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Winning Trade % Confidence vs. Straight Losers Expectation
"Faith is the substance of things hoped for, the evidence of things not seen." --- "Therefore, I Believe it and I will see it. And every day and in every way, I am healthier, wealthier, and wiser."
Can you help answer these questions from other members on NexusFi?
The fact is only Horst knows whether the results are real or fictional. I've had winning streaks that exceeded the 90% win ratio on the chart (just hold on to the losers baby) for several consecutive months - until I blew the account in one massive ugly fat tail. Am I a super freak?
Or as my statistics professor in college so aptly put it on the first day of class, "statistics are a LIE"
I don't quite understand, are referring to our futures.io (formerly BMT) member Fat Tail as ugly?
Well, since you admitted you lost your account, that would make you a Super Loser...but you're showing some hope because you told aztrader that you made 65 pennies today.
Ah, so are you referring that aganami is a mendacious individual for posting the statistical chart?
"Faith is the substance of things hoped for, the evidence of things not seen." --- "Therefore, I Believe it and I will see it. And every day and in every way, I am healthier, wealthier, and wiser."
Using your same example is it correct to say that at 78% win percentage that if a trade is a loser that the probability of the next 3 also being losers is 0.23%?
It will plot any number of possible equity curves to give you an idea of your methods performance variability - of course it depends on your estimate of those variables.
It all helps in getting familiar with your method.
These are always fun to mess with. Consider a method where the losses are twice as big as the wins, but wins happen 90%. Attached. I'd say that's a damn nice equity curve... not as nice as Horst's... but it would do.
What the chart is showing is that over a sample set of n events, the likelihood of repetitive losses are as indicated.
I know that it seems like it's saying the same thing but it's not.
The expectation for the next trade is the same as it was for the last trade.......
So just to be technical, you shouldn't view it as saying "well, I've lost 3 in a row so the expectation of the next trade being a loser very small" that's dangerous. As pointed out in another thread, you CAN however approach the concept from a string standpoint and if you encorporate the same strategy over all events(trades) then it comes out in the wash.
Basically, in order for this to work for a money management strategy, you have to approach the concept consistently among all trades, you can't decide to just jump in and cherry pick a single event, because as I said, the expectation for any single trade is the same/similar.
I think he was using it more as a confidence bolster to stick to your guns and realize that just because you lose 2 trades in a row, don't be fearful/pensive and stick to the plan and be disciplined and when it comes out in the wash (100 trades or such) then it will be in your favor.
Yes, those two are in fact two different things. The chart is about a likelihood of a string of losses given your expectation for each trade (which is assumed to be constant).... not about expectation for the next trade per se (which is the same as previous one).
That's it, it's a psychological tool to help you remain consistent during a string of losses... by having some idea about the # of losses given your batting average.
You are never in the wrong place... but sometimes you are in the right place looking at things in the wrong way.