been raised
to enigma

 

Thanks for this great opportunity to add further to the confusion.

I see the following similarities between systematic trading and an analytical, statistics-based approach to betting on horses:

(… and I am ignoring here other similarities that doubtless exist too between insider trading and fixing races, or between fundamental trading and the more fundamental horse-betting approaches based around knowing the form of a given horse or perhaps like that mentioned by another earlier poster who based a theoretical bet around seeing an owner and several investors paying attention to one particular horse, etc. …)

… so, the similarities between systematic trading and an analytical, statistics-based approach to betting on horses:

• While the results are deterministic (i.e. the outcome at any moment in time depends on the immediately prior state and all the factors or forces in play at that time), the results are also epistemically random (i.e. from a practical standpoint, it is currently not possible to know with certainty all details of the prior state nor all the factors and forces in play; so there is uncertainty in the outcome).

• As the outcomes are uncertain, statistics can be used to identify the distributions of conditional probabilities of the outcomes, and to construct edges.

• Indicators (e.g. moving averages), bars (e.g. time-based, range based), trends, etc ... can all be constructed.

• NinjaTrader can be used in both cases ... (just kidding about this one)

• Also due to the uncertainty, playing out an edge successfully is a matter of relying on the law of large numbers to converge outcomes to the expected distribution over time, so money management is important too in both cases, to ensure you are still around for when the good times start to roll again.

Systematic trading also shares at least some of the above with an analytical, statistics-based approach to poker playing or blackjack.

 

Truly one of the more delightful threads I've seen from ET in quite some time!

.Now if I could only find a proper Mint Julep around here....

 

Bone I totally agree on your appreciative comment.

 

Very well said!