That's quite alright...I don't mind setting them up for you to knock down. IMO, the raison d'etre of this forum is to provoke thought by expressing different points of view. IMO, you are the perfect agent provocateur, because your arguments are always based on facts and reason. I always respect logical appeals to my views, and find your counterpoints to be very informative, thought provoking, and elegant.
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I agree with everything you wrote. The guys who own Susquehana are all ex-professional poker players, and of course Brett Steenbarger is on a campaign to recruit poker players to be trainees for the hedge fund he is associated with. Good poker players make good traders, and conversely, good traders make good poker players, for the very reasons you enumerated.
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Charlie DiFrancesca said in his famous lecture on pit trading that the pit is not a casino. The point he was making was that in the pit the odds favor the disciplined local who earns the bid/ask spread. That was certainly true in the time before electronic trading and more "democratic" access tightened the bid/ask spreads and allowed highly capitalized R&D firms to have equal or superior access to the markets. Charlie was making the same point you are making about the expected returns of a trade. With the odds in your favor, your highest expected value comes from a long string of small bets, like being the slot machine in a casino.
I was never a trader who stood in the pit all day trying to wring that edge out of the market as many times as I could, even though I understood and agreed with the statistical argument. I did not achieve consistent profitability until I started shooting for a goal and leaving when I hit it. (As I've said elsewhere, the first month I used that approach was the first of about 80 consecutive months I made money). I think the reason was because, while it was not a casino, I was not a slot machine. Emotion and exhaustion would eventually creep in and ruin my discipline and my results.
The trader I respected most in my pit disagreed with my approach. But if worked for me.
Just my 2 cents. And Fat Tails, you rock!
"You don't need a weatherman to know which way the wind blows..."
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The problem with comparing trading and poker though is that you can analyze your play to a degree that on a losing streak you can figure out the sum expected value of the bets you made and figure out if you are losing because of variance(and just need to wait for the law of large numbers to converge) or are simply playing poorly.
With trading, you don't know if it is variance or playing poorly as the probabilities are unstable and moving.
If anything professional sports betting is far closer to trading than poker. Sabermetrics and baseball betting I would imagine is the closest as you are trying to infer future probabilities from past data but also not getting bogged down with microstructure like calculating ball speed.
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