market, the game of probablity
Posted: Fri Dec 31, 2010 4:50 pm
Hello All,
this is my measly contribution to kreslik, i just copied and pasted these from anther forum. now the timestamp was on dec 5th, so really, if i read tro's method a month ago, id be saying "BULLSHIT!!! blah blah" i feel truly blessed to be guided step by step, i already won the lottery twice by having my great parents, then my great gf, now i just need to win the lottery a third time by changing myself so that i cant take care of lottery #1& #2. now, i am not a writer or anything and find difficult to get my idea across most of the time, so im sorry if this post confuses you.
the following are copy and pasted from the other forum, with something cut out for non-related purpose.
====================================
First, the similarity between warren buffet investment style and Hedge Fund HFT.
now most of you will be like "this guy if F'ing crazy, warren buffet is investment style and HFT is technical" ahhh, but if you think deeper (i also hypothesize that warren buffet realized this early on but that is just my thinking, but i got evidence to back up my thinking if you want to pm about it, such as why did he manage other people's money first and then start his own thing, its the plateau that you want to reach, because you can only enter and exit so much without influencing the price against your position ). like i said before, if you think about it, warren buffet said (not in exact word) "dont follow the crowd, believe your own assessment" what is BEHIND his word is that if you have a less probability of being right in the LONG run. i stress LONG, meaning average over time. Because he realized that media and anything we read and can comprehend is being controlled by the people in power. if you have probability of reading something for your EVENTUAL benefit (i stress eventual and long run and will take those out in the following paragraphs, so when i talk about gains or loss and benefit, it will be the eventual and not the immediate), so lets just say you read something for your eventual benefit will be 1%. which is not unlikely, since all the news source we have access to is controlled by the gov or people in power(why you never read gov experiment failed and you get a news article that nuke power plant exploded, if anyone who went to college and just google searched, nuke power plant dont explode ). so the probablity being 1% the chance of you reading something for your benefit next time is reduced down to .1% and if you think just how much just in advertisement we are exposed daily (3000) and cut that by half, meaning, what is the probablity of you reading somethng half the time being for your eventual benenfit, raise 1% to the 1500 power, i dont think a normal calc to the 20th decimal place can display the number, meaning 0, zilch, that is also the reason why we have a mask put over our head, the very senses makes up human, the powerful have controlled it since day one. Sh*t, im getting offtopic.
warren buffet realized this and traded against the crowd and made billion. now let me explain why HFT exist.
for example, using your system, you calculated your average loss is 150 dollars over time. your win loss ratio is alright, 2:1. so the chance of you coming across a losing trade over all the trades you will take is 1/3, 33%. lets sat you have a 10000 account, and you only invest 30percent of that on anytrade using your system. so 3k for any thing that meets your criteria for entering a trade based on your system. so in order for you to lose ALL the 3k or 30 percent of your account, you have to make 20 trades in a row. but the chance of you making a losing trading using your criterias is only 33% raised that to the 20th power and you get the chance of you losing all your 3k overtime, which should be close to zero. you have better chance winning the multistate lottery. now imagine if the data you use to build your buy/sell signal is based on millisecond time frame, 1 tickat a time and orders coming in, making sense on the smallest tick chart possible, if you just had the ratio stated above, you losing money is zelch, off course, the calculations is not including commission, or slippage(the nail in the coffin for a trade system really), the minimal food for your chicken that lays gold eggs if you will.
so really, both Warren buffet and HFT realized that although they dont have a perfect system, or the holy grail that many traders look for, if they trade this way, overtime, they will beat teh system. that is also bad news will only have effect on a sold company stock for the short term.
anyway, i have said enough, and feel i have contributed to this community for the smart people who can utilize what i said for their future system development. in addition, if your system gives you 20% yield over the year, why not trade something that gives you a higher leverage. if you have 1 in a billion chance of losing all your initial investment, all you have to make sure of is that you will ALWAYS have enough capital to enter the trade.
sorry it sounded like a acceptance speech at the award shows, and if you think im a loonitic, im ok with that. but this helped you in your future trading or life perspective, im glad.
============================
well, im really bad with words, not having english as my first language. But if you really think about it. everything we read, or majority of it, whether it be news or even education, the EVENTUAL benefit will be for the rich and powerful. you maybe be making 200k a year working having a PHD or working for goldman sacs, but your output is so much greater. now i dont really have the exact number, but im sure the gov or the top tier entity do, lets just say on average, 1000 phd over the past year as a whole made the pharmateutical industry 1 billion dollars, so actually their worth should be 1 million a year IF they were working together with material etc etc, but if pharm companies want to up their chance of not paying you too much working, they will pay you 5 times less than your worth, and guess what most phds make, around 200k. NOW, the imediate benefit is in our favor, so, we made 200k this year, but working class as a whole, the eventual benefit is for the upper tier.
if you think this deeply, since most news medias are controlled by the powerful, what is the chance of you reading something overtime that will be for your benefit: 0 to the twentith decimal place in a DAY. now all these probablities off course i use rough numbers, instead of how much materials we are really exposed to, i substitued advertisement rate (3000 a day), etc etc. these are just rough numbers, me as ONE person thinking about it, now the upper tier as an entity had been here ever since society existed. really, since the day we are born, the powerful didnt have to do anything, because the probablity is in their favor, since being very young, we are like a sponge with no ability to comprehend or question the materials we are sucking in. so really, ever since we are born into this world, the mask is already put onto our faces, skewing our view toward the eventual benefit of the top tier, with the immediate favor being in ours.
if you apply this to teh stock market, (now, i derived the life meaning from the stock market and not the other way around, thats why im so grateful to this forum), why does news only have immediate benefit for the company .
on a conspiracy note, why does gov give welfare to the poor.... again, think outside the box.
gov paids poverty people 100 dollars a kid a month, to the poor people, they are thinking: "why not bore more kid, we make money just fromt eh kid" what they dont realize is that you just F'cked your kid's possiblity of jumping out your current class. if the family is on welfare, if they have only one kid and the parents really wanted the kid to have an education, even if the kid is mediocore in grades in high school, they could have saved moeny for teh last 18 years for the kid to go to college, but if they bore 4 kids, there is NO way they can aford the tuition for all 4 of their kid. immediate benefit : 100 dollars per kid a month, gov eventual benefit : 4 working bees for the hive for the next generation. also, now if the kid is exceptional and gotten scholarship, off course that is another thing. but the gov already knows how many people do they need for the lower class to make this country run cheaply, calcualte the average birthrate for the lower class and voila, you get how many poor kids they are willing to help getting out of the class to go to college if the middle class sees a lack of working bees.
oh, another extreme conspiracy thing, if you think the economy crash is coincidence, i think not anymore. guess what we (being in the 20-30 range) are gonna tell our kid after experiencing such a sharp decline in jobs: "WORK hard SON, or daughter, study harder than your dad ever did" we are gonna push them harder than we pushed ourselves, what does that create for the next generation : competition. what does competition create? middle class making less or doing more for how much they are now. so expect more people to move down a class or staying the same as their parent but making the same ammount.
dam'n, i can write forever about this. everyone knows the flash crash is not an accident, but what was it used for??? its a stress test for the market if you will, if the gov gonna play the market now, they want to know their probablity as well. they want to know, if every body is jumping out of the ship , how much money do they have to put in to stablize the market, and its not much, only 7 billion rushing in is enough to bring DOW to its knees. so the smart people would take this chance and really study the crash, if there is this many shares being sold, the ES went down this much etc etc. this also led me to further believe that there is NO holy grail out there, but wining systems.
these are just examples, the numbers are MY best guesstamations. BUT if you really get my thought process, your eyes will be opened, we are much like the human batteries in the Matrix, an illusion put over our head when we are born. after realizing this, i give the writer behind the matrix props. who represented the matrix: a old white dude. if you unplug from the system, what can you do: extraordinary things. who are the agents hunting down the rebels: dudes in suits. I really hope everyone can see life differently after reading this. i really feel sad for humanity, feel so powerless to change it, because if there were a revolution, the old system is erased, the rich will alwys wants to be richer, the powerful will always want more control, just a matter of who.
i can go on and on about this, writing endlessly, but, those example above should help those not only in the stock market, but the way to look at society.
And thank you adamgreen, for suggesting the books to me, I will definitely be reading those, but Im not much a reader, being Asian and all, astigmatism making my head hurt when i read too much, lol. never finished a book in my entire life, goosebumps dont count when your parents made you read it for English learning purposes, those were dark time (100 new words everyday) T.T (but at the same time, made me who I am today ^.^)
=================================
Oh, the meaning of life, I dont know, I guess for me, even if my system fails in the future, is contentment and happiness, "being loved by the ones that you want love from" warren buffet. if my system does not fail and the market runs like it has been for as far as thinkorswim has data for, I'd like to help the less fortunate people in the world, help those who has the chance to jump out of their class but unable to do so due to financial reasons. does one really need that much money?? a new M3 for me every 5 years and a million dollar house paid off in cash is enough for me along with some savings. think about it, when you made money in the market, someone lost money, probably those who already lost their jobs and try to get rich fast in the market. your money increase is really upon the blood of others, much like corporate ladder climbing.
i guess what Im really try to say, when you become successful, dont forgot ALL the people that contribute to your success, it is never your own, everyone that you come across helped to shape the person you are today, whether it be online forums, or the poor guy who made your account grow bigger. help those less fortunate than you if you have enough capital off course.
Oh, and I really want as much criticism as possible from the people on this forum, many of which are much smarter, more life experiences and older than me. Me being so young and realizing this feels surreal to me but it makes so much sense as numbers dont lie. so please post what you think.
===================================
===================================
i just copied and pasted these from another forum, which i started off, sorry, tro, this is actually the second forum i ever posted on
again, these are just my thought process, and as you read, i didnt start out in forex, actually more like stocks=>futures=>forex
the reason being that stocks is 1:1, futures 1:10 and forex 1:50/100.
oh, and another reason is that forex is the closest thing to the money, less middleman= greater return for the same effort.
anyway, i really have nothing to contribute to others on this forum but this general concept. but i feel real grateful to all others on this forum that i feel i need to contribute at least something.
happy new years all, and follow the great master TRO.
this is my measly contribution to kreslik, i just copied and pasted these from anther forum. now the timestamp was on dec 5th, so really, if i read tro's method a month ago, id be saying "BULLSHIT!!! blah blah" i feel truly blessed to be guided step by step, i already won the lottery twice by having my great parents, then my great gf, now i just need to win the lottery a third time by changing myself so that i cant take care of lottery #1& #2. now, i am not a writer or anything and find difficult to get my idea across most of the time, so im sorry if this post confuses you.
the following are copy and pasted from the other forum, with something cut out for non-related purpose.
====================================
First, the similarity between warren buffet investment style and Hedge Fund HFT.
now most of you will be like "this guy if F'ing crazy, warren buffet is investment style and HFT is technical" ahhh, but if you think deeper (i also hypothesize that warren buffet realized this early on but that is just my thinking, but i got evidence to back up my thinking if you want to pm about it, such as why did he manage other people's money first and then start his own thing, its the plateau that you want to reach, because you can only enter and exit so much without influencing the price against your position ). like i said before, if you think about it, warren buffet said (not in exact word) "dont follow the crowd, believe your own assessment" what is BEHIND his word is that if you have a less probability of being right in the LONG run. i stress LONG, meaning average over time. Because he realized that media and anything we read and can comprehend is being controlled by the people in power. if you have probability of reading something for your EVENTUAL benefit (i stress eventual and long run and will take those out in the following paragraphs, so when i talk about gains or loss and benefit, it will be the eventual and not the immediate), so lets just say you read something for your eventual benefit will be 1%. which is not unlikely, since all the news source we have access to is controlled by the gov or people in power(why you never read gov experiment failed and you get a news article that nuke power plant exploded, if anyone who went to college and just google searched, nuke power plant dont explode ). so the probablity being 1% the chance of you reading something for your benefit next time is reduced down to .1% and if you think just how much just in advertisement we are exposed daily (3000) and cut that by half, meaning, what is the probablity of you reading somethng half the time being for your eventual benenfit, raise 1% to the 1500 power, i dont think a normal calc to the 20th decimal place can display the number, meaning 0, zilch, that is also the reason why we have a mask put over our head, the very senses makes up human, the powerful have controlled it since day one. Sh*t, im getting offtopic.
warren buffet realized this and traded against the crowd and made billion. now let me explain why HFT exist.
for example, using your system, you calculated your average loss is 150 dollars over time. your win loss ratio is alright, 2:1. so the chance of you coming across a losing trade over all the trades you will take is 1/3, 33%. lets sat you have a 10000 account, and you only invest 30percent of that on anytrade using your system. so 3k for any thing that meets your criteria for entering a trade based on your system. so in order for you to lose ALL the 3k or 30 percent of your account, you have to make 20 trades in a row. but the chance of you making a losing trading using your criterias is only 33% raised that to the 20th power and you get the chance of you losing all your 3k overtime, which should be close to zero. you have better chance winning the multistate lottery. now imagine if the data you use to build your buy/sell signal is based on millisecond time frame, 1 tickat a time and orders coming in, making sense on the smallest tick chart possible, if you just had the ratio stated above, you losing money is zelch, off course, the calculations is not including commission, or slippage(the nail in the coffin for a trade system really), the minimal food for your chicken that lays gold eggs if you will.
so really, both Warren buffet and HFT realized that although they dont have a perfect system, or the holy grail that many traders look for, if they trade this way, overtime, they will beat teh system. that is also bad news will only have effect on a sold company stock for the short term.
anyway, i have said enough, and feel i have contributed to this community for the smart people who can utilize what i said for their future system development. in addition, if your system gives you 20% yield over the year, why not trade something that gives you a higher leverage. if you have 1 in a billion chance of losing all your initial investment, all you have to make sure of is that you will ALWAYS have enough capital to enter the trade.
sorry it sounded like a acceptance speech at the award shows, and if you think im a loonitic, im ok with that. but this helped you in your future trading or life perspective, im glad.
============================
well, im really bad with words, not having english as my first language. But if you really think about it. everything we read, or majority of it, whether it be news or even education, the EVENTUAL benefit will be for the rich and powerful. you maybe be making 200k a year working having a PHD or working for goldman sacs, but your output is so much greater. now i dont really have the exact number, but im sure the gov or the top tier entity do, lets just say on average, 1000 phd over the past year as a whole made the pharmateutical industry 1 billion dollars, so actually their worth should be 1 million a year IF they were working together with material etc etc, but if pharm companies want to up their chance of not paying you too much working, they will pay you 5 times less than your worth, and guess what most phds make, around 200k. NOW, the imediate benefit is in our favor, so, we made 200k this year, but working class as a whole, the eventual benefit is for the upper tier.
if you think this deeply, since most news medias are controlled by the powerful, what is the chance of you reading something overtime that will be for your benefit: 0 to the twentith decimal place in a DAY. now all these probablities off course i use rough numbers, instead of how much materials we are really exposed to, i substitued advertisement rate (3000 a day), etc etc. these are just rough numbers, me as ONE person thinking about it, now the upper tier as an entity had been here ever since society existed. really, since the day we are born, the powerful didnt have to do anything, because the probablity is in their favor, since being very young, we are like a sponge with no ability to comprehend or question the materials we are sucking in. so really, ever since we are born into this world, the mask is already put onto our faces, skewing our view toward the eventual benefit of the top tier, with the immediate favor being in ours.
if you apply this to teh stock market, (now, i derived the life meaning from the stock market and not the other way around, thats why im so grateful to this forum), why does news only have immediate benefit for the company .
on a conspiracy note, why does gov give welfare to the poor.... again, think outside the box.
gov paids poverty people 100 dollars a kid a month, to the poor people, they are thinking: "why not bore more kid, we make money just fromt eh kid" what they dont realize is that you just F'cked your kid's possiblity of jumping out your current class. if the family is on welfare, if they have only one kid and the parents really wanted the kid to have an education, even if the kid is mediocore in grades in high school, they could have saved moeny for teh last 18 years for the kid to go to college, but if they bore 4 kids, there is NO way they can aford the tuition for all 4 of their kid. immediate benefit : 100 dollars per kid a month, gov eventual benefit : 4 working bees for the hive for the next generation. also, now if the kid is exceptional and gotten scholarship, off course that is another thing. but the gov already knows how many people do they need for the lower class to make this country run cheaply, calcualte the average birthrate for the lower class and voila, you get how many poor kids they are willing to help getting out of the class to go to college if the middle class sees a lack of working bees.
oh, another extreme conspiracy thing, if you think the economy crash is coincidence, i think not anymore. guess what we (being in the 20-30 range) are gonna tell our kid after experiencing such a sharp decline in jobs: "WORK hard SON, or daughter, study harder than your dad ever did" we are gonna push them harder than we pushed ourselves, what does that create for the next generation : competition. what does competition create? middle class making less or doing more for how much they are now. so expect more people to move down a class or staying the same as their parent but making the same ammount.
dam'n, i can write forever about this. everyone knows the flash crash is not an accident, but what was it used for??? its a stress test for the market if you will, if the gov gonna play the market now, they want to know their probablity as well. they want to know, if every body is jumping out of the ship , how much money do they have to put in to stablize the market, and its not much, only 7 billion rushing in is enough to bring DOW to its knees. so the smart people would take this chance and really study the crash, if there is this many shares being sold, the ES went down this much etc etc. this also led me to further believe that there is NO holy grail out there, but wining systems.
these are just examples, the numbers are MY best guesstamations. BUT if you really get my thought process, your eyes will be opened, we are much like the human batteries in the Matrix, an illusion put over our head when we are born. after realizing this, i give the writer behind the matrix props. who represented the matrix: a old white dude. if you unplug from the system, what can you do: extraordinary things. who are the agents hunting down the rebels: dudes in suits. I really hope everyone can see life differently after reading this. i really feel sad for humanity, feel so powerless to change it, because if there were a revolution, the old system is erased, the rich will alwys wants to be richer, the powerful will always want more control, just a matter of who.
i can go on and on about this, writing endlessly, but, those example above should help those not only in the stock market, but the way to look at society.
And thank you adamgreen, for suggesting the books to me, I will definitely be reading those, but Im not much a reader, being Asian and all, astigmatism making my head hurt when i read too much, lol. never finished a book in my entire life, goosebumps dont count when your parents made you read it for English learning purposes, those were dark time (100 new words everyday) T.T (but at the same time, made me who I am today ^.^)
=================================
Oh, the meaning of life, I dont know, I guess for me, even if my system fails in the future, is contentment and happiness, "being loved by the ones that you want love from" warren buffet. if my system does not fail and the market runs like it has been for as far as thinkorswim has data for, I'd like to help the less fortunate people in the world, help those who has the chance to jump out of their class but unable to do so due to financial reasons. does one really need that much money?? a new M3 for me every 5 years and a million dollar house paid off in cash is enough for me along with some savings. think about it, when you made money in the market, someone lost money, probably those who already lost their jobs and try to get rich fast in the market. your money increase is really upon the blood of others, much like corporate ladder climbing.
i guess what Im really try to say, when you become successful, dont forgot ALL the people that contribute to your success, it is never your own, everyone that you come across helped to shape the person you are today, whether it be online forums, or the poor guy who made your account grow bigger. help those less fortunate than you if you have enough capital off course.
Oh, and I really want as much criticism as possible from the people on this forum, many of which are much smarter, more life experiences and older than me. Me being so young and realizing this feels surreal to me but it makes so much sense as numbers dont lie. so please post what you think.
===================================
===================================
i just copied and pasted these from another forum, which i started off, sorry, tro, this is actually the second forum i ever posted on
again, these are just my thought process, and as you read, i didnt start out in forex, actually more like stocks=>futures=>forex
the reason being that stocks is 1:1, futures 1:10 and forex 1:50/100.
oh, and another reason is that forex is the closest thing to the money, less middleman= greater return for the same effort.
anyway, i really have nothing to contribute to others on this forum but this general concept. but i feel real grateful to all others on this forum that i feel i need to contribute at least something.
happy new years all, and follow the great master TRO.