the topic is averaging down and it was a good thread until you insisted we all talk about your edge take it to the edge thread otherwise, it's because I own the table with an edge and all the shooters think they have one the ones that crack me up are the losers who keep doubling in hopes that sooner or later they will make their point
Well... not sure if this is what you are looking for- but typically under normal settings- bollingers will look at 20 periods and wrap lines around a +/- 2 std deviation range. The area within represents 96% approx of price distribution. When a large spike occurs outside - it indicates an extreme... and that a reversion to the mean is imminent. The false sense of security occurs here however- as while it is 100% certain that price will indeed revert to the mean (the 20 sma/ema)... what is not certain is if the mean reversion will be higher tham your entry if long or lower than your entry if short. Price can pierce for an extendec period... thereby driving the mean higher or lower... resulting in a negative postion when its all said an done. Indicators such as these should only be used as a confirmatiom tool... but not as a trigger in and of itself.
I"ll tell you why: It's becausr the rules of the game dictate that the probabilites are in your favor... plain and simple. Let's take blackjack. Each hand is independent of the other, correct? Does Vegas have an edge on a single hand? Of course not. Uncertainty exists...regardless of what happened on any other hand in the past-- a hand stands on its own merit. At any given time- a random bettor can take Vegas to the cleaners. HOWEVER-- based on the rules of the game- Vegas knows that over a statistically meaningful number of hands- they will always come out ahead. Why? Because the rules of the game dicate that the probabilities/odds are in their favor. That is an "edge".. and there is nothing different from this analogy to that of trading.. plain and simple.
ok, get one of your rules and put it on the computer and run it out and tell me when it finally hits ruin. Because they all do. The only one that won't is Martingale, and that assumes you have an infinite supply of capital and no betting limits.
This has zero to do with risk of ruin scenarios... You are digressing here. I'm talking about trading edge as in strategy... not optimal bet/position size/risk mgmt. An edge is completely worthless w/o proper risk management... it doesnt take a genius to figure that out... but this is moot regardless.
it isn't an edge if it has risk of ruin. Maybe it's just semantics, but when someone claims they have an edge it just sounds to me like they are trying to be a big shot, like they own a casino, when in fact they are just lucky (or very skilled) betters.
its not a fools game this is how morgan and goldman trade, you've again provided a skewed vision that pigeonholes your mental capacity,i e bollinger bands,nothing wrong with that if its your preference,but if you are wearing blinders,you wont grow and your tool box may come up short as the market changes,for instance, the vanishing return to the mean,just an if..the example says that you selll into a general area rather than a specific price