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Admit it - your profits are based on luck

  • #321
  • Sep 27, 2008 11:42pm Sep 27, 2008 11:42pm
Quoting Spoony
Did anyone predicted the subprime crisis? Have they been gambling or speculating their way through?

Yes, and yes.
  • #322
  • Sep 28, 2008 12:04am Sep 28, 2008 12:04am
a lot of people have predicted this crisis years ago but no one listened.
Even a guy on this board made some crazy posts a while back citing fibonacci was predicting some major financial disaster lol.
  • #323
  • Sep 28, 2008 12:06am Sep 28, 2008 12:06am
Quoting Leonlorenzo
Anyone got any idea what has happened to Tdion?

His display pic and all his profile is gone, real strange.
http://www.forexfactory.com/showthread.php?t=109277
  • #324
  • Sep 28, 2008 7:02am Sep 28, 2008 7:02am
Quoting Spoony
Did anyone predicted the subprime crisis? I mean those investmant banks, lehman brothers, wamu and hundreds of super funds have gone bankrupt in the past few months. How could they not foreseen it? They been in the market for years longer than us and yet they r the first to go. Have they been gambling or speculating their way through?
I guess that's a classic example of what happens when someone only looks at the upside of a deal instead of calculating risk and managing money.

Plenty of analysts and market gurus predicted something like this would happen, most of them underestimated just how bad it was going to be though.
  • #325
  • Sep 28, 2008 2:07pm Sep 28, 2008 2:07pm
Quoting merlin
this is an old technique (like 30 years old!) and its prone to failure. this is addressed extensively in the market wizard books as well as fred gehms book. if you search for thousands of patterns, obviously a few good ones will pop up. but what have you done other than predict the past? if you read my article i wrote for S&C, youll see that my opinion is that you are going about this backward. i believe in starting with a fundamental premise (which can only be derived from market experience) and then build the system based on that premise. dont let the data tell you what to do, instead you should come up with a premise and "ask" the data if you are right or wrong about it. and you cant ask too many times, because then the data will start to control you. control the system development process or it will control you!
wow I only just read this now Merlin, so unbelievably well said

Thanks

Mike
  • #326
  • Sep 28, 2008 2:54pm Sep 28, 2008 2:54pm
Dear Thread,

As long as someone is wondering whether anyone predicted the subprime crisis, allow me to answer John Paulson of Paulson Associates made approximately $3.7 billion personally by shorting the whole thing. He thought of the trade, designed the trade (it couldn't be done at the time), suffered through the trade moving against him, and had the conviciton of adding to his position and, of course, hung in there. The trade of the century thus far, frankly. Warren Buffet's buy into Goldman's, stepping up to the plate literally (where were the other buyers?), will also look prescient in years to come.

Lenoxer
  • #327
  • Sep 28, 2008 4:01pm Sep 28, 2008 4:01pm
Quoting Lenoxer
Dear Thread,

As long as someone is wondering whether anyone predicted the subprime crisis, allow me to answer John Paulson of Paulson Associates made approximately $3.7 billion personally by shorting the whole thing. He thought of the trade, designed the trade (it couldn't be done at the time), suffered through the trade moving against him, and had the conviciton of adding to his position and, of course, hung in there. The trade of the century thus far, frankly. Warren Buffet's buy into Goldman's, stepping up to the plate literally (where were the other buyers?), will also look prescient in years to come.

Lenoxer

when did he start his position?
  • #328
  • Sep 28, 2008 4:06pm Sep 28, 2008 4:06pm
Quoting Leonlorenzo
Anyone got any idea what has happened to Tdion?

His display pic and all his profile is gone, real strange.

I don't know about him, but I know that 4x trading is not the only place where one can push the envelope too far.
  • #329
  • Sep 28, 2008 4:13pm Sep 28, 2008 4:13pm
I'm not sure of the date. But the following is from Alpha Magazine:

Hedge fund manager Paulson earns $3.7 billion

Thu Apr 17, 2008 5:19am EDT
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LONDON (Reuters) - Bets on a U.S. housing crisis earned hedge fund manager John Paulson $3.7 billion (1.9 billion pounds) in 2007, ahead of industry legend George Soros and 2006's highest-paid manager James Simons, according to Alpha Magazine.
Paulson, whose bet that investment grade mortgage bonds would be subject to default in record numbers came good in the subprime meltdown last summer, was one of five managers earning more than $1 billion, Alpha said in a note on Wednesday.
His earnings were more than double those of 2006's top earner -- mathematics professor-turned-investor James Simons, who founded Renaissance Technologies Corp -- who in 2007 earned $2.8 billion.
George Soros, whose Quantum Endowment Fund returned 32 percent last year, earned $2.9 billion.
The top 25 managers earned, on average, $877 million in 2007, up from $532 million in 2006.
This "may well prove to be the greatest display of individual wealth creation in any year in the modern history of finance", Alpha said in the note.

Cheers,

Lenoxer
  • #330
  • Sep 28, 2008 5:26pm Sep 28, 2008 5:26pm
@Lenoxer:
I wonder what Mr Paulson would think if he knew he was being discussed in a thread entitled "Admit it - your profits are based on luck". LOL.

@Mike:
I agree, the comment by Merlin is very profound.

@Kudzu, Leon:
TDion has explained his position - see the link in Opie's post (#323).

David
  • #331
  • Sep 28, 2008 5:32pm Sep 28, 2008 5:32pm
Quoting tdion
So no matter how skilled you are..... no matter how exceptional your trading aptitude.... no matter how much experience....

you are nothing without your better half: the market.

She is your dance partner. You don't control her. She controls herself. Your skills and timing might be impeccible, but she can ruin the dance routine.


Egotists, stop patting yourself on the back, and give the market her due when you make your profit. And by the same token, newbies don't get too down on yourself over your losses either.
Hey man let me tell you something :
You DO NOT gamble in this market .
If you do so you are right .
This is a game of patience , science , money management , . . . .
There is a big stuff to learn.
  • #332
  • Sep 28, 2008 5:58pm Sep 28, 2008 5:58pm
You do gamble. Look up gamble in the dictionary. Peace.
  • #333
  • Sep 28, 2008 8:01pm Sep 28, 2008 8:01pm
Laff... depends on your definition of gambling.

Strictly speaking any bet on a game of chance is gambling, so yes, individual trades are gambling in that sense.

But if you have a defined statistical edge that plays out over time, you're playing w/ the law of large numbers on your side and it stops being gambling as a larger number of trades are taken... moving beyond a game of chance.
  • #334
  • Sep 28, 2008 8:16pm Sep 28, 2008 8:16pm
Quoting Rabid
Laff... depends on your definition of gambling.

Strictly speaking any bet on a game of chance is gambling, so yes, individual trades are gambling in that sense.

But if you have a defined statistical edge that plays out over time, you're playing w/ the law of large numbers on your side and it stops being gambling as a larger number of trades are taken... moving beyond a game of chance.
I'll say it again, the entire point was that a given "statistical edge" might disappear at any given moment due to changes in volume and market structure over the years.
  • #335
  • Sep 28, 2008 10:29pm Sep 28, 2008 10:29pm
Quote
I'll say it again, the entire point was that a given "statistical edge" might disappear at any given moment due to changes in volume and market structure over the years.

Whatever... lol.

If that's how you define statistical edge, yes. But that's not how I define one. Yes the particulars can change over time, but that's easy to determine during the process, and a properly determined edge will have a good returns distribution so as not to disappear "at any given moment."

If you really take the time to understand your edge, it's not something that can be just randomly taken away from you. The specific distribution of the edge may vary within some bounds over time, but all of that is quantifiable.

I go back to my "9 or better" game example. It's all just an exercise in conditional probability.
  • #336
  • Sep 29, 2008 4:19am Sep 29, 2008 4:19am
Quoting hanover
I wonder what Mr Paulson would think if he knew he was being discussed in a thread entitled "Admit it - your profits are based on luck". LOL.
lol, probably something like "damn, I'm one helluva lucky son-of-a-gun gambler!"

  • #337
  • Sep 29, 2008 4:24am Sep 29, 2008 4:24am
Quoting fxterrapin
I'll say it again, the entire point was that a given "statistical edge" might disappear at any given moment due to changes in volume and market structure over the years.
However many times you 'say it again' it doesn't mean it makes any difference to overall profitability.

An edge doesn't just dissapear overnight, it's obvious if/when a system loses it's effectiveness and it's adjusted to suit market conditions accordingly.
  • #338
  • Sep 29, 2008 4:28am Sep 29, 2008 4:28am
Quoting Ted1983

Peace.
Is that fish, pips, and peace? Mushy?

Do you have a lispth
  • #339
  • Sep 29, 2008 5:28am Sep 29, 2008 5:28am
Quoting tdion
So no matter how skilled you are..... no matter how exceptional your trading aptitude.... no matter how much experience....

you are nothing without your better half: the market.

She is your dance partner. You don't control her. She controls herself. Your skills and timing might be impeccible, but she can ruin the dance routine.


Egotists, stop patting yourself on the back, and give the market her due when you make your profit. And by the same token, newbies don't get too down on yourself over your losses either.

Yeah, right!!!

Said the same thing the other day. Indicators show trend ... past tense, fibo predicts...yeah, maybe.

So I for 1 agree with you ... we are small sand grains at her mercy
  • #340
  • Sep 29, 2008 6:42am Sep 29, 2008 6:42am
Quoting Jnita

....we are small sand grains at her mercy
Not really.

The market isn't some romantic-sounding free spirit in control of 'herself', the market simply consists of buyers and sellers, it's nothing more than a facility for us to speculate on and make money.

When I make a profit on a trade it's due to my own analysis of where I believe traders are probably going to take price. When I make a loss I was wrong in my analysis. To say that the market was responsible for my gains and losses is incorrect and would be something of a cop-out, ie "it wasn't my fault, it was the market, 'she' was nasty to me!".

As for indicators, they show all sorts of things, and Fibonacci percentages (which are closely watched by a large number of traders) highlight probable support and resistance levels, both are just tools in a toolbox, how effective they are will depend on how proficient the user is.
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