Why Is The Obvious Not So Obvious?

Discussion in 'Risk Management' started by nysestocks, Jan 25, 2009.

  1. Johno

    Johno

    Low risk entries and picking tops or bottoms are usually totally different animals!

    Time to start thinking!
     
    #271     Mar 18, 2009
  2. nysestocks

    nysestocks Guest

    To continue:

    I am actually getting a bit interested in this author, as he knows what he is talking about, but he does not know the "obvious", nor will he ever know it!

    "Expectancy is sometimes recommended as a predictor of profitability. It is the
    probable return or profit for the next trade. It applies to a single trade. For a
    series of trades expectancy must be extended in ways that are not always obvious.
    The way in which expectancy is extended to a series of trades depends on
    the risk strategy being used for that series of trades. If fixed risk is being used
    then the extension is quite simple and straightforward. However if a percent of
    equity is being used as a risk strategy extending expectancy is more difficult.
    Expectancy is sometimes considered to be a figure of merit for a trading method.
    A high expectancy suggests that one method will be better than one with a
    lower expectancy. This is only roughly true. All measures of expectancy have
    problems because they forecast only the average expected profit. They say nothing
    about drawdown, nor are they predictive of the range of profit that might
    occur. Monte Carlo simulation shows the range of profit and drawdown that
    can be expected from a series of trades."
     
    #272     Mar 18, 2009
  3. nysestocks

    nysestocks Guest

    You can not see the top of a mountain when you are standing on it!

    I said I would not post analogies and the such, but in some cases they can explain the meaning in a few words, what otherwise might take a paragraph, or more!
     
    #273     Mar 18, 2009
  4. DrEvil

    DrEvil


    Nysestocks,

    thanks for the thread. I am enojying it! I will be honest and admit that I have no idea what the obvious is that you refer to. That said, I am making money. So I ask myself, perhaps I am doing the 'obvious' unwittingly and if I am then my percentage returns should roughly equal those one a trader who knows what the 'obvious' is and exploits is correctly.

    So my question is, what would be an aproximate percentage of growth on the account of such a trader who is knowlingly exploiting the 'obvious'?
     
    #274     Mar 19, 2009
    Joe6Pack likes this.
  5. Of course one should not sell a swing high.
    There is still too much risk. Price is in the process
    of establishing or confirming a resistance. Too choppy
    and unpredictable here. Waiting for the roll-over to
    become relatively 'irresistible' (~5%-10% off the top)
    then jumping ahead of the pack right before the break
    is the better bet.
    This would constitute one SHABL strategy,
    and is (to me) 'obvious'. Auto-bots set these up all
    over the place these days. (Another 'obvious'?)
    So is "The Obvious" then just a collection of littler obviouses?
     
    #275     Mar 19, 2009
  6. rcn10ec

    rcn10ec

    traderbigt, THANKS!

    nysestocks,
    This thread is providing me with some good "exercise" that cleanses one from all the "toxins" that have been taken in. I need that. It is appreciated. rc
     
    #276     Mar 19, 2009
  7. Not correct. Expectancy is the edge of a trading system - in the traditional gambling sense - assuming a large enough sample of trades has been used to calculate it and profits and losses are normally distributed.

    Expectancy is NOT "the probable return or profit for the next trade". It is the expected return calculated from a sample of trades. You should learn the difference.

    There is no such thing as "probable return". It is only in the mind of the person who wrote that piece.

    In probability theory, there are event spaces and probability of events. In statistics, there is expected value and deviations from it, amongst other things.

    Whoever mixes probabilities and statistics is in the best case scenario, a loser.
     
    #277     Mar 19, 2009
  8. nysestocks

    nysestocks Guest

    Maybe you are right, and maybe you are wrong!

    It will become "obvious" to some what it is they need to know, and what it is they do not need to know!
     
    #278     Mar 19, 2009
  9. nysestocks

    nysestocks Guest

    If you are making money, then you are of course on the right track!

    In relation to your % question, and depending on available capital, and depending on the level of opportunity in the market traded, and depending on the mental state of the trader, the % growth compared with what the "experts" teach should be somewhere in the region of say 50% PA return for a good trader using the "experts" way and anywhere from 500% to 1000% for the few that are fully aware of what the "obvious" can, and does, deliver!

    Now, before people get all hyped up, one must remember than all people are different, and for one person 1000% might be a reality, while for another it may be very hard to keep even 10% of what they made!

    So, even when the "obvious" is known by someone, it still does not guarantee continued success!
     
    #279     Mar 19, 2009
  10. Redneck

    Redneck

    Sir,

    Contrary to popular opinion – one’s P/L is the absolute best trading indicator there is – follow it ardently for it will lead you to success... And eliminate all others as they are worthless - IMHO Sir

    Redneck
     
    #280     Mar 19, 2009