The Gamblers Fallacy and the Hot Hand - Psychology and Money Management | futures io social day trading
futures io futures trading


The Gamblers Fallacy and the Hot Hand
Updated: Views / Replies:1,761 / 15
Created: by tturner86 Attachments:0

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors – all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you don’t need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 
Thread Tools Search this Thread
 

The Gamblers Fallacy and the Hot Hand

  #1 (permalink)
Elite Member
Austin, TX
 
Futures Experience: Intermediate
Platform: F-16CM-50
Favorite Futures: JDAM
 
tturner86's Avatar
 
Posts: 5,784 since Sep 2013
Thanks: 9,849 given, 11,160 received
Forum Reputation: Legendary

The Gamblers Fallacy and the Hot Hand

The Gambler's Fallacy And The Hot Hand - Business Insider

Reply With Quote
The following 5 users say Thank You to tturner86 for this post:
 
  #2 (permalink)
Quick Summary
Quick Summary Post

Quick Summary is created and edited by users like you... Add FAQ's, Links and other Relevant Information by clicking the edit button in the lower right hand corner of this message.

 
  #3 (permalink)
Elite Member
London + UK
 
Futures Experience: Advanced
Platform: Proprietary Analytics
Broker/Data: Multiple broker + Multiple feed
Favorite Futures: Currently European and US equities
 
sands's Avatar
 
Posts: 432 since Dec 2013
Thanks: 223 given, 205 received


The difference between perception and reality is a key psychological battle for us all.

Interesting article, illustrates why most people would stay in a trade when they should get out. and when they enter on a false premise.

Reply With Quote
The following 2 users say Thank You to sands for this post:
 
  #4 (permalink)
Trading Apprentice
Novosibirsk + Siberia/Russia
 
Futures Experience: Advanced
Platform: ThinkorSwim, TWS.
Broker/Data: IB, TOS.
Favorite Futures: ETF, Stocks, Futures, Options
 
Cornix's Avatar
 
Posts: 21 since Oct 2012
Thanks: 1 given, 22 received

"Players on losing streaks went for riskier and riskier bets, taking bets with higher odds against in the hope that a big payoff would make up for their losses. Players on winning streaks went in the opposite direction and made bets that were more likely to win as their streaks went on."

Situation looks similar to widely known disposition effect in behavioral finance, when investors/speculators tend to hold losses, but cut winners.

Reply With Quote
The following 2 users say Thank You to Cornix for this post:
 
  #5 (permalink)
Trading Apprentice
Tashkent+Tashkent/Uzbekistan
 
Futures Experience: Intermediate
Platform: MetaTrader
Favorite Futures: USD/JPY
 
Posts: 11 since Apr 2014
Thanks: 0 given, 5 received


Cornix View Post
"Players on losing streaks went for riskier and riskier bets, taking bets with higher odds against in the hope that a big payoff would make up for their losses. Players on winning streaks went in the opposite direction and made bets that were more likely to win as their streaks went on."

Situation looks similar to widely known disposition effect in behavioral finance, when investors/speculators tend to hold losses, but cut winners.

The reverse effect is other part investors who hold wins and cut losses. That's why it is relative reasoing.

Reply With Quote
The following 2 users say Thank You to kernel for this post:
 
  #6 (permalink)
Trading Apprentice
Novosibirsk + Siberia/Russia
 
Futures Experience: Advanced
Platform: ThinkorSwim, TWS.
Broker/Data: IB, TOS.
Favorite Futures: ETF, Stocks, Futures, Options
 
Cornix's Avatar
 
Posts: 21 since Oct 2012
Thanks: 1 given, 22 received


kernel View Post
The reverse effect is other part investors who hold wins and cut losses. That's why it is relative reasoing.

It is much more common misbehavior among investors to cut winners and hold losers than the opposite.

Reply With Quote
The following user says Thank You to Cornix for this post:
 
  #7 (permalink)
Elite Member
Austin, TX
 
Futures Experience: Intermediate
Platform: F-16CM-50
Favorite Futures: JDAM
 
tturner86's Avatar
 
Posts: 5,784 since Sep 2013
Thanks: 9,849 given, 11,160 received
Forum Reputation: Legendary

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.

Reply With Quote
The following 3 users say Thank You to tturner86 for this post:
 
  #8 (permalink)
Trading for Fun
Los Angeles
 
Futures Experience: Advanced
Platform: x_trader
Favorite Futures: Stocks
 
ReaM's Avatar
 
Posts: 127 since Mar 2011
Thanks: 96 given, 95 received

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


Last edited by ReaM; May 14th, 2014 at 09:39 AM.
Reply With Quote
The following 3 users say Thank You to ReaM for this post:
 
  #9 (permalink)
Trading Apprentice
Tashkent+Tashkent/Uzbekistan
 
Futures Experience: Intermediate
Platform: MetaTrader
Favorite Futures: USD/JPY
 
Posts: 11 since Apr 2014
Thanks: 0 given, 5 received


ReaM View Post
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 question is in TIME. Maybe that week was series of misfortunes and If you traded in the second week you would make up for your losses. Maybe month. Or Year. Maybe in longer run. That's why deposit has significant importance in your trading success.

Reply With Quote
 
  #10 (permalink)
Trading for Fun
Los Angeles
 
Futures Experience: Advanced
Platform: x_trader
Favorite Futures: Stocks
 
ReaM's Avatar
 
Posts: 127 since Mar 2011
Thanks: 96 given, 95 received


no,

you can't trade true randomness, you just can't.

It's different with the markets as you can see spots where inefficiencies occur and take advantage of it. You just know what your edge is. But in roulette, you keep seeing patterns that look like patterns but they don't work, it's just randomness, things just don't make sense there after a while. You think you see things, but the results prove you wrong time and time again.

I think there's enough proof in the world that you can't trade roulette profitably (unless you exploit the mechanics of the ball, somehow, which doesn't count as it's not about exploiting here). Even if you decide to bet on black after a streak of 12 red, it's still the same 18/37 to go either way on the next, less than 50%.


Last edited by ReaM; June 25th, 2014 at 12:51 PM.
Reply With Quote
The following user says Thank You to ReaM for this post:

Reply



futures io > > > The Gamblers Fallacy and the Hot Hand

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Jigsaw Trading: TBA

Elite only

FuturesTrader71: TBA

Elite only

NinjaTrader: TBA

Jan 18

RandBots: TBA

Jan 23

GFF Brokers & CME Group: Futures & Bitcoin

Elite only

Adam Grimes: TBA

Elite only

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
3 min video - Julia Galef: The Sunk Cost Fallacy kickmic Psychology and Money Management 2 November 24th, 2014 06:55 AM
second hand ninja trader artfuls NinjaTrader 2 December 7th, 2013 12:26 AM
What Gamblers and Weather Forecasters Can Teach Us About Risk kbit News and Current Events 0 May 27th, 2012 03:24 PM
CAUSE, EFFECT & THE FALLACY OF A RETURN TO NORMALCY kbit News and Current Events 0 March 6th, 2012 06:05 PM
SFO Magazine: The Percent Profitable Fallacy shodson Traders Hideout 2 August 18th, 2010 06:07 AM


All times are GMT -4. The time now is 12:14 PM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-15 in 0.12 seconds with 19 queries on phoenix via your IP 54.226.34.209