Probability theory and trading

[G_V_V]

WHY???

[Preston]

I knew a guy who use to bet on horses esp favourites. When the favourites lost, he would double his bet on the next favourite on the assumption that sooner or later he will recover all his money. To cut a long story short, this guys is now poor ( lost his profitable business), divorced, and spends most of his time at casino's as he has got no home to go to. It is important is come to the realisation that sometime we do make a wrong call and to cut losses.

[THRESHOLD]

You are really only averaging down. As for this "field" you say you are "creating"... it already existed - its called "the market." Just take your position at the best level you can calculate. If it drops - sell it and re-enter lower. OR hold it and sell when it rises ie. do the conventional thing - there is no need to re-invent the wheel. your system requires too much capital to be sunk. Ultimately you can only profit by the variation about the point of entry within the period denoted by your buying intervals (smoothed by the number of steps in your sequence.) ie. you will, for the most part, follow the beta of the instrument you are buying. If you create an array of short positions against your longs = you can achieve the effect you seek. That is what hedge funds do. They tend to underperform the maket over time; but they strip the volatility from the exposure they assume.

[G_V_V]

I know what my loss will be if the market goes to 10,000 and I also know the governments will bail out the banks to push the market up again. So I can't be bluffed.

[Preston]

GVV, you are making an assumption a constant.I guess you are the master of your own destiny.

[G_V_V]

It would be my field within the market, a place where I would be harvesting money. How does one know how far it will drop to re-enter? Why do you say R250,000 min is too much capital? the rest of your comment is obscured to me. The part about hedging is not my way of farming money.

[G_V_V]

With a little help from above we can do all things.

[THRESHOLD]

I never said that any specific amount was too much capital. I said your system required to much capital to be committed - for the return. A system should surely be designed to minimise the amount of exposure relative to return.

[THRESHOLD]

Incidentally - there is a system - you can read about it in any good book on trading; it has been deisgned by millions of traders over centuries (granted most of it is fairly modern though.) AND even that system fails catastrophically occasionally. I am not trying to be oppositional - but you (and I) and everybody else - we're just not that clever. Isaac Newton said (after being wiped-out in the South Sea Comapany stock crash and referring thereto: "I can calculate the movement of stars but not the madness of men."

[Skerp]

I've learn't two things from this post, GVV too smart for most of us, you don't win arguments against guys like him. Secondly he maybe doesn't trade CFD's.

[G_V_V]

I must correct again, 19 times 20 = 380 divided by 2 = 190 or R190,000

[G_V_V]

Ha ha ha Newton was right however did he ever consider the fact that we are star dust.

[G_V_V]

I must correct again the above, 19 times 20 = 380 divided by 2 = 190 or R190,000

[G_V_V]

Well if you are talking about the initial margins it's on 19 contract however if you are including the loss if the market drops like a knife to 10,000 it includes R190,000 paperloss. Remember though markets never drop in a straight line so profits are made as the market moves up and down so basically we are comparing the R1,000 profit and the margin which is between 30% when the market is high and 100% when the market is low. If you make R1000 profit when the market is 10000 in a week yearly that is 5600% relative to interest rate interest.

[G_V_V]

I trade shares using the system I have explained above and have doubled my capital in the past 6 years including interest and dividends whilst the Dow Jones has done nothing in the past 10 years.

[louisg]

Do you trade the DOW?

[G_V_V]

No I don't.

[Skerp]

Thanks for the honest answer and credible facts. I trade CFD's on the Top 40 Index, part-time/hobby and am 29% up for the year so far. Me be not smart enough to understand your system! Remember farmer!

[prancing_horse]

Your obviously a SHARP farmer.Do you play the maize futures, and if yes how have you done?

[G_V_V]

For some time I traded futures and the profit I made was almost equal to the brokerage so I am still in the profit of the deviation but almost square if you include the brokerage. In all it cost me about R16,000 brokerage but the profits paid for it so I am almost square. However I did buy shares when my future trades where losing so those losses I made back on shares.