If this was futures trading, does it look like I have a (+) expectancy?

Discussion in 'Trading' started by Fonzy66, Oct 31, 2012.

  1. Fonzy66


    Hi all

    Sorry if this is not very related to trading, but I need opinions from traders so I'm posting here.

    The attached picture shows my performance at the blackjack tables, plotted with Excel. Each dot represents my "P/L" at the end of each session.

    This represents 4 months of cardplay and about 300 sessions.
    Net balance is + $12,178

    I use a default bet size of $5. And I increase it when I have a winning streak. The largest bet size was $250 on a very good streak.

    Comments are welcome. I'm hoping to hear from experienced system testers.
  2. tommo


    I think a cumulative equity chart would give a clearer picture. For example if your equity chart constantly see-sawed between up a few grand and down a few grand and you happened to present your data on an upswing then i would say it would show no edge. But if there is a smooth upward slope with hundreds of data points it would be interesting to see.

    but that is speaking as trader. I know little about blackjack but unless youre counting cards the house has a statistical edge over you and bet sizing wouldnt change that... well thats my understanding.
  3. NoDoji


    If this was futures trading and you increase your size based on a "winning streak" (or a "losing streak", for that matter), any positive expectancy inherent in the remaining facets of the system will likely be erased.

    There is a random distribution between wins and losses for any given set of variables that define an edge (Mark Douglas, Trading In The Zone), making "streaks" irrelevant.
  4. bone

    bone ET Sponsor

    In my personal opinion, games of chance are not relevant to forward projections about the possibilities for sustained success trading markets for a living over the long term.

    Now, there are most certainly professional BlackJack players and professional Poker players on this earth. One could argue that "chance" is more applicable to BlackJack than Poker.

    I don't think it is particularly helpful to compare gaming outcomes to trading outcomes because the nature of the winning and losing streaks and the ability for the gambler or trader to make strategic adjustments independent of chance is not comparible in my personal opinion.

    A successful legitimate career trader will have a trading system where the entry signals and position management rules are not critically dependent upon chance. Again, that is just my own personal opinion. In fact, I would argue that position management is much more critical to successful trading than having a positive expectancy per se. You can actually be a profitable trader utilizing a system with a fairly mediocre statistical expectancy rate.

    Every clear thinking soul knows that if you really need absolutes in your life, then trading is not the business for you. Go get a government job. But a good trader will not endure a lengthy losing streak without making some sort of adjustment to his trading system design - or at the very least, sit on his hands and be way more selective. In this respect, I would opine that a trader has a bit more flexibility and room for maneuver compared to a professional gambler. The professional gambler does have some options and he can make some changes - but in my personal opinion the trader has alot more flexibility and tools available and that is the defining difference. Just my 2 cents.
  5. then that would mean nobody should ever add to a position
  6. NoDoji



    What does adding to a position have to do with strings of consecutive winners or losers? The trade isn't a winner or a loser until the entire position is closed, no?
  7. Visaria


    I don't see why.

    Suppose i toss a coin where if heads comes up, i win 2x my bet but lose if tails comes up. A bet with positive expectation.

    I bet a few times, have a streak of 3 heads (winners) and decide to double my bet next time. I still have a positive expectation bet.
  8. semantics I suppose. I consider each tick in my favor a winner
  9. Visaria


    It would be interesting and may provide evidence of an edge but not necessarily proof.

    Yes, this is correct.
  10. NoDoji


    A (fair and balanced) coin toss isn't a positive expectancy system. It's 50/50. The distribution of heads and tails can be very random; you can, for example have quite a few heads in a row (a "winning streak") but the expectancy is still 50/50.

    Now, let's say the coin is rigged in a way that it will land, on average, heads 60% of the time and tails 40% of the time over a particular number of tosses, and for the sake of illustration we'll say that we need at least 100 tosses (trades) to see the approximate 60/40 result.

    Since the distribution of these wins and losses is random, a streak of heads or a streak of tails is meaningless in the 100-toss scheme of things. If you're the casino who wants to take advantage of this excellent positive expectancy "edge", you have to play every toss (take every trade) with an equal bet. If you believe that a streak of heads or tails somehow means the odds of the game have shifted away from 60/40, and decide to abstain from some of the tosses or bet larger on some of them, you become the gambler who does not have an edge in the casino unless by cheating.
    #10     Nov 1, 2012