How advanced mathematics and gaming theory can help you as a trader - Psychology and Money Management | futures io social day trading
futures io futures trading


How advanced mathematics and gaming theory can help you as a trader
Updated: Views / Replies:33,156 / 203
Created: by RM99 Attachments:16

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
 16  
 
Thread Tools Search this Thread
 

How advanced mathematics and gaming theory can help you as a trader

  #161 (permalink)
Site Administrator
Manta, Ecuador
 
Futures Experience: Advanced
Platform: My own custom solution
Favorite Futures: E-mini ES S&P 500
 
Big Mike's Avatar
 
Posts: 46,238 since Jun 2009
Thanks: 29,350 given, 83,220 received


Lampert View Post
The spreadsheet is too large to post (16 MB) but I can send if you PM me.


Len

Just zip it then attach it.

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.

If you want
to support our community, become an Elite Member.

Reply With Quote
The following user says Thank You to Big Mike for this post:
 
  #162 (permalink)
Trading for Fun
montreal
 
Futures Experience: Intermediate
Platform: sterling trader
Favorite Futures: gold spy
 
Posts: 75 since Jan 2012
Thanks: 0 given, 8 received


nakachalet View Post
just curious, what kinds of setup do you use for your trading then? thx

I use Andrews pitchfork. Many dont like this kind of stuff but as it is all i have really learnt I love it, Its funny how when ever i see a chart some one posts price seems to just fly all over the indicator but with forks everything looks like its bouncing in the right place.

When I was trading in an office I remember listening to the squack. Here you can hear when Goldman Sachs makes a move. Many times I notice that they buy and sell at key points that i also use just they do so more selectively.

Reply With Quote
 
  #163 (permalink)
Trading for Fun
montreal
 
Futures Experience: Intermediate
Platform: sterling trader
Favorite Futures: gold spy
 
Posts: 75 since Jan 2012
Thanks: 0 given, 8 received



Lampert View Post
I liked reading this thread, especially @Fat Tails rock-solid explanations about the gambler's fallacy. The summary in post #2 is also helpful.

If some still believe that strings of outcomes and progressive betting are beneficial for independent events, perhaps the following charts can help. I expanded on the spreadsheet provided by @worldwary in post #47.

This first chart shows 10 trials with a constant betting strategy (coin flips with 50/50 W/L). The initial capital is $100 and every bet is $10.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).



This second chart shows 10 trials with the same scenario, except that bets are increased by 50% after each win - ie. bets are increased during strings of wins. After each loss, the bet is returned to $10. The average bet is $13.34. This is the anti-martingale system or the "progressive string strategy" as described by the OP.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).



Just for interest, this chart shows one of the trials with three strings of 10 wins.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).



This last chart shows the distributions of final capital from 500 trials of each of the two betting strategies. Results from the progressive betting strategy have been normalized to match the bets used in the constant betting strategy (each final capital x 10.00 / 13.34). The binomial distributions are quite similar and their averages are close to the initial capital of $100. In other words, there is no benefit from the progressive betting strategy.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).



On the positive side, these charts show that one should be able to play a 50/50 game for a long time given a reasonable initial capital.

The spreadsheet is attached if anyone is interested.


Len



Your charts seem to disprove what i think fat tails is saying.

From my understanding Fat tails suggests that every toss is independent of the previous one. Yet he says that the odds of having 3 tails in a row is .5 x.5x.5

Maybe i havent thought about enough but it seems that as the string gets longer the "chances of having another head after a streak of heads is getting slimmer.

the chart where there is an increased bet placed after a string shows that it favours profit. from what i remember the negative was 2000 but the max positive was 3000, this could be luck but who knows. Even that one line that goes to the 3000 dollar line can be some thing that can be played. If you were to bet a chart like that over and over and favoured the buy side you'd end up really happy i think. In esence its a the "slight edge" we may all look for in trading. But yes it could be a big anomaly but in general there anomalies are wiped out over many runs.


also the other (i think last chart) shows something similar to my previous mentioned card flipping idea. and that is that there is a maximum to how big a string can get. which means that there is some form of "memory" as you call it.


Seems to me, some one who sah not really looked as deeply in to this as yourselves that you are backing up 2 opposing theories.

1. the odds decrease as strings go on (seen mathamatically) .5 x .5 x .5 = less then .5
2. solid objects dont have memory ?

and the second theory is where your logic seems to come from. There is no math or science there, the word memory was just used for lack of a better word and this makes it even more believable as only living things can have memory.

If things are not dependant on previous flips there would be no reason to revert back to the 50 50. if we do revert back to the 50 50 over many tries this indicates that previous flips must be accounted for in order to get back to the 50 50. That is to say the coin must keep a memory in order to revert to a certain percentage.

now again, i haven't really learnt all about this stuff, this is just my opinion which is usually wrong and not from any research. I'm sure some math genius has figured this all out. but untill i read it (when i have time as im very focused on trading right now) and i truely understand it then and find that the words used in the conclusion match the math ( this is usually where there is an issue in science) then Ill be happy to be better informed

randomness (50-50) can be charted and the randomness disapears as seen on your charts. step back they all look very symetrical (except the one where bet was increased).

I'll probably change my position on this as the convo goes on or i read past posts/links im sure

Reply With Quote
 
  #164 (permalink)
Elite Member
Northern Germany
 
Futures Experience: Intermediate
Platform: NT
Favorite Futures: FDAX, CL
 
vvhg's Avatar
 
Posts: 1,583 since Mar 2011
Thanks: 1,016 given, 2,807 received

The answer is already in your post:


traitor786 View Post
1. the odds decrease as strings go on (seen mathamatically) .5 x .5 x .5 = less then .5

To arrive at the chance of three heads in a row you multiply .5 three times. If you now want to calculate the chance of 4 heads in a row you just extend the string by *.5. this proves that the single event has got a .5 chance in order to give the 4 heads in a row event the chance of .5*.5*.5*.5


vvhg

Hic Rhodos, hic salta.
Reply With Quote
 
  #165 (permalink)
Trading for Fun
montreal
 
Futures Experience: Intermediate
Platform: sterling trader
Favorite Futures: gold spy
 
Posts: 75 since Jan 2012
Thanks: 0 given, 8 received


vvhg View Post
The answer is already in your post:



To arrive at the chance of three heads in a row you multiply .5 three times. If you now want to calculate the chance of 4 heads in a row you just extend the string by *.5. this proves that the single event has got a .5 chance in order to give the 4 heads in a row event the chance of .5*.5*.5*.5


vvhg

yes but the last flip is a single event. even though it is part of the string. I imagine that the falasy would say state that the last flip has in a string has a 50 50 chance. the fact that the we mutiply the odds togeteher to get a smaller the 50 50 i would imagine is common sence?

I cant even tell what side your on.

the question should be.

if a coin is fliped 3 times , and 2 heads show up, what are the chances that the next flip comes a head also.

since the last flip has not been made, do we just assume it is an individual flip at 50 50 or do we look at the previous flips and say that it is .5 to the power of 3 ?

In order for it to be a falasy it should go against common sence to some respect and common sence would state that the last flip is not a 50 50.\

if you believe the last flip is a 50 5o, then all flips are 50 50.

if that the case then why do we even quote the formulae .5x..5 x .5 ?

maybe im just unclear on what side you are on or maybe im not understanding something here

Reply With Quote
 
  #166 (permalink)
Elite Member
Northern Germany
 
Futures Experience: Intermediate
Platform: NT
Favorite Futures: FDAX, CL
 
vvhg's Avatar
 
Posts: 1,583 since Mar 2011
Thanks: 1,016 given, 2,807 received


traitor786 View Post
yes but the last flip is a single event. even though it is part of the string. I imagine that the falasy would say state that the last flip has in a string has a 50 50 chance. the fact that the we mutiply the odds togeteher to get a smaller the 50 50 i would imagine is common sence?

I cant even tell what side your on.

the question should be.

if a coin is fliped 3 times , and 2 heads show up, what are the chances that the next flip comes a head also.

since the last flip has not been made, do we just assume it is an individual flip at 50 50 or do we look at the previous flips and say that it is .5 to the power of 3 ?

In order for it to be a falasy it should go against common sence to some respect and common sence would state that the last flip is not a 50 50.\

if you believe the last flip is a 50 5o, then all flips are 50 50.

if that the case then why do we even quote the formulae .5x..5 x .5 ?

maybe im just unclear on what side you are on or maybe im not understanding something here

All tosses are .5, and that is not my belief, it is the very definition of a fair coin toss.
If the last toss was not .5 how could we then calculate the exact probability of the string by .5^n?
Doesn't this clearly prove that each individual coin toss is .5? Otherwise the calculation wouldn't work.

vvhg

Hic Rhodos, hic salta.
Reply With Quote
 
  #167 (permalink)
Elite Member
Berlin, Europe
 
Futures Experience: Advanced
Platform: NinjaTrader, MultiCharts
Broker/Data: Interactive Brokers
Favorite Futures: Keyboard
 
Fat Tails's Avatar
 
Posts: 9,651 since Mar 2010
Thanks: 4,226 given, 25,601 received
Forum Reputation: Legendary


traitor786 View Post
Your charts seem to disprove what i think fat tails is saying.

From my understanding Fat tails suggests that every toss is independent of the previous one. Yet he says that the odds of having 3 tails in a row is .5 x.5x.5

The charts do not disprove independency. The odds for having 3 tails in a row are .5 x .5 x .5 = .125, because the tosses are independent.


traitor786 View Post
also the other (i think last chart) shows something similar to my previous mentioned card flipping idea. and that is that there is a maximum to how big a string can get. which means that there is some form of "memory" as you call it.

This is a fallacy. There is no maximum. However, the probability for a long string is inferior than the probability for a short string. If you want to get 10 tails in a row, the probability calculates as 1/1024. This means that statistically you need to run 1024 experiments of tossing a coin 10 times to observe the event "10 tails in a row" once. Even with 1024 experiments, it is not sure that you will observe the event, as there are random elements that contribute to the outcome.


traitor786 View Post
1. the odds decrease as strings go on (seen mathamatically) .5 x .5 x .5 = less then .5
2. solid objects dont have memory ?

The odds do not decrease, the odds for a single toss remain at 0.5. The calculated probability for three tosses in a row is larger than the calculated probabilibty for 4 tosses. This means that the probability depends on the number of consecutive tosses, but it does not decrease.

Objects do not have a memory,. If you have somebody who cheats when throwing the coin - consider that guy has a memory how he manipulated the previous toss - then there may well be a dependency between 2 consecutive events.

Reply With Quote
The following 2 users say Thank You to Fat Tails for this post:
 
  #168 (permalink)
Membership Revoked
Oslo, Norway
 
Futures Experience: Advanced
Platform: CQG, Excel
Favorite Futures: CL
 
Lornz's Avatar
 
Posts: 1,198 since Apr 2010
Thanks: 500 given, 1,235 received

All this discussion about coin flips reminded me of this:

http://www.espenhaug.com/ScientificCoinFlipExperiment.pdf

Reply With Quote
The following 3 users say Thank You to Lornz for this post:
 
  #169 (permalink)
Elite Member
Berlin, Europe
 
Futures Experience: Advanced
Platform: NinjaTrader, MultiCharts
Broker/Data: Interactive Brokers
Favorite Futures: Keyboard
 
Fat Tails's Avatar
 
Posts: 9,651 since Mar 2010
Thanks: 4,226 given, 25,601 received
Forum Reputation: Legendary


Lornz View Post
All this discussion about coin flips reminded me of this:

http://www.espenhaug.com/ScientificCoinFlipExperiment.pdf


Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Reply With Quote
The following 4 users say Thank You to Fat Tails for this post:
 
  #170 (permalink)
Elite Member
Northern Germany
 
Futures Experience: Intermediate
Platform: NT
Favorite Futures: FDAX, CL
 
vvhg's Avatar
 
Posts: 1,583 since Mar 2011
Thanks: 1,016 given, 2,807 received


But if you find the box, don't open it! You might half kill the cat...


vvhg

Hic Rhodos, hic salta.
Reply With Quote

Reply



futures io > > > How advanced mathematics and gaming theory can help you as a trader

Thread Tools Search this Thread
Search this Thread:

Advanced Search



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

Linda Bradford Raschke: Reading The Tape

Elite only

Adam Grimes: TBA

Elite only

NinjaTrader: TBA

January

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Random Line Theory Big Mike Traders Hideout 358 July 15th, 2017 12:16 AM
Using Dow Theory indicator as a filter in automated strategies nanobiotech NinjaTrader Programming 8 March 28th, 2015 07:56 PM
Economic Theory PandaWarrior Off-Topic 10 May 15th, 2011 12:06 PM
Ryans Chewing Gum theory Ryanb Psychology and Money Management 2 December 8th, 2010 10:25 AM
GAME THEORY tigertrader Off-Topic 3 October 7th, 2010 09:16 PM


All times are GMT -4. The time now is 09:45 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 2017-12-12 in 0.15 seconds with 20 queries on phoenix via your IP 54.221.93.187