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Discussion in 'Psychology' started by Urkel, Sep 18, 2006.

1. ### Urkel

"Here's an interesting paradox. Casinos make consistent profits day after day and year after year, facilitating an event that has a purely random outcome. At the same time, most traders believe that the outcome of the market's behavior is not random, yet can't seem to produce consistent profits. Shouldn't a consistent, nonrandom outcome produce consistent results, and a random outcome produce inconsistent results?" - Trading in the Zone/Fisher p.102

Discuss

2. ### Bearbelly

The events at a casino are far from random.

3. ### Algorithm

Casino activity and gaming v. markets is apples and oranges my friend.

4. ### Urkel

try again thinking outside the box

5. ### volente_00

The casino represents your broker in the analogy.

6. ### ang_99

Casino has a mathematical edge that never changes. I think its 5% for roulette.

7. ### Raystonn

Casino game results follow a normal distribution with rules that give them a small edge. No trading system I have ever seen has a true normal distribution. They tend to have fat tails. Since trading systems do not have a normal distribution, it is much harder to predict an average gain/loss per trade over millions of trades. The law of large numbers does still apply, but the mathematical models that rely on a normal distribution are not entirely accurate.

-Raystonn

Raystonn,

A truly coherent reply - well said!

The only other thing I'd add is that games (roulette, blackjack, poker, etc) take place in a finite universe (52 cards only in the deck, etc.) which makes the odds calculable. THe market does not represent a finite universe.

9. ### nazzdack

For what it's worth; profit, loss, edge and time exposure in gambling are defined by the rules of the game(except blackjack & poker). In the market, those four things are variable.

10. ### Hook N. Sinker

Price behavior of a security might show 99 % disordered price behavior and 1 % ordered price behavior (sometimes called a trend). The ordered part may only appear occasionaly, perhaps once a year. Trading results could vary depending on the timeframe and method used.

#10     Sep 19, 2006
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