The Gambler's Fallacy

Has anybody applied The Gambler's Fallacy to trading?

Briefly what this says is "The gambler's fallacy is a logical fallacy involving the mistaken belief that past events will affect future events when dealing with random activities..." etc.

The idea is that the dice or roulette wheel does not have a memory. So if red came up 10 times in a row on the roulette table then the chance of it coming up red the next time is not affected by the previous results.

I am interested to know how this applies to trading.

$2.25 roundtrip - that's good! I do not trade big enough for that sort of deal. But I think that my math is almost correct though right? 60% win/loss ratio has you losing money 65% breakeven and 70% just making a small profit right?

Call MB Trading tell them i send you check them out. And that is one way, I don’t know about the math i don’t use it, I was never good at it.

http://www.mbtrading.com/ratesFutures.asp

Thanks for the reference inventor. You are a very helpful guy!!

Inventor: It looks like your logic and mathematics is reasonable. This is even though you claim that you do not use mathematics. My only concern here is that you can maintain a 70 percent or better win and loss ratio. If you can do that then this is a sound and good strategy but if that disappears then you are in trouble.

Let’s see if I can explain the mathematical aspect of trading for me, when it comes to figuring out mathematical calculations I’m slow, so instead off going back thru the daily trades and calculate the win/loss % ratio I simply look at my account and if on the end of the month / year I’m on the + well I’m a happy camper. This is not to say that is not useful is like let’s say my ratio is 70/60 or 80/50 is that going to change my strategy? No! what is gone na make me change my strategy is the mistakes I make as I do every day at the end of the day I ask myself what have I done wrong and Wright it down or as I make them and I try not to repeat them, witch is not ease, is like I have this set of rules and there in a plaque in front of me but do you thing I have time to look at theme while I’m trading? No, but they are there. Well? I know them by hart but in the heat of the moment and not to mention the distractions well? But you are right you must have some kind of idea were you stand.

Inventor, it sounds like you have an unusual problem. Most traders who know their rules by heart also have instinctive memory to implement those rules. It normally happens that you do not follow your rules because you don't remember them.

When you trip, for example, you do not think that you must put your arms out in front of you to stop your fall. You do not have time to think about this. Your arms automatically go out and break your fall. This is instinctual. A habit that you learned as a child when you fell. You probably do not even remember learning this.

It is my opinion that successful traders who claim that they use their intuition are in fact just using a sum of reflexes where they can very quickly add together a number of patterns and their minds subconsciously weigh the risks and probabilities.

In your case it appears that your memory holds these facts (your rules) but does not bring them to the subconscious or conscious level when you are trading. It could be the distractions or many other things that you are thinking about when executing a trade that is keeping them suppressed. If you are anxious, for example, it may be possible that your anxiety or adrenalin is suppressing that information. Do you think that if you were more relaxed when you traded that you would be able to recall all of your rules when entering and managing a trade?

Yes I can!!! and very good analogy George thank you…….my problem is very simple my rules are simple to, Rule #1 trade in the morning till 8.30 last trade win/louse and close up shop, rule #2 fallow rule #1. I always make profits on my first 2 trades 85 % at the time then curiosity and greed sets in and as you very well know after 8.30 the MM’s will start and ruin my day……….

BTW I wonted to listen to your interview you had with Amanda the one on rocket room but it takes hours to load up is there any other web site to go?

You say that you trade until 8:30 in the morning? What time zone are you in? Somewhere in Europe? What time would that be in New York?

Have you thought about paper trading after your cut-off time? Paper trade until you master that time zone of the market.

I do not know of any other place to get the recording. In fact I do not even have a link stored for it myself.

quote:

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Originally posted by inventor

[quote]Originally posted by George Soros

You say that you trade until 8:30 in the morning? What time zone are you in? Somewhere in Europe? What time would that be in New York?

Have you thought about paper trading after your cut-off time? Paper trade until you master that time zone of the market.

I do not know of any other place to get the recording. In fact I do not even have a link stored for it myself.

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I'm in California and I start at 5.30 and when I’m in Greece I start at 3.30 in the afternoon.

I have a simulator From Rosenthal Collins Group was my broker, and this is the funny part no meter what kind of trouble I get in to with the simulator I can always get out with a profit or brake even.

Here is the link
http://www.rocketboom.com/vlog/archives/2006/06/rb_06_jun_08.html

That is a good interview. I watched RocketBoom when Amanda was the host but I do not watch it anymore. Now I think that there is a Brit chick doing it.

UrbanSound, you and I are saying the same thing. Simply using price bars you cannot predict the next bar. The predictability of future bars is in the patterns. Such patterns include S/R, Fibs and such. It is the formation that gives predictive value because from that you are able to see what other traders are thinking and hoping for.