Indeed, a resource on correlation coefficients would be most helpful.

Geo

We consider here about 4,500 US equities traded on the NYSE, AMEX, and Nasdaq markets. In order to compare the price fluctuations of those equities, we compute the correlations for all possible pairs, i.e. about 10 million pairs. The engine developed by Impactopia helps sorting out the millions of correlation coefficients. A user can query the database for calculating lists of top correlated pairs of stocks, lists of anticorrelated pairs, and lists of correlated stocks to any equity.

Okay, so I thought I'd contribute a little bit of wisdom or at least food for thought.

What would you say, if I told you that you can make money on a mutually exclusive, binomial event such as flipping a coin (50% probability)?

It blows most peoples minds when I tell them this. Here are the conditions......A) You must have control over the wager amount, B) You must have a significant starting capital (say 100x the initial wager amount) and C) You must adhere to a strict diet of progressive betting strategy.

Here's how it works: Progressive betting requires that it be truly mutually exclusive and also requires inherent "strings" be present over a given sample of n events.

Take for instance, our coin flip example. If you have a data sampling of say 10,000 flips. Over the course of that entire data set, you will experience both positive and negative strings. The distribution will follow an exponential decay (i.e. there will be a very small number of long strings and there will be a very large number of short strings.) A typical distribution for strings might look like this......10 strings 1, 9 strings 3, 8 strings 7, 7 strings 15, etc.

Ever wonder why typical profit analysis tools show strings? Here's how to make it work.

If the event is truly mutually exclusive and binomial, over large samplings, you'd expect the number of winning strings to be similar (negligibly identical) to losing strings.


So, you bet initally 10 units. If the outcome is a win, you take 50% of the profit and leave the other half out as an additional wager increase. If the next outcome is positive, you do the same, take 50% and leave the rest, again upping your wager. When you lose, you restart the wager sequence back to the original wager/lowest increment.

So over a string of 5 wins (10 unit start bet)....it would yield 65.9375 units of profit and the same losing string would yield a loss of 50 units.

The key to progressive betting is inherent strings. The system fails and you actually lose money if there are no strings and it's simply a binary oscillator (i.e. win, loss, win, loss, win, loss, etc).

This is exactly how successful blackjack betting strategies are employed.

The second part of this segment is second order effects and how even with a 50% probability and a "player" using progressive betting will still end up losing.

Maybe this those have some merit to a degree. I live about 30 min. from Oklahoma so this last weekend me and the wife decide to take a small drive over to Oklahoma to check out the Wyns Casino. I don't know how to play any cards game such as blackjack or texas hold em. Slot machines are a waste in my opinion so my game of choice was roulette. My game plan was to watch all the numbers that had come up recently so I wrote down the #'s that had come up more than once . Then what I did I wrote numbers that had not come up at all. Then Ipaired numbers together. All this while the wheel kept on spinning and new numbers would come up. When I had up to six pairs of numbers I was ready to begin. I placed my wagers up to 5 chips covering pairs of #s that had been hot and the ones that were cold. At first I won three wagers at once and was like this works but then a string of losses came up that almost took me out. Just when I was about to lose all my money I had strings of wins again that put me where I started. In a span of three hours I played with the same money I began while I saw people come and lose everything. My plan was simple but changing constantly oh and I had no alcohol in me either. At the end of the night I ended up flat...which is better than losing. So my probabilties on that night were at 50/50

If you play roulette, you have a negative expectancy. Your probabilities were less than 50/50. You simply did not play long enough to lose all your money.

In roulette there is no such thing as hot or cold numbers. Consecutive wheels runs are independent from each other, so the result of any run does not depend on the previous run.

Writing down numbers is a futile endeavor, as the outcome of the current run does not depend on previous runs. For further information check the "Gambler's Fallacy".

I don't know I played for about 3 hours straight with the same money. I have done this technique before in vegas and it worked for me their as well until I started drinking....lol. Im not saying that your going to beat the system but in my experience your odds at winning do get better.

Think about it again. Roulette is a sucker's game, because the only way to win is sheer luck.

Your "system" is funny, because it has no impact on the results.

It is like playing in a lottery. The odds are against you, but there will always be a winner.

Thanks for this post!

Could you post one example which explains, how you have adapted Optimal F to comply with larger drawdowns?

For me the position sizing that results from Optimal F is still too aggressive, so if you discovered with Optimal F that your position sizing was too large, what leverage did you use before?

The Bet Size Modulator
The outcome of your bets are not influenced by or correlated to the bet size. If you have doubled your bet size this does not change the win rate of the following bet, so it just doubles your expectancy.