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What are similarities between trading and gambling?

  • #221
  • Nov 10, 2015 11:40pm Nov 10, 2015 11:40pm
If the diference between card type games and roulette and dice is the fact that card type games can have a positive expectancy because as certain cards are used during the unfolding of the game the possibilities remaining become more predictable and the probabilities change ,ofcoarse if you have the skill to compute this ,.then just maybe there is a change in expectancy on games such as roulette regarding probabilities ,ie the trends

some believe this to be the case .Probably not the best example to post here, as the author ended up in jail for kidnapping his parents .

//www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCEQFjAAahUKEwj7gLbpz4fJAhWCyhoKHc53B58&url=http%3A%2F%2Fwww.roulette30.com%2F2014%2F04%2Fgamblers-fallacy.html&usg=AFQjCNHo44Q-1u1cIEFSI5fYNkEoTJplUw
  • #222
  • Nov 10, 2015 11:48pm Nov 10, 2015 11:48pm
Quoting R19
Do you think the executive management was pleased with this outcome?: The Press of Atlantic City: Second high roller takes Tropicana for another $5.3 million at craps, blackjack, mini-baccarat Posted: Tuesday, June 7, 2011 6:00 am
In a sense, yes. Why do you think they invited him back? They know that all of this will generate a lot of publicity and that it will bring more players to their casino. This casino is just playing at a higher level. Some people risk 1% a trade, some risk 5% a trade. This casino is like the latter. They know that if they can entice more people to play very high-stakes games, then the house will make a killing!

Although, it said that the owner is a billionaire. Now that's just the owner, I'm sure the casino as a whole has even more money. Do the math: 5 Million/1Billion = 0.005, so a $5-million-dollar risk for them is just half of one percent, or less if they have more than a billion.

From the same article...
Quote
Rodio has spent nearly 31 years in the casino industry. He recalled one Japanese gambler who won about $6 million while playing baccarat at Trump Plaza Hotel and Casino in the 1980s. But he said he had never before heard of two gamblers winning more than $5 million each at one casino so close in time.

So that gives you an idea of how rare it is. If that Japanese gambler made $6 million in the 80s, why didn't he keep going and win another $6 million over the past 30 years?
  • #223
  • Nov 10, 2015 11:54pm Nov 10, 2015 11:54pm
There are a lot of casinos around the world. I posted this elsewhere and plan to read it.
Attached Image
  • #224
  • Nov 10, 2015 11:56pm Nov 10, 2015 11:56pm
Quoting diceman555
If the diference between card type games and roulette and dice is the fact that card type games can have a positive expectancy because as certain cards are used during the unfolding of the game the possibilities remaining become more predictable and the probabilities change ,ofcoarse if you have the skill to compute this ,.then just maybe there is a change in expectancy on games such as roulette regarding probabilities ,ie the trends some believe this to be the case .Probably not the best example to post here, as the author ended up in jail for...
You're talking about "the Counterargument", right? I just read it. The author has no idea what he's talking about. It's painfully obvious in every paragraph. He really doesn't understand statistical independence or basic logic at all. He's actually caught up in the Gambler's Fallacy as he tries to prove it, therefore he's begging the question.

He thinks that the law of large numbers means that individual events have to conform to a certain value. But it's the population that must, not any individual event. He's all mixed up.
  • #225
  • Nov 10, 2015 11:56pm Nov 10, 2015 11:56pm
Quoting R19
There are a lot of casinos around the world. I posted this elsewhere and plan to read it. {image}
Yeah, actually that looks really interesting!
  • #226
  • Nov 11, 2015 12:04am Nov 11, 2015 12:04am
Yeah but you look at this leaf of money management... You miss the tree.. Its a perfectly comfortable leaf

Quoting mathematician
{quote} As you can tell from my last post, I think there are actually a lot of similarities -- if you trade like the house. {quote} Well, yes, I guess every participant is "gambling" in the sense that no one knows with 100% certainty what will happen next. It's just that one side is gamling with positive expected return, and the other is not. {quote} It's interesting ... because ultimately, I don't think the every tick of the price is statistically independent of every other tick (in the way that every spin of roulette is independent). However,...
Time hides Nothing
  • #227
  • Nov 11, 2015 12:06am Nov 11, 2015 12:06am
Quoting mathematician
{quote} You're talking about "the Counterargument", right? I just read it. The author has no idea what he's talking about. It's painfully obvious in every paragraph. He really doesn't understand statistical independence or basic logic at all. He's actually caught up in the Gambler's Fallacy as he tries to prove it, therefore he's begging the question. He thinks that the law of large numbers means that individual events have to conform to a certain value. But it's the population that must, not any individual event. He's all mixed up.
Totally agree that hes all mixed up ,but 90 % here suffer similar fate .............
  • #228
  • Nov 11, 2015 12:09am Nov 11, 2015 12:09am
Back to one of the reasons I started posted on this thread. If you trade go spend hours at a casino. Don't play if you don't want to or play small, BUT you will learn. In my view, it's the closest thing to a trading floor without being on a trading floor (exchange or investment bank, etc.) just because of the activity. It should help you improve your trading by minimizing hesitation in executing on your trading approach.
  • #229
  • Nov 11, 2015 12:13am Nov 11, 2015 12:13am
concidering we all have the same information at hand but the majority are beaten by the house,broker edge .are the small group of winners using the information at hand diferently ,allowing them to reduce house edges and slightly tilting it in favour or just luckly ?
  • #230
  • Edited 12:38am Nov 11, 2015 12:19am | Edited 12:38am
Quoting R19
Back to one of the reasons I started posted on this thread. If you trade go spend hours at a casino. Don't play if you don't want to or play small, BUT you will learn. In my view, it's the closest thing to a trading floor without being on a trading floor (exchange or investment bank, etc.) just because of the activity. It should help you improve your trading by minimizing hesitation in executing on your trading approach.
I tend to agree with you here R19. There are so many valuable skills to learn from gambling that are directly applicable to trading.

Both gambling and trading have techniques that can deliver positive expectancy. It is the system applied that carries the positive expectancy not the game or the market itself which is simply the medium within which you apply a strategy. I have heard of several successful gamblers who specifically search casinos for biased roulette tables. This is because some *less desirable* gaming venues deliberately bias their tables or engage croupier techniques to achieve a biased outcome to magnify house returns.

Of course some games like some markets deliver no positive expectancy in relation to the application of a specific system. For example over an extended period, a particular market may offer no positive expectancy for a trend following strategy. For a particular game, the same can be said dependent on the system employed.

Some games like some inefficient markets are harder to or impossible to harvest positive expectancy from.

I really think the distinction between gambling and trading is a very grey area. Some skilled gamblers who use specific systems for specific games can achieve long term success in exactly the same way that a successful trader uses specific systems for a particular set of market conditions that allows them to enjoy positive expectancy.

Most participants in the retail market who do not understand positive expectancy or have not trully tested their system in particular market conditions to achieve that result are simply unsuccessful gamblers in disguise.

PS In every classical system, there are opportunities to exploit an edge as deep down there is just complexity, not true 'randomness' in the same sense as quantum mechanics. Even in a roulette wheel if you apply physics to the game itself, you can in principle lift the edge in your favour. If you know the initial condition of a coin flip (eg. head/tails up/down), you can predict with a probabilistic edge an outcome simply by applied physics that commences from the initial condition along a classical trajectory. Complex yes, random no.

A distinction between gambling and trading is just dependent on your definitions as fundamentally it is just different ways to play a game of complexity.
  • #231
  • Nov 11, 2015 12:33am Nov 11, 2015 12:33am
But this is the whole point, if you are a real trader even if it were possible to, you could not test your system for positive expectancy. You dont even need to. There is no system... This is the mentality of a gambler. And sure profitable gambling strategies exist in the market place, no doubt. For whatever length of time is completely infinite in variabilty based on the strategy and management employed.

But essentially real traders ARE the market. Not some carbon copy of it.

Quoting Copernicus
{quote} I tend to agree with you here R19. There are so many valuable skills to learn from gambling that are directly applicable to trading. Both gambling and trading have techniques that can deliver positive expectancy. It is the system applied that carries the positive expectancy not the game or the market itself which is simply the medium within which you apply a strategy. I have heard of several successful gamblers who specifically search casinos for biased roulette tables. This is because some *less desirable* gaming venues deliberately bias...
Time hides Nothing
  • #232
  • Nov 11, 2015 12:42am Nov 11, 2015 12:42am
Quoting mathematician
You're talking about "the Counterargument", right? I just read it. The author has no idea what he's talking about. It's painfully obvious in every paragraph. He really doesn't understand statistical independence or basic logic at all. He's actually caught up in the Gambler's Fallacy as he tries to prove it, therefore he's begging the question. He thinks that the law of large numbers means that individual events have to conform to a certain value. But it's the population that must, not any individual event. He's all mixed up.
Totally agree with you, the counterargument is nonsense. He starts by equivocating on the word "independence" and that starts a chain of reasoning that's steeped in Gambler's Fallacy, as you point out.

Whenever I see a roulette webpage that promotes ideas grounded in Gambler's Fallacy, I immediately assume that they're selling math-based systems that they claim can overturn the house edge. Surprisingly, in this case it doesn't appear to be so. But then they demonstrate further ignorance by recommending a range of popular betting systems for which it can be easily demonstrated deliver no mathematical edge. In other words, just the usual nonsense.

If there was a math-based (as opposed to physics based) system capable of beating roulette, everybody who's capable enough would use it continuously, and casinos would be forced to change either the rules, the game mechanics, or the payout values; or otherwise face a rapid descent into bankruptcy. That's obvious to me, but apparently not to the gullible folk who waste their money buying math-based roulette systems.
  • #233
  • Nov 11, 2015 12:44am Nov 11, 2015 12:44am
You have to be so careful about underlying assumptions of mathematical models as an edge can often be found in the assumptions themselves. For example an assumption such as 'independent event' whilst in theory makes perfect sense, cannot be actually achieved in practice. For example a roulette wheel and a single spin is not actually an independent event as it is a 'process of events over a period of time' that can be integrated to create an almost infinite array of discreet events in the single spin of a wheel. Each integrated event holds information that can be used for predictive purposes to gain an edge if you drill deep down into the process itself. This is exactly the same rationale that is applied to this market by successful traders with an edge.
  • #234
  • Nov 11, 2015 1:19am Nov 11, 2015 1:19am
you'll never rain on peoples parade and get away with it. This much you can expect..

This is why the truth will seldom be spoken, Theres no intellectual or material profit in it. This is the making of the heard. Its very hard to be something other.

g/l
Time hides Nothing
  • #235
  • Nov 11, 2015 1:26am Nov 11, 2015 1:26am
Quoting CindyXXXX
you'll never rain on peoples parade and get away with it. This much you can expect.. This is why the truth will seldom be spoken, Theres no intellectual or material profit in it. This is the making of the heard. Its very hard to be something other. g/l
There are no truths. Only models with apriori assumptions. It allows us to progress and prevent being blinded by dogma.
  • #236
  • Nov 11, 2015 1:28am Nov 11, 2015 1:28am
Quoting R19
Back to one of the reasons I started posted on this thread. If you trade go spend hours at a casino. Don't play if you don't want to or play small, BUT you will learn. In my view, it's the closest thing to a trading floor without being on a trading floor (exchange or investment bank, etc.) just because of the activity. It should help you improve your trading by minimizing hesitation in executing on your trading approach.
Now that is something I can get behind! I agree that many people overthink every single trade. If you're doing it right, there should be little hesitation and consistent application for your approach.
  • #237
  • Nov 11, 2015 1:31am Nov 11, 2015 1:31am
Quoting CindyXXXX
Yeah but you look at this leaf of money management... You miss the tree.. Its a perfectly comfortable leaf {quote}
I don't believe money management is all that's necessary. One also needs a true edge in terms of being able to spot opportunities where you can tip the odds in your favour.
  • #238
  • Nov 11, 2015 1:32am Nov 11, 2015 1:32am
and on it goes
Time hides Nothing
  • #239
  • Nov 11, 2015 1:33am Nov 11, 2015 1:33am
Quoting Copernicus
{quote} ... Most participants in the retail market who do not understand positive expectancy or have not trully tested their system in particular market conditions to achieve that result are simply unsuccessful gamblers in disguise. ...
Agreed.
  • #240
  • Nov 11, 2015 1:38am Nov 11, 2015 1:38am
Quoting hanover
{quote} Totally agree with you, the counterargument is nonsense. He starts by equivocating on the word "independence" and that starts a chain of reasoning that's steeped in Gambler's Fallacy, as you point out. Whenever I see a roulette webpage that promotes ideas grounded in Gambler's Fallacy, I immediately assume that they're selling math-based systems that they claim can overturn the house edge. Surprisingly, in this case it doesn't appear to be so. But then they demonstrate further ignorance by recommending a range of popular betting...
Yeah, totally. There are a few guys hawking their software that claims to unlock the mystical mathematical secret order of the markets. They spew a bunch of fancy-sounding rhetoric to scare their audience into thinking that there's something they don't know and can learn from this software.
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