{quote} {image}
In this post we are going to use a 1:1 risk:reward ratio and a edge over the spread that equates to 0.1% - very tiny! Not as bigly as we'd like to see. But it'll do! Without management, just taking the trades as they come, what do you think the probability is that we will see a profit after a series of 100 trades? If you guessed around 50%, you are pretty close, it's actually only 46.759%.
> sum(dbinom(51:100, 100, 0.5+0.05/100)) [1] 0.4641868
So that means with this system, we can expect to lose money every 100 trades, more than half the time.
> sum(dbinom(0:49, 100, 0.5+0.05/100)) [1] 0.456228
{quote} i know it seems like that would be the case, but because the count of wins and losses will folllow a geometric Brownian motion themselves(along with price) it is extreme rare that after 100 trades the losses and wins will equal each other.
{quote} That is because in these sample sizes, we will see an arcsine distribution instead of a Gaussian one.
m <- 100 #No. of trade
n <- 100000000 #No. of iteration
p1 <- p2 <- p3 <- numeric(n)
for (i in 1:n){
r <- cumsum( sample( c(1 , -1), m, replace = TRUE, prob = c(0.5+0.05/100 , 0.5-0.05/100) ) )
p1[i] <- r[m]
p2[i] <- length(r[r>0])
p3[i] <- p2[i]/length(r)
} > length(p1[p1>0])/length(p1) #probability of your account to be positive after 100 trades [1] 0.4641471 > mean(p3) #probability of the equity curve staying at postitive side during 100 trades [1] 0.46746
i think some of you guys think to intellectual, too rational. this will not work in the end. trading is more an art than a scientific approach. you cant dance, draw pictures or trade successfully with too much thinking and overanalysing.
(this including the art of trading).
ok, lets say trading can be scientific, rational...but the market is it not. could we agree with this? anyway i dont want to make thinks too complicated and everybody thinks different from his/her few of experience. i just want to helped some who might run in their circles and dont find the way out.
You name it, we have all kind of cheese toppings you would like to put on your Pizza!
{quote} The Market is irrational >>> Agree. That's why we have: Chaos theory Brownian motion Uncertainty principle Emergence Theory Quantum Physics Randomness Anti-fragility Non-linear Math Lorenz Systems (and System Science) Evolutionary Psychology + Cognitive Psychology + Social Psychology You name it, we have all kind of cheese toppings you would like to put on your Pizza!
