The Market's House Edge! :(

Discussion in 'Strategy Building' started by Remiraz, Aug 9, 2005.

  1. ====================
    Was thinking along the same lines;
    even the indexes are figured wirhout any comissions.

    However , unlike stockbrokers,the casinos are quite open about thier hatred of card counters, which they & thier private detectives consider undesirable ''customers''
    #11     Aug 15, 2005
  2. You forgot to factor in commissions, this is only half of the story.

    I have long believed that the markets where never a zero sum game and that the if you calculated the amount of commission paid every day by every retail trader it would be very shocking!
    #12     Aug 15, 2005
  3. Remiraz


    I did. By assuming no comms. LOL. Because the comms is different for everyone its hard to count but the spread is the same for all. Also $4 RT comms might have different tick value in different market. Hard to count. Or maybe i'm lazy. :D
    #13     Aug 15, 2005
  4. Don't you think that our edge change dynamically as soon as the trader change his stoploss with a trailing stop?

    The idea behind this thread is the stoploss is fixed and unmovable as with the target and the edge house is the same during all the time of the trade.

    - So what about the change of the edge when you trail your stops (should the position move in your favor)?
    #14     Nov 5, 2005
  5. Remiraz,

    It took me a couple of minutes to think about this and then I realized. Isnt the house edge more like noise than an edge? Or do you think its best to call it an edge? Im sure this comes in handy when developing high frequency trading systems.
    #15     Nov 6, 2005
  6. Anyone willing to partecipate to the latest 2 posted questions?
    #16     Dec 12, 2005
  7. Remiraz,

    You make some bland and incorrect assumptions when trying to calculate a "house edge".

    While I strongly believe that no such thing as a "house edge" exists in trading, I will go over some fairly basic rules of probability distributions and the way in which supply/demand ideas relate to them. This will hopefully to be to your benefit:

    Psychology and price movement are not random. In fact, they fall into certain types of probability distributions day in and day out. Long term and short term supply/demand control these distributions and quantities of each force can be analyzed to find statistically significant behavior.

    If you understand the above, then you only trade when the "odds are in your favor" so to speak. In fact, there are many times when the odds will be overwhelmingly in your favor depending on which price points you chose to trade (this idea along with a solid psychological make up are the keys to consistency).

    As far as trailing stops, I do not use them. I only adjust my stop to breakeven after enough gain on the trade.

    #17     Dec 12, 2005
  8. Isn't supply and demand constantly changing by the minute making s/d statistically insignificant? :confused:
    #18     Dec 12, 2005
  9. A 1 minute chart is too short of an interval, longer term buyers and sellers do not change their intentions in minute time frames.

    I'm not sure if you understand the basic concepts of price/volume analysis. Markets trend, oscillate, trend, oscillate, etc, etc... imbalances of supply and demand create trends and the current value of the market is the mean of the price/volume distribution.
    #19     Dec 12, 2005
  10. Hi Mike,

    If you do not believe in house edge, do you always use market orders to get in your trades? And, are you a daytrader or longer term trader? I tend to agree with Remiraz that there is actually some sort of house edge because the real price is something in between bid and ask, and if you always pay up as in market orders, you would be incurring extra costs. However, I also think that in volatile times, when there is a need to get in and get out quick, I still use market orders. Put it this way, I would bargain for better prices if I am not in a hurry. Would like to listen to other's views.
    #20     Dec 12, 2005