The Gamblers Fallacy and the Hot Hand

June 28th, 2014, 07:24 AM

NYTimes: That’s So Random: Why We Persist in Seeing Streaks

June 28th, 2014, 08:33 AM

ReaM

A long time ago I played with an .exe of a roulette simulation where the wins were plotted around a zero line and it went up and down like a chart. I tried to "trade" it and after maybe a week of trying I wasn't able to make profit. Even if the price went 50 blacks (or reds) one way and you entered in opposite it could still go 50 against you. Whatever happened before doesn't matter.

It's probably a common knowledge though

The difference between trading and a pure game of luck is that with trading what transpired before DOES indeed matter. Traders have memory and charts are just a representation of this memory at work while a roulette wheel has no memory.

June 28th, 2014, 09:05 AM

trendisyourfriend

The difference between trading and a pure game of luck is that with trading what transpired before DOES indeed matter. Traders have memory and charts are just a representation of this memory at work while a roulette wheel has no memory.

LOL
Finally a voice of reason/experience.

Thanks

June 28th, 2014, 09:26 AM

trendisyourfriend

The difference between trading and a pure game of luck is that with trading what transpired before DOES indeed matter. Traders have memory and charts are just a representation of this memory at work while a roulette wheel has no memory.

That is why there is support or resistance. Buyers or sellers remember either getting burned or profiting at different prices.

April 25th, 2016, 03:26 PM

tturner86

As with any game of chance each game is a separate event and must be treated as such.

One draw of the lottery does not affect the next, one round in poker does not affect the next, etc.

And so the same with trading, each trade needs to be separated and work individually. But often we don't do that, we cut a winner short to lock in profits to recoup what we lost before. Or we let a loser run because we cut an earlier winner short, hoping that it will come back. I think this is one of those golden nuggets in trading.

If you can separate each trade, not care about winning or losing that trade, and work to increase your reward you can do well trading.

Hi tturner86 !

It appears to me that you know much more trading than me. In add, I really think that I should follow your advice to better manage my trades. Unfortunately, I don't understand how much time you give to your trades to know if it's a loser or a winner. I mean, I trade swing. I often need to wait my trades loosing a bit of value before they become profitable. I've understood that I have to support some loss to be profitable.

Is it really possible to be profitable without letting any loser run ?

Regards,
P.

April 25th, 2016, 04:46 PM

Pharmakon

Hi tturner86 !

It appears to me that you know much more trading than me. In add, I really think that I should follow your advice to better manage my trades. Unfortunately, I don't understand how much time you give to your trades to know if it's a loser or a winner. I mean, I trade swing. I often need to wait my trades loosing a bit of value before they become profitable. I've understood that I have to support some loss to be profitable.

Is it really possible to be profitable without letting any loser run ?

Regards,
P.

For me the key has been to trade signal to signal. Or try to. If my read of the market is LONG then I should be try to trade LONG and should stay LONG until that changes. Once that changes I should look to exit for a profit or a loss.

I did this trading M6E on a weekly swing basis. So I was holding trades for days-weeks. Because it was M6E the risk was really small ($1.25 tick with $150 margins), but it was live cash and it helped me to learn to trust my read and trade what I am seeing.

The Gamblers Fallacy and the Hot Hand

Discussion in Psychology and Money Management

The Gamblers Fallacy and the Hot Hand