You're right about the spread. Its only purpose is to make the fav look as bad as the dog. The vig is where bookies make their $. But the mixed lines are quiet common, specially for halftime & such. If you call a few bookies, and you get lines 3 1/2 on one side and 3 laying 30% (dog gets 110 for 100 bet +3 spread) on the other they're both competitive lines
exactly, almost any system you can come up with will over time break even minus the spread and commissions, that's why I always advise traders not to abandon a system in a drawdown. That's a sure way to take the slow grind down into the big washout. Especially if you follow a system until the drawdown is more then you can handle, and then switch to a new system with a now reduced account.
once I had a paper account that had gotten way far ahead of my real account. So instead of resetting the paper account I decided just to lose the money to get it back even. It was harder than heck. I did everything, took small profits and add to losers. No matter what I did I couldn't lose. Finally I figured out the only sure way was to just HFT until the spread and commissions got me back down. After about two hours I was completely exhausted. otherwise, it's just as hard to come up with a losing system as it is to come up with a winning system. The only losing system I know has a target but no loss prevention program. I saw it in action with a client and it is quite awesome. So for instance, you trade ES for one point and will not take a loss no matter what. It's amazing how long that will work. After a while it actually starts to look like a good idea. But eventually the big move against you comes. So to answer your question, after watching that losing system, I just did the opposite and that is when I became profitable. But it certainly isn't as easy as using stops. All that will do is get you to BE minus the spread and commissions.
When is the last time something "completely unexpected highly improvable and extraordinary" happened? Maybe in 2001 because the financial crisis was not so unexpected. I let you pay premium for the next ten years while I trade normal, expected events. You also confuse trading with gambling. The system you described is a gambling system. It has nothing to do with the systems in the OP.
Many have construed my handle here as signifying that I concern myself and/or try to protect myself from "Black Swan Events" but nothing could be further from the truth. No one can afford to pay premium because it makes them feel safe. Bill has it correct here. More than nine out of ten events that are portrayed as completely unpredictable are in fact rather predictable. While few could get the timing as right as Paulson, that the Greenspan insanity would end badly and end in a significant decrease in home prices was inevitable. Just because the press, Washington and the talking heads on CNBC call at as a fluke does not mean it was a fluke.
Wasn't the downgrade of the US credit rating August last year unexpected? If not, then why would the market drop so dramatically. The market didn't appear to discount that event and seasonality predicted a year different from what occurred. Could you please outline what you mean by a gambling system and by a trading system. I am unclear on what you mean.
The market did exactly the opposite when US was downgraded. Bonds rallied to the lowest yields in decades. Those that hoped for easy money got killed including famous fund managers. Let us start by the simple fact that in gampling the expectancy is known and except in a few cases outlined in Thorp's book (if I recall correctly now), it is always negative. To the contrary, the market can be a game with positive expectancy, sometimes for many years. This is one of the most informative blog posts I have found. It shows how some markets can be a game with positive expectany for a long time More on Games with Fancy Names that People Play There are other differences between trading and gampling but this one is the most important. But one thing is for sure: gamblers choose to play a negative expectancy game and rely on luck or do that for fun. Traders try to capture the available positive expectancy. This is different.
A black swan is almost never "completely unexpected" to all parties... e.g. 911 was not an unexpected event for the terrorist who committed the atrocity... it was unexpected for everyone else. Still a black swan. Same goes for the collapse of Lehman & bear... as well as other near-collapses that we saw in the 2008 crisis (the world's biggest bank losing >95% of its value and going subdollar for a couple of days counts as the type of event that puts the black swan hunting strategy into profits). The black week had several days > 20 sigmas... it broke many statistical models... The correlations meltdown of 2007 was also an unexpected event that impacted many hedgefunds and stat arbs around the world... But the swan hunting strategy is not concerned strictly with catastrophic events. One flavour of this strategy consists of buying out of money calls on small biotechs (or similar) hoping for one of them to find gold and grow exponentially... (similar to buying all lotery tickets on a lotery that has no cap for profits) This strategy is not a gamblers martingale system where you double on every losser hoping to get a massive payday later... (before you go broke) this is more similar to placing small bets on every number of the roulette or buying one of every lottery ticket... but unlike the casino the possible profits are not limited by the house... so the system is not fixed against betting every number... I've personally never traded this strategy, but I believe that it is a valid system that has an interesting and counter-intuitive risk-reward... since it is basically the opposite of the LTCM system (which would get many many small profits and one HUGE catastrophic-take-down-the-world's-financial-systems-in-one-shot loss...)
The system you are describing has negative expectancy depending on the time period a black swan takes to occur. In that respect, it is gambling. Only gamblers elect to play negative expectancy games.