Do you have a EDGE over the market?

Discussion in 'Technical Analysis' started by benysl, Jul 20, 2005.

  1. benysl


    The below topic is for your thinking only.

    Regardless of whatever trading system or method you are using. Do you have a Edge over the markets?

    A coin toss will have a 50% chances of it landing head and 50% chance of it landing tail if we assume both sides is equal.

    Think about the follow scenario (Commission is excluded for simplicity)

    you enter a trade at 6500 with a target profit at 6510 and stop loss at 6490, your chances of hitting either side is 50/50. From a mathetician and statistic point of view, how do we increase the change to greater than 50%
    if we cannot we got no edge or advantage.

    Another scenario you enter long at 6500 target at 6520 and stop loss at 6490, your chances of hitting 6520 for a 20 ticks gain is only 33% while your chances of hitting 6490 for a 10 ticks loss is 66%

    1 more scenario
    You buy Microsoft at 65.00 set a stop loss at 63.00 and a profit targe at 69.00. Why do you allow a 2.00 stop loss? Why not set a stop loss at 64.80, isnt a 0.20 stop loss better than a 2.00 stop loss. We know if we set a 0.20 stop loss we will have a 95.238% chances of hitting it first before it hit the profit.

    we are taught to belief let profit run and cut losses short
    the problem with this is if profit > stop loss, the chances of hitting stop loss will be greater than hitting profit
  2. You need to watch the markets more, so you can estimate trend better.
  3. Get yourself a three sided coin. Markets go sideways. That'll skew your "stats" a little. Also observe how often the market retraces to just past where you (and everybody else) entered a position. Oh. Now we need a multi-sided die to cast to account for manipulation. Even better, get yourself a backtesting program and TEST random entry. Optimizing it will keep you busy for a while.
  4. benysl


    nah that is not my point. Whether uptrend or downtrend or sideways. The % do not change.
    See it from a mathetician point of view. You enter a trade with a profit target of 1 points and stop loss 1 points (not counting commission to simplified this illustration), your chances of hitting either side is 50/50.

    How do you increase the edge to 51/49??
  5. You're hopeless. My point is that you and everybody else influence the market to go against you JUST BY TAKING A POSITION. Bye.
  6. ig0r


    This can only happen when there is a mispricing in the market. Very simple example:

    Stock XYZ closes at 10.01x0.02 on the Made Up Stock Exchange (MUSE). After hours, ARCA is 10.00 x 10.05. All of a sudden, ISLD offers 9.96... If you can lift that 9.96 and hit the 10.00, you've just picked up some edge - in this case a true arbitrage.

    It only gets more complex from there, usually involving taking on some risk by providing liquidity.
  7. Unless its a random entry: Wrong.

    See NZBryant's post.
  8. ig0r


    lol, to OP:

    i know you will be tempted, but try not to listen to these wackos ;)
  9. We're ALL wackos here. If you were good at ANYTHING else, why on earth would you TRADE? It's like aspiring to be an elephant circumciser ("The pay's not good, but the tips are big!").
  10. According to you, the market will move in a positive direction if more people bet against it ?

    Please explain Mr. Cibiades.
    #10     Jul 20, 2005