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Admit it - your profits are based on luck

  • #401
  • Sep 30, 2008 3:12am Sep 30, 2008 3:12am
What can I say? I got too many requests to come back.

Wattawatta, why so hateful? You are about the nastiest person on this forum. Sorry to disappoint, but I won't be engaging in these childish disputes with you anymore.

Quoting wattawatta
I thought you said you were leaving? Like a dog returning to its own vomit.

And please don't send me any more cursing PM's
  • #402
  • Sep 30, 2008 4:25am Sep 30, 2008 4:25am
Quoting lostinspace
So your definition of 'luck' is random chance?
Kind of. I would say luck is a non existant supernatural force, invoked by those who do not intuitively grasp the random nature of existence.

For example. Although I am not a professional statistician or physicist, I am aware that if I win the lottery I am not in reciept of some devine, benevolent intervention in aid of my financial situation.
  • #403
  • Sep 30, 2008 4:25am Sep 30, 2008 4:25am
I thought "luck" was the exact opposite of "random chance"... If you are lucky, then you defy random chance. In any case, I think people have an entirely wrong idea of the theoretical limits to which analysis can be applied. Randomness, according to modern science, is so deeply embedded in the very core of existence that it cannot, even in theory, be overcome. This stems from two separate "inherent" reasons:

1. Uncertainty produced by the quantum nature of matter at the microscopic level - which can only be overcome at the macroscopic level by using statistical mechanics. By tdion's definition of luck therefore, we are all "lucky" just because we don't all of a sudden fall through the floor. According to quantum mechanics, a person could theoretically, at any time, simply fall through the floor that they are standing on. The probability of this happening is very very very very very low, but NOT ZERO. Does that mean I should consider myself lucky because I consistently manage not to fall through the floor?

2. Another set of uncertainty is introduced in the world around us through the inability of our measuring instruments to have infinite precision. What this means is that when we measure the state of any system, we cannot be certain that the variables we measure (such as angles, positions and velocities) don't have extra "decimals" which we can't see with our instruments.

These are both uncertainties that come up at the most basic levels of matter and hold true even for the simplest and most "predictable" systems. In addition to this inherent uncertainty in everything, in more complex systems such as financial markets, we have the added uncertainty that results from our inability to even know which variables to measure or how to apply them to the system in any consistently predictive manner. So the level of uncertainty is three-fold. The uncertainty is there and so is therefore its doppelgänger, luck. Therefore, to say that you can predict the outcome of anything with 100% certainty is bollocks. That DOES NOT mean that your forex profits are based on luck. While we cannot predict anything with certainty, we also cannot ignore the effects of probability on the way it shapes the world. Just as statistical mechanics is a good macroscopic approximation of what goes on in the microscopic or "quantum" world, just as I don't consider myself particularly "lucky" simply because I haven't fallen through the floor, so too I don't consider myself particularly lucky simply because I have been profitable in forex.
  • #404
  • Sep 30, 2008 4:36am Sep 30, 2008 4:36am
Quoting fierceman
Therefore, to say that you can predict the outcome of anything with 100% certainty is bollocks.
I don't know anything about dropping through floors so I'll leave that bit, but are you referring to my comment about 100% accuracy? If so, there's a difference between accuracy and certainty.
  • #405
  • Sep 30, 2008 4:40am Sep 30, 2008 4:40am
No I wasn't referring to your comment. I was referring to tdion's statement from a while back that unless you can guarantee with 100% certainty that every trade you make will be a winner, then any profits you make are based on luck.
  • #406
  • Sep 30, 2008 4:41am Sep 30, 2008 4:41am
Quoting Ted1983
Kind of. I would say luck is a non existant supernatural force, invoked by those who do not intuitively grasp the random nature of existence.
Well now I'm confused!

I don't believe in luck in the traditional sense of the word, and I don't believe everything is random, so where does that leave me? Certifiable?
  • #407
  • Sep 30, 2008 4:47am Sep 30, 2008 4:47am
I found a $50 note in the street one day.

By using a system, discipline,MM and my knowledge of the markets, I made a profit of $50 today.


You tell me, which was luck.
Polishing my crystal ball
  • #408
  • Sep 30, 2008 4:54am Sep 30, 2008 4:54am
Quoting lostinspace
Well now I'm confused!

I don't believe in luck in the traditional sense of the word, and I don't believe everything is random, so where does that leave me? Certifiable?
You don't have to believe in randomness. The beauty of current scientific theory is that it leaves the door open for you to believe that this apparent randomness is the result of whatever you want to believe. In effect, it imposes certain limits on science itself, and therefore allows your mind to speculate about what lies beyond those limits.
  • #409
  • Sep 30, 2008 5:10am Sep 30, 2008 5:10am
Quoting fierceman
You don't have to believe in randomness. The beauty of current scientific theory is that it leaves the door open for you to believe that this apparent randomness is the result of whatever you want to believe. In effect, it imposes certain limits on science itself, and therefore allows your mind to speculate about what lies beyond those limits.
What limits?
Its only in aperfectly Newtonian universe that we are limited. If it was possible to predict the motion of every particle with 100% accuracy, (which is a neccessary belief if you don't believe in randomness) then I could tell you where you would be in ten years time and with whom. So counterintuitively it is the uncertainty which underpins everything that removes us from the shackles of a predetermined fate.
  • #410
  • Sep 30, 2008 5:28am Sep 30, 2008 5:28am
Quoting fierceman
You don't have to believe in randomness. The beauty of current scientific theory is that it leaves the door open for you to believe that this apparent randomness is the result of whatever you want to believe. In effect, it imposes certain limits on science itself, and therefore allows your mind to speculate about what lies beyond those limits.
So it's limited only by my own imagination?

I think I'm more of a practical realist than a hopeless romantic, I believe there's a logical explanation why most things happen which probably explains why I don't believe in luck. Random events are just that, random.
  • #411
  • Sep 30, 2008 5:39am Sep 30, 2008 5:39am
What does it mean when the knowledge of the markets, MM, system, and discipline lose $50?

Quoting 30XTCi
I found a $50 note in the street one day.

By using a system, discipline,MM and my knowledge of the markets, I made a profit of $50 today.


You tell me, which was luck.
  • #412
  • Edited 5:53am Sep 30, 2008 5:39am | Edited 5:53am
Quoting Ted1983
What limits?
Its only in aperfectly Newtonian universe that we are limited. If it was possible to predict the motion of every particle with 100% accuracy, (which is a neccessary belief if you don't believe in randomness) then I could tell you where you would be in ten years time and with whom. So counterintuitively it is the uncertainty which underpins everything that removes us from the shackles of a predetermined fate.
If you read what I wrote more carefully, you'll see that we are actually agreeing about the "shackles of a predetermined fate" . I never said that the introduction of randomness limits us in any way. In fact it allows us to explore, on a philosophical level, what is beyond the limits of science, which are now well defined as a result of quantum mechanics, and which were assumed to not exist in the age of classical mechanics.

EDIT: (just wanted to add this) Even in a Newtonian universe, you cannot predict anything with 100% accuracy because of the precision limits of your measuring equipment. That's what I was trying to point out in #2 a few posts up. Chaos theory is based on classical, not quantum mechanics, so although it is deterministic in nature, it still doesn't allow for 100% certainty.
  • #413
  • Sep 30, 2008 5:42am Sep 30, 2008 5:42am
Well, this discussion could go on endlessly. It comes right back to the original point of post #1....

After you click BUY or SELL, you can only watch the trade develop.... and you have no control over what it will do.

If you knew EXACTLY what makes the price move at the moment you enter your trade, it is no luck. But otherwise, every tick up and down is a random walk in freezing black space.
  • #414
  • Sep 30, 2008 5:59am Sep 30, 2008 5:59am
Quoting tdion
Well, this discussion could go on endlessly. It comes right back to the original point of post #1....

After you click BUY or SELL, you can only watch the trade develop.... and you have no control over what it will do.

If you knew EXACTLY what makes the price move at the moment you enter your trade, it is no luck. But otherwise, every tick up and down is a random walk in freezing black space.
I think there's a fundamental misunderstanding of what trading actually is.

A trader isn't trying to control what happens to price after he clicks Buy or Sell because that is obviously out of his control. The only thing he can control is how much he is prepared to risk, and what he considers is an acceptable return for that risk. Based on his analysis of where he believes price will probably go determines whether he thinks the trade is viable, and subsequently whether he Buys or Sells.

It's no mystery why price moves up and down, it isn't some inexplicable random event.
  • #415
  • Sep 30, 2008 6:30am Sep 30, 2008 6:30am
Quoting Lenoxer
I'm not sure of the date. But the following is from Alpha Magazine:

Hedge fund manager Paulson earns $3.7 billion



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

An impressive display of wealth creation.
  • #416
  • Sep 30, 2008 6:44am Sep 30, 2008 6:44am
Quoting lostinspace
I think there's a fundamental misunderstanding of what trading actually is.

A trader isn't trying to control what happens to price after he clicks Buy or Sell because that is obviously out of his control. The only thing he can control is how much he is prepared to risk, and what he considers is an acceptable return for that risk. Based on his analysis of where he believes price will probably go determines whether he thinks the trade is viable, and subsequently whether he Buys or Sells.

It's no mystery why price moves up and down, it isn't some inexplicable random event.


I don't know why tdion comes here.
  • #417
  • Sep 30, 2008 6:47am Sep 30, 2008 6:47am
I think he enjoys a healthy debate.
  • #418
  • Sep 30, 2008 6:48am Sep 30, 2008 6:48am
Quoting opie999
Yes, all things that happen are preceded by cause. But it's impossible to foresee and predict every single cause of every single event. Chaos happens despite our very best efforts to circumvent it. The best we can do is use sound MM to mitigate the effects of shitty luck.

Just a few random thots of my own.

good point on the diff b/ qual and quant. It still stands that no one can either qual or quant luck. You cannot either math luck nor can you flesh it out to know where it comes from. Probability is a different thing in that you can math it. Luck does not equal probability.

part of the problem with the premise of this thread is that people have different perceptions of what the core vocab of randomness is. Aside from the dictionary def people do use these terms differently:

luck
chaos
random
probability
chance

The supposed 5% of traders who actually make money in the 4X after a long period of preparation and hard work would not credit their success to pure luck, but to an aquired skill of learning how to navigate the randomness of the market. There is a difference.
  • #419
  • Sep 30, 2008 6:59am Sep 30, 2008 6:59am
Quoting tdion
Well, this discussion could go on endlessly. It comes right back to the original point of post #1....

After you click BUY or SELL, you can only watch the trade develop.... and you have no control over what it will do.

If you knew EXACTLY what makes the price move at the moment you enter your trade, it is no luck. But otherwise, every tick up and down is a random walk in freezing black space.
Every tick up or down somebody is making money.
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Polishing my crystal ball
  • #420
  • Sep 30, 2008 7:00am Sep 30, 2008 7:00am
Quoting lostinspace
I think there's a fundamental misunderstanding of what trading actually is.

A trader isn't trying to control what happens to price after he clicks Buy or Sell because that is obviously out of his control. The only thing he can control is how much he is prepared to risk, and what he considers is an acceptable return for that risk. Based on his analysis of where he believes price will probably go determines whether he thinks the trade is viable, and subsequently whether he Buys or Sells.

It's no mystery why price moves up and down, it isn't some inexplicable random event.
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