Yes Sir - because the overriding is always uncertainty of the outcome Not random - simply uncertain Randomness only present when our actions random RN
Cornix, The double speak, hedging and downright verbal gymnastics are in full effect here. These poor souls are so self deluded they have bought their own delusion. The language structure is classic, it's the way the "faithful" speak. DON"T FALL FOR IT. yes, I know its appealing-- its how most religions work, first its what folks want to hear, second its presented in such a way that twists logic and reality via language. In this regard it is account killing, in religion, the fanaticism leads to death and war. surf
Very interesting thesis, RN, thanks for that. If you allow, another question: are those principles of trade management similar for ANY strategy or they can also be anything with the only rule of consistent application?
Well, it depends on your point of view. It boils down to determinism or causation---- obviously, like it or not, from our point of view the market is random since we are lacking information most of the time. Just because you guess right or make money trading does not mean the market is not random. surf
If you just bet black on roullette-- that's a rule. over and over again, lose lose lose lose, make a 10X bet and it hits black- quit------ is it your rules or just dumb luck that made you a winner? That's the consistent application of a rule, so with a bit of luck thrown in, it can work! This is how delusion starts--- its insideous because its supported by wins-- just like the roullette guy who's rule is to only bet black.
I fully agree with you regarding roulette. However, let's wait for clear explanation by RN first, likely some details are missed.
I do not guess. I make "non random" decisions, because the markets are not random. The fact that my decisions are not randomly distributed in wins and losses proves that the markets are not random. In random circumstances there should be 50% losses and 50% wins, at least in a statistically representative quantity of trades. If I have +1000 trades and my wins are 60,70 or more%, then it is clear that the markets are not random. Random means the wins should be around 50% of all trades. They should be equally distributed.
CF First and foremost..., I am no where qualified to speak about ANY (every) strategy For day trading.., where the goal is to extract a certain portion of the ADR - by trading moves (not necessarily trading a / the "trend") - I would say Yes RN
Trading and roulette have totally nothing in common. If you think roulette is trading I would advice you not to trade, because you will have results that are comparable to roulette. In roulette you make a choice that you cannot change anymore when the wheel is turning. In trading you can continuously analyze the situation and take appropriate action. That's a huge difference. In roulette you have totally no control of the situation. In trading you can take control of your position and in this way change your chances while being in the game. So your situation is completely different. In roulette every result is between 0 and 35 and can be any number. So that is random. result can jump from one extreme to the other extreme. In trading the outcome should be anywhere between zero and infinity to be random (theoretically between minus infinity till plus infinity). In roulette we see the results jump up and down between the minimum and the maximum, whereas in trading we don't see this. I never saw prices jump from 0 to 125477995452110054522, and then to 125,45. Prices move in a much smaller range, so they are not random. There is a reason why prices don't jump from one extreme to the other and back. That reason is that there is an estimated value behind every price. This estimation can vary, but is never random because every move is a result from a new value estimation.
Interesting discussion. One should not confuse a self-organizing complex system (like the markets) with a Random process. Markets are not random, as you claim @surf, but are self-organizing complex systems. If you are interested in learning about complex systems as applied to markets read Hayek's beautiful work on Complexity. By this definition, there do exist patterns that can be exploited, but the exact nature (shape) of a pattern or the timing of occurrence of such pattern cannot be predicted. The model of markets based on informational efficiency is the worst thing that happened to the advancement of knowledge about markets -- there are multiple philosophical problems with that model, but this is not the place or forum to discuss it. @Conix pay close attention to what @Redneck said about how he "defines" trading plans. He has a knack of slipping very important distinctions in a very subtle manner . One cannot trade a signal in all contexts even if that signal occurs in multiple contexts. The first and foremost thing to do is to develop a framework that gives you the ability to exactly define contexts in a objective way -- i.e., if you give your framework to define contexts to multiple people, all the answers from different people will be the same. Once you have such framework, look at signals that have high probability of success in that context. These are the signals you want to trade in that context. The same signal in a different context might not be a high probability signal. Only after you have identified the trade-able signals are you ready to develop a trading plan -- entry, stop loss, how to manage the trade, exit -- around each of the signal you identified for a particular context. No step in this process can be skipped. These steps should be repeated for all the contexts you have identified using your framework. After you have completed the above process, reflect about randomness and markets - possibly you will acquire a deeper understanding of how markets work, the patterns they form, and thereby really appreciating Hayek's work, should you chose to read it! When @Redneck bets $5.00 that he can take a losing "trading plan" (within quotes and emphasis added to distinguish the use of this word in a traditional sense from the one I outlined above) and make it profitable, my guess is, he will use his framework for context and determine the context in which such "trading plan" can be used so as to make it profitable. In other words, he will make the "trading plan" context-aware (and thus into a trading plan, without quotes and emphasis, as described above). But it is just my guess; I could be totally incorrect. Also, "technique" (trading plan developed as described above), although is necessary, alone is not enough. There is more to trading than a trading plan. All the best. Regards, Monoid.