bear, that's a great analogy. cards TRULY are random. yet, given a random distribution of cards, a skilled player, given sufficient "n" makes money. and that money necessarily comes from losing players. the stock market is not zero sum, like a poker game, but the futures market is, so it's a good analogy. otoh, if you are a short term trader, the stock market is ESSENTiALLY close enough to zero sum to also have merit in this analogy. look at johnny chan. he won TWICE in a row (granted, the WSOP had far fewer players back then), but that is still INCREDIBLE. the chances of that happening by chance, are astronomically small similarly, there are many players who consistenty win and place in the money in WSOP and circuit events at very high rates, and there is NO way that skill does not play a part. to quote an old stats professor "at some point, a million points of data becomes compelling" this has nothing to do with reality. it has to do with what people WANT to believe to soothe their egos losing traders who don't want to admit they weren't a good enough trader to make it, cannot accept that it was THEIR fault. so, if the market is random and perfectly efficient, they can blame the market there is NO way that gus hansen, negreano (sp?), etc. could achieve their results purely through luck simlarly, it is (as close to ) impossible (as one could imagine) that somebody who makes THOUSANDS of trades a year could be profitable in an efficient market. the more trades you make, the more you pay (relatively) in slippage and commission in an efficent market, anybody (many people) could get lucky and make money position/swing trading with a few dozen trades in a year when you get into the THOUSANDS of trades, it is not statisitically possible also note that i am generally a scalper (i also trade longterm accounts, but i am referring to my dow minis trading), and a scalper has a greater burden to overcome because his targets are smaller thus commission is a greater %age of his trading expenses and a much higher burden to overcome (must have, ceteris paribus, a greater edge to be profitable) most of my primary trade targets are about 6 points (depends on the setup), so i am going to pay 4/5 a point in commission, and that is close to 1/6 of my trading profits would get eaten up by commission. that is MASSIVE because my edge has be well beyond 1 pt a trade to be profitable to any extent, especially also considering slippage in fast moving markets.
Hey, you're not Alex are you? I just spent a few days in a room with a guy who does the same thing. Scalping the YM for 5-10 points all day long. I really like this approach but it requires scaling in and out to be really effective and I cannot afford to go this route yet.
Huh? 15 tosses could hardly be considered as approaching infinity - only an idiot would use the Central Limit theorem to draw any kind of conclusion. However, if after 1 million tosses you get 55% heads I would accept the Central Limit theorem's implication that the coin is probably biased.
bear, i am not alex i just find that the most profitable method (scaling out) certain setups allow scaling in as well. depends on the setup
I think we're making the same point. Price movement can't be modelled with stochastic linear distributions. That's the inherent and fatal flaw of price-based "indicators" and supposedly objective models like Market Profile. And, with due respect, there're more idiots than morons out there.
"supposedly objective?" all indicators i am aware of are 100% objective. that says nothing about their UTILITY. but i am not aware of any indicator that is not OBJECTIVE. just as price is objective. i love the fact that many daytraders try to find the grail through indicators. it makes the market more predictable. PROFITABLE technical analysis is the study of the losing trader. there are far more of them than winning traders, and knowing how they think (and don't think) is key.
fair enuf market profile users (and i use MP myself btw) are wrong if they think THEIR model is objective, and others aren't frankly, i get tired in some MP threads and forums where they get all "holy grail" abou t it there is nothing magickal about the "value area" or the point of control. they are nice reference areas, but so are classic support/resistance levels, pivot, etc.
whitster, agreed, I've used MP myself successfully. There are moments when price forms a normal distribution with a value area, as you say, that's tradeable. There are also moments when broken clocks are correct, too -- twice a day. You're obviously an "old hand" who knows when an MP distribution offers an edge and when it doesn't. It ain't the universal panacea, by a long shot. We're just looking for high-probability setups, not inviolate "rules" that produce winning trades. (I don't use the term "Holy Grail" (or "holy grail", for that matter) -- remember, I promised! -- because usage in the trading context isn't consistent with the Percival/Parzifal myths. No offense meant.)
YES WE are on the same page MP models price over time so does a tick chart and so does a timechart neither is more objective than the other. but, they do help give different insight into past market behavior. im pretty zen about this stuff. i don't believe in grails, just trading with an edge