Fun With Statistics

Discussion in 'Trading' started by Brandonf, Dec 31, 2003.

  1. Brandonf

    Brandonf ET Sponsor

    Understanding the "odds" behind my trading has been very helpful for me, both in terms of not becoming cocky after a big wiinning streak and not becoming dispondent and losing confidence after a losing spell.

    If your system has 30% winners you can expect at some point to have 22 losses in a row. You can also expect to have 9 winners in a row at some point.

    40% 19 losses in a row, 11 winners.

    50% 14 losses in a row, 13 winners in a row ( I dont know why it is, but every time i run this there are more losses then winners to expect)

    60% 10 losses in a row, 14 winners in a row

    70% 9 losses in a row, 25 winners in a row

    80% 5 losses in a row, 33 winners in a row.

    Be sure your risk managment plans in 2004 include provisions that if you hit your loss cluster you will be around to come out of it.

    Brandon
     
  2. At first glance and without looking too deeply (it is New Year's Eve after all), I would dispute your figures purely on the grounds of symmetry. 40% winners should be a mirror image of 60% winners (winners transposed with losers) and it's not even close.
    Another indication there's a bug in your software. I doubt it is calculating the figure analytically, which is probably the best method in this case, but rather uses some form of simulation. Also, I don't want to get into what you mean by "expect at some point".

    All this, however, doesn't change the very important message of your post.
     
  3. Wow, just ran a simulation on 100% winners and it had 5 losers in a row.

    Tough freakin game! (Must be those NYSE specs shaving again)
     
  4. LMAO :D
     
  5. Did you run these numbers using an Excel VB simulation? If so, could you share the code?

    thanks in advance,

    Scott