Strategy Trading, Probabilities & Blackjack/Poker

Discussion in 'Strategy Building' started by Remiraz, Sep 10, 2005.

  1. jason_l


    random entries woud be 50/50 if the the market were random. The assumption here I believe is that being a trend, the market is no longer acting in a random fashion.
    I also would think MOST traders who are not on the floor operate on the assumption that markets are NOT random.
    #31     Sep 29, 2005
  2. Remiraz


    random entries are not 50/50 due to spread/comms/slippage. 10 ticks tp/sl with 1 tick spread its about 40/60.

    this still holds in a trend, trading in trend's direction. how so? because its super easy to test this on a backtester. just find periods where it trends and test entries in the same direction. its still random.

    its no secret that the biggest money makers in this industry are the institutional arbers. Arbitrage is still raking in millions if not billions for people at Goldman Sach, Merill Lynch etc. these guys believe the markets are random.

    while traders who assume markets are not random are often associated with "90% lose" etc. :(
    #32     Sep 30, 2005
  3. joeper


    All this blackjack theory/gambling related to trading is bull crap.
    One simple rule: Do not go against the market - random or not random.

    Done. WTF is all the fuss about. Let's keep it simple for uCKs sake.

    Ya let's see Fibonacci's numbers help you out when you try to go against the market...
    #33     Sep 30, 2005
  4. The quant, etc approach doesn't make much money relatively speaking.

    The BJ thing doesn't apply to making money either.

    It is best to start with a blank sheet of paper and go from there.




    What do you need to fill in to get a handle on making money?
    #34     Sep 30, 2005
  5. Jack,

    Tell us what is "The quant approach".

    #35     Sep 30, 2005
  6. However you want to view the nature of markets, the important thing is that whatever the belief is, you are comfortable with that view because you have a way of making money from the market. Please stop worrying about how arbs at goldman sachs view the markets -- they are not entering their trades randomly despite what you claim they believe, and you do not have the resources as an individual trader to emulate what they do. You need to start with the belief that you will be able to find situations where you buy or sell in anticipation of the rest of the market players buying or selling after you -- that's pretty much what it comes down to and is all you really need concern yourself with.
    #36     Sep 30, 2005
  7. Quant has become a significant contribution to the financial industry, especially in terms of the capital applied to its developmnet, refinement and utilization.

    I am very gald that it exists in the specific context that it helps me to make money because others than myself are devoted to its application in the market place.

    Two heavy hitters in the field whose progress I am a student of are ITG and State Street. QuantEX and Lattice, their platforms respectively, do the dynamic functions as articulated briefly by Larry Harris for the layman.

    Other key word and phrase searches you can conduct would include:

    Programming languages
    Router systems
    dynamic market conditions
    real time market data
    large trading program management
    electronic order management (order routing)
    fast order routing systems
    high-frequency proprietary trading strategies
    standardized orders and instructions
    cell phone (attention demanding alternative)
    floor operations
    anomoly limitations

    Obviously, you can use the above to write a glossary type or style definition that shows the avantages and deficiencies ( see corresponding order of the above phrases from advantages to dissadvantages).

    This is a reply on the form II or III extra credit level for a Tuesday hand in that is current event oriented.
    #37     Sep 30, 2005
  8. Remiraz


    do note that I never said they were entering randomly.

    I guess this is what seperates those making money from those who aren't. Knowing the difference between random and entering at random.

    Blackjack and trading is more similar than most people think.

    Think about it. The hands a player get on the Blackjack table is random. Assuming the casino took measures against card counters and shuffle cards after each hand.

    Yet you can improve your odds by not entering randomly, using basic strategy. Although this will still leave you with a -0.5 edge, its a big improvement over the -5 to -10 edge random play have.

    Thus we have:

    -A game whose results are totally random
    -Yet we can entering non-randomly to improve our edge

    This is what make the biggest bucks in the industry.
    #38     Oct 1, 2005
  9. Remiraz


    Quants have been making money thru arbitrage operations since the markets exists. You should try reading up on arbitrage.

    The BJ thing applies to making money in the market. Though you're right it doesn't apply to making money in general.

    Consider this: You need 10,000 or more samples in all other situations (BJ etc) to determine if you have an edge. Why should trading be any difference? Anything below that could be due to variance. A good read for that would be "Fooled by Randomness".

    No. While i do not deny the possibility that your mindset might work, i can't confirm it too. Until I do, there is no visible benefit for me to "keep it simple" like you say.

    FYI Fibo isn't technical, mathematical or proven. Its more of a mumbo jumbo cult thingy. :p
    #39     Oct 1, 2005
  10. If something is totally random, it does not matter what system you use or how you enter -- your results will be completely random as well -- ie, calling coin filps, roulette.
    What separates them is that the former concern themselves with what makes money and what doesn't, while the latter prefer to theorize about red herring concepts like randomness.
    The only reason anyone can "beat the dealer" in blackjack is precisely because it is not a completely random game -- I don't understand the point in assuming a shuffle after each hand. You can improve your results in any game by just making higher probability choices given the rules (standing on 19 in blackjack) or payout (not taking "prop" bets at crap table), but it does not mean you can necessarily gain an edge overall in that game. In blackjack past hands affect the outcome of future hands, and that makes it the only casino game (other than poker) that has any possible connection to trading.

    The edge in institutional arbitrage is based on information and technology available to these those firms to identify the opportunities; the nominal profits a result of their accesibility to capital and ability to apply it in situations where outright loss is minimized. "Big money" is made applying big money. But I don't see how any of this relates to the belief in market randomness. If I know of a willing seller of X at 50 and a willing buyer at 51, I will buy at 50 and sell at 51 regardless.
    #40     Oct 1, 2005