2009.09.10 DRAIN THE BANKS - LIKE A RAT

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oldmangeezer
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Rats vs Humans

Postby oldmangeezer » Thu Oct 15, 2009 10:46 pm

Sunday, September 27, 2009

Rats Can Be Smarter Than Humans



"Look, for example, at this elegant little experiment. A rat was put in a T-shaped maze with a few morsels of food placed on either the far right or left side of the enclosure. The placement of the food is randomly determined, but the dice is rigged: over the long run, the food was placed on the left side sixty per cent of the time. How did the rat respond? It quickly realized that the left side was more rewarding. As a result, it always went to the left, which resulted in a sixty percent success rate. The rat didn't strive for perfection. It didn't search for a Unified Theory of the T-shaped maze, or try to decipher the disorder. Instead, it accepted the inherent uncertainty of the reward and learned to settle for the best possible alternative.

The experiment was then repeated with Yale undergraduates. Unlike the rat, their swollen brains stubbornly searched for the elusive pattern that determined the placement of the reward. They made predictions and then tried to learn from their prediction errors. The problem was that there was nothing to predict: the randomness was real. Because the students refused to settle for a 60 percent success rate, they ended up with a 52 percent success rate. Although most of the students were convinced they were making progress towards identifying the underlying algorithm, they were actually being outsmarted by a rat."

Pg 64 - HOW WE DECIDE


"Think about the stock market, which is a classic example of a "random walk," since the past movement of any particular stock cannot be used to predict its future movement. The inherent randomness of the market was first proposed by the economist Eugene Fama, in the early 1960's. Fama looked at decades of stock market data in order to prove that no amount of knowledge or rational analysis could help you figure out what would happen next. All of the esoteric tools used by investors to make sense of the market were pure nonsense. Wall Street was like a slot machine."

Pg 67 - HOW WE DECIDE


TRADING IS SIMPLE:

* Price either goes up or down.
* No one knows what will happen next.
* Keep losses small and let winners run.
* POSITION SIZE = RISK / STOP LOSS
* The reason you entered has no bearing on the outcome of your trade.
* You can control the size of your loss (skill) but you can't control the size of your win (luck).
* You need to know when to pick up your chips and cash them in.



Substitute Stock Market with Forex.

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oldmangeezer
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Postby oldmangeezer » Thu Oct 15, 2009 10:47 pm

TRO I'm deleting all you indicators. LOL

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TheRumpledOne
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Postby TheRumpledOne » Thu Oct 15, 2009 11:47 pm

When highly verbal people get control of the audit process, they tend to make five critical mistakes:

* They write verbal auditing standards that are too subjective and vague, with requirements like "minimal use of electric prod" and "non-slip flooring." Individual inspectors have to figure out for themselves what ?minimal use? means. A good audit checklist has objective standards that anyone can see have or have not been met.

* For some reason, highly verbal people have a tendency to measure inputs, such as maintenance schedules, employee training records, and equipment design problems, instead of outputs, which is how the animals are actually doing. A good animal welfare audit has to measure the animals, not the plant.

* Highly verbal people almost always want to make the audit way too complicated. A 100-item checklist doesn't work nearly as well as a 10-item checklist, and I can prove it.

* Verbal people drift into paper audits, in which they audit a plant's records instead of its animals. A good animal welfare audit has to audit the animals, not the paper and not the plant.

* Verbal people tend to lose sight of what's important and end up treating small problems the same way they treat big problems.

Page 268 - 269 Animals in Translation

====================

Does this sound like some of the trading methods and systems out there?
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!

Please do NOT PM me with trading or coding questions, post them in a thread.

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TheRumpledOne
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Postby TheRumpledOne » Fri Oct 16, 2009 12:12 am

Image

THE DRAINING CONTINUES...
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!



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forrestang
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I know the problem

Postby forrestang » Fri Oct 16, 2009 12:47 am

The problem I don't think is following the system and always turning left?

I think the problem is the last step of the process:
"Take profit if/when you can."

This is a bit ambiguous. Wouldn't a rat have this problem too? Seems like a rat would jump on the first piece of cheese, like 1 pip :D

Following the system would be simple if the only part of the exercise was picking the entry(turning left).

Here are the options:
-Do you set a fixed number?
-Do you set a target to a prior/recent support level where price stopped paused on the way down?
-Trail below bar lows or swing points in attempt to catch that decent runner?
-Scale out at multiple predetermined points of one's choosing?

Other opinions?

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Patch
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Postby Patch » Fri Oct 16, 2009 2:21 am

forrestang

What do you think of taking 3 or 5 or 9 or 10 pips profit. I'd rather take 3 pips on 100 contracts, than 100 pips on one contract. Less time in the post 9/11 market.

Patch
Counting Pips
ENOUGH being a Yalie for me Back to the Sea. "What i can lose, i can win" "YES YOU CAN" - dragon33 -"Pick one method and one pair and stick with them until you master it. "The choice is yours - success or failure." TRO

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Postby TheRumpledOne » Fri Oct 16, 2009 2:44 am

Image

SOMETIMES YOU DO GET LUCKY!
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!



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Postby forrestang » Fri Oct 16, 2009 3:02 am

Patch wrote:forrestang

What do you think of taking 3 or 5 or 9 or 10 pips profit. I'd rather take 3 pips on 100 contracts, than 100 pips on one contract. Less time in the post 9/11 market.

Patch
Counting Pips


That is a reasonable suggestion. Just depends on wether you can pick enough trades that will have a high enough win % if you are going to cut profits quickly frequently that overrun your normal 10pip stoploss.

I have been doing really good on various late night swing trades in FX for some time.

I am interested in "The Rat" specifically for the NY/London session trading for quick/constant targets with some decent size.

I will nail a simple profit/stop strategy down soon.

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Postby AndreasF » Fri Oct 16, 2009 4:56 am

Image

The RAT method is really amazing- simple and profitable.
I mainly use it on H1- less entries compared to M5 but more pips and I don't have to spend every minute in front of the screen.

Thanks, TRO - you did excellent work

Andreas

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Postby noone22 » Fri Oct 16, 2009 8:12 am

TheRumpledOne wrote:SOMETIMES YOU DO GET LUCKY!


Is it about luck?

TRO, in this trade, have you waited
for semafor to appear against your direction
or candle to become red and move down significantly
to exit?

In the middle of this up trend you may not know,
whether it's going to continue up or will go down.

If I'm exiting the long trade (with profit),
and price is continue rising up -
I never regret, because I'm happy to catch some cheese
and know, that cannot catch them all.

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