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Webinar: FuturesTrader71 (FT71) on Risk, Sizing, Scaling and Trade Management
Started:March 17th, 2012 (04:25 PM) by Big Mike Views / Replies:13,420 / 135
Last Reply:March 13th, 2013 (05:45 AM) Attachments:5

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Webinar: FuturesTrader71 (FT71) on Risk, Sizing, Scaling and Trade Management

Old March 22nd, 2012, 08:34 PM   #31 (permalink)
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Big Mike View Post
There are two outcomes to the next trade.

Win
Lose

Scratch = loss, commissions/time

Two outcomes = 50/50

We are talking only about the very next trade. Not a string of trades.

If you could predict the future, and you knew the next trade was a loser, why take it?

If you could predict the future, and you knew the next trade was a winner, why not trade 1,000 lots?

Mike

Mike, with all due respect this is a highly flawed argument, and is just plain wrong.

Following your logic, we can say:

There are 2 outcomes to playing the lottery:

Win
Lose

Doesn't mean I've got a 50% chance of winning it does it?

It doesn't matter that we're talking about just a singular trade, you could use the same argument and pick any percentage and it makes just as much sense. People are just thinking 2 outcomes, 1/2 = 50%.

I can say that the next roll of a (fair 6 sided etc) dice has a sixth of a chance of being a 1, that's not the same as "predicting" it's not going to be a 1.

It would be funny if it wasn't so sad.

I understand what FT71 is trying to convey, but it's a very poor way of putting it, and I don't think he realises just how bad his mistake is.

Dovie'andi se tovya sagain.
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Old March 22nd, 2012, 08:48 PM   #32 (permalink)
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I will bow out of the "50/50 next trade" line of debate, as we've already been through this on the last thread. It would be nice to talk about something else instead of focusing on this. So many good things discussed in the webinar, yet no one can get past the fact they can't predict the outcome of the very next trade.

The last thing I will say is that no one knows if the next trade will be a winner or a loser. There are two outcomes. You either are a winner or a loser. Call it what you want, but those are the choices of the very next trade.

I suggest you do the coin flip test.

Mike

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Old March 22nd, 2012, 08:52 PM   #33 (permalink)
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Hotch View Post
Mike, with all due respect this is a highly flawed argument, and is just plain wrong.

Following your logic, we can say:

There are 2 outcomes to playing the lottery:

Win
Lose

Doesn't mean I've got a 50% chance of winning it does it?

It doesn't matter that we're talking about just a singular trade, you could use the same argument and pick any percentage and it makes just as much sense. People are just thinking 2 outcomes, 1/2 = 50%.

I can say that the next roll of a (fair 6 sided etc) dice has a sixth of a chance of being a 1, that's not the same as "predicting" it's not going to be a 1.

It would be funny if it wasn't so sad.

I understand what FT71 is trying to convey, but it's a very poor way of putting it, and I don't think he realises just how bad his mistake is.

Look, the folks who actually understand formal mathematics, statistics & probability are relatively few. No reason to fight it since this forum and thread are dedicated to trading and not helping people understand mathematics. FT71 is using a simple, basic, and flawed argument to support a simple, basic and correct point... your next trade will either win or lose. That has nothing to do with the probability that your next trade will be successful. If the last 30 consecutive spins of a roulette wheel have come up Red, the odds the next spin will be Red is exactly 50/50 (if you ignore the zeroes.) But I'm sure no one thinks the probability of rolling 31 consecutive Reds is 50/50. It is what it is.

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Old March 22nd, 2012, 09:14 PM   #34 (permalink)
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trendisyourfriend View Post
I agree you can't predict at 100% the outcomes of a trade. But seeing each trade as a 50/50 proposition is not exact either. Don't read me wrong, i know what you mean but you are not using the right words.

Like mike said, the PROBABILITY of a future trade is 50/50, two outcomes, win or lose. The outcomes of a string of previous trades is a STATISTIC that represents your historical performance.

There is no way to know the distribution of losses against wins, you might have a 90% historical win rate, but the outcome of the next trade is unknown.

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Old March 22nd, 2012, 09:57 PM   #35 (permalink)
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Hotch View Post
Mike, with all due respect this is a highly flawed argument, and is just plain wrong.

Following your logic, we can say:

There are 2 outcomes to playing the lottery:

Win
Lose

Doesn't mean I've got a 50% chance of winning it does it?

It doesn't matter that we're talking about just a singular trade, you could use the same argument and pick any percentage and it makes just as much sense. People are just thinking 2 outcomes, 1/2 = 50%.

I can say that the next roll of a (fair 6 sided etc) dice has a sixth of a chance of being a 1, that's not the same as "predicting" it's not going to be a 1.

It would be funny if it wasn't so sad.

I understand what FT71 is trying to convey, but it's a very poor way of putting it, and I don't think he realises just how bad his mistake is.

6-sided dice have 6 outcomes...how many outcomes can a trade have?

How many possible prices or variables does the market generate?

The market is not a drawer of socks where you can compute the probability of pulling out a white pair of socks. It is an endless stream of variables.

The very next outcome of the trade is not 50% of a winning trade. It is a trade that either pays you for your edge or it doesn't. That's all.

This is where the intellect and need to be right is in conflict with the facts in front of us. This is where one wait for all things to line up to take the trade and then when the trade doesn't go the right way, we hesitate to take the loss because "dammit, everything lines up." Wrong! You can be the Michael Jordan of trading...your very next trade has an equal chance of having a winning as it does having a losing outcome.

You take the trade on a 60% edge because you have a better chance of winning over the series (which is dynamically changing by the way as far as that xx% edge). However, you can't have a 60% winner and a 40% loser on the next trade...can you?

Not sure why this is confusing. It is in front of us every day. It is a simple fact.

Mike stated it correctly. If you knew which of the 60% trades were winners, then mortgage your house and put 1,000 contracts on those and skip the rest. Oh...so you don't know where the 60% will come in?...so what do we do then?

That's my point, you wait for your edge where one activity has a higher probability over another as a series and you take the trade KNOWING that it has a 50/50 chance. You manage the risk and let the edge take care of itself over time.

Am I still confusing everyone? I'm probably not explaining in a simple way.

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Old March 22nd, 2012, 10:00 PM   #36 (permalink)
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timefreedom View Post
Look, the folks who actually understand formal mathematics, statistics & probability are relatively few. No reason to fight it since this forum and thread are dedicated to trading and not helping people understand mathematics. FT71 is using a simple, basic, and flawed argument to support a simple, basic and correct point... your next trade will either win or lose. That has nothing to do with the probability that your next trade will be successful. If the last 30 consecutive spins of a roulette wheel have come up Red, the odds the next spin will be Red is exactly 50/50 (if you ignore the zeroes.) But I'm sure no one thinks the probability of rolling 31 consecutive Reds is 50/50. It is what it is.

Well put.

Now, with that being said...I would love to learn about the complexities the "not flawed" argument so to speak. I would like to know what other way to look at this. We also work on trader-based automated systems and maybe this is knowledge I can apply there.

As always, past performance is NOT indicative of future results....for a reason.

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Old March 22nd, 2012, 10:11 PM   #37 (permalink)
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@addchild

2 outa three ain't bad

outcome of the next trade is unknown: correct
2 outcomes: correct
50/50: false

@timefreedom

Formal mathematics? This is basic stuff. I'll agree the forum is about trading, but mathematics is included in that, otherwise we might as well throw out discussion on psychology and half the content on here. Understanding basic mathematics will quite likely help you be a better trader (see the Risk of Ruin thread).

If his point is "your next trade will win or lose", then he should just say that. "Teaching" people things that are patently false and then such mistakes being dismissed leads to this sort of nonsense:

Coin flip probabilities and relevance [Archive] - Physics Forums

Dovie'andi se tovya sagain.
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Old March 23rd, 2012, 02:46 AM   #38 (permalink)
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Tip


The recording of the webinar has been posted:

Webinar: FuturesTrader FT71 on Risk, Sizing, Scaling and Trading Probabilities




Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

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Old March 23rd, 2012, 04:00 AM   #39 (permalink)
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Hotch View Post
@addchild

2 outa three ain't bad

outcome of the next trade is unknown: correct
2 outcomes: correct
50/50: false

If his point is "your next trade will win or lose", then he should just say that. "Teaching" people things that are patently false and then such mistakes being dismissed leads to this sort of nonsense:

Coin flip probabilities and relevance [Archive] - Physics Forums


Wow, thanks for showing me how to beat a coin toss!

-----------------------------------

I rarely discuss mathematics, as, for some strange reason, it always leads to heated debates.

If I place a trade with a 1 tick stop and a 100 tick target, would you still think that it had a 50% chance of success?

As stated several times before: the number of outcomes does not dictate the probabilities.

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Old March 23rd, 2012, 04:04 AM   #40 (permalink)
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Thank you FT71 for this incredible webinar. You webinar series helped me a lot. Iīm sure others would charge a lot for it, or split the sessions and charge us twice.

I donīt understand why the 50/50 % statement is generating such a discusssion. You cannot predict the outcome of the next trade! To accept that helps you to accept the losing trades and to prevent you from " wanting to be right" as well as "doing impulsive trades"! Of course you can have an edge with your risk and money management and manage the trade to your favour. But thatīs not the point here. Your next trader will be a loser or a winner. You cannot predict with a certain probability what the outcome will be. Or do you know in advance what other traders will do after you entered the market? So: 50/50!

By the way if someone has this crystal ball, PLEASE write me a PM!

Best regards,

Malvolio


Last edited by Malvolio; March 23rd, 2012 at 04:11 AM.
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