FINALLY someone mentions what is 90% of the ballgame... Being properly hedged at all times. Other than ultra-short term scalping... The only way to produce "consistent" returns is to be an expert and obsessive hedger. But too many people here believe they can lay directional bets using whatever... And beat a market that is essentially random for liquid securities.
To anyone/everyone struggling with consistency, check out this article... I think it has deep implications for systematic/method traders and reinforces the principles taught by Mark Douglas in a beautiful way... Note especially that the mathematician cannot explain why the curve grows exponentially, because of the random components/structure of the experiment. Reminds me a lot of the work done by Wolfram on fractals generated by simple rules/formulae. But the axiom behind Wolfram's work is that there's got to be rules to begin with. Is this validation of Douglas' belief that in trading, the consistent application of an effective trading rule can yield random results at the micro level but beautiful non random results at the macro level? Nitro would probably enjoy talking about this Here's the link: http://www.sciencenews.org/pages/sn_arc99/6_12_99/bob1.htm
<i>"Other than ultra-short term scalping... The only way to produce "consistent" returns is to be an expert and obsessive hedger."</i> That is a common opinion voiced by many, but it is 100% false. If there is one, just one person who is trading directional and making a profit, that statement on its face is invalid. Market action is random, but often predictable to enough degree for success. There are definite trends visible at the time of movement and repeated price patterns within that can be exploited with defined edge. Please don't confuse "random" with "non-repeating" in the markets. Those terms are not synonymous.
Maverick, the absolute value of the numbers grow exponentially. However, the sign of the values is still random. In effect you are leveraging up quickly and alternating between massive gains and massive losses at random. -Raystonn
If you are alternating between massive gains and losses at random, then the curve should not grow exponentially correct? If I'm not mistaken this is what the mathematician cannot explain. What am I missing?
He is using the absolute value in the graph. By examining typical random Fibonacci sequences based on coin tosses, Viswanath uncovered a similar pattern. He ignored the minus signs, thereby taking the absolute value of the terms
Why is it that every time I make a thread similar to this, someone comes on and says: "You arn't taking any advice". Why cant I simply just ask an innocent question?... If I started a poll asking what kind of cars people drive, and if 60%+ drive a Toyota, does that mean I need to "take the advice" and sell my car?..no. The question was, "how did you become consistent?", not "how can i become consistent?" Sorry if I tend to ask questions that are similar. I have over 800 posts, I dont remember them all. --- peppermint let me ask you, what is your edge? your answer will probably be the same as mine. speed. If you find an opportunity, you must be able to capitalize on it before everyone else. If time was on our side, we'd all be investors and NOT traders.
I agree. If he used the neg figures instead of the abs value, I think that graph might look a lot different. Mav, How would we use this? Could you give an example?