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.

"with valium to support it" ... ? Are you talking about the drug diazepam with trademark Valium?

I understand the part where you are adding to the trade each 1 point and then targeting break even or profit. You say that it is 85 to 90% successful. So on the 10 to 15% when it fails I assume that you are being stopped out on everything that you are adding in the simulator. In those 10 to 15% of cases what are the losses like? Are the wiping out all the profits?

Valium..? hahaha my spelling and my grammar leaves something to be desired!!!!

Well if you don’t give your system the time to confirm it self or come thru then you have to give it a % of failure you can not account for. And yes the losses will be substantial

Are you saying that on the simulator that you have not lost any money? In other words it has so far been 100% successful?

If you take the human error and behavior out of the loss/win % than the answer is yes

And your problem is that you currently cannot "use" the same mindset when you are trading real money?

What is THE key difference(s) in your mind using the simulator and in real trading?

What are the other differences that you experience between the simulator and real trading?

I am wondering if it is possible that you can work on 1 aspect at a time and eliminate the problems? It sounds like you have a very good methodology even though it is on the smallest time frame that I have ever heard of.

George Soros
What is THE key difference(s) in your mind using the simulator and in real trading?
inventor
simulator not my money system works --real money save capital not given enough time to work.
George Soros
I am wondering if it is possible that you can work on 1 aspect at a time and eliminate the problems? It sounds like you have a very good methodology even though it is on the smallest time frame that I have ever heard of.
inventor
Well? here are the rules to successful play ES with the system, first make one trade in the morning win or loose and go away, or trade other markets, if I stick around and try to get a bigger fish well guess what like I mention previously the MM get to work on the market and I'm working my a.. off to stay alive.
Es far as time frame I have not tested a longer time frame besides I'm a chicken when it comes to 5/6 point swings!

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Originally posted by elite trader

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Originally posted by inventor

That will be me!!!

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Ah okay

I thought that it might be someone very famous. Perhaps you are someone very famous? Do people always quote you? If you live in both Greece and California then perhaps you are a movie star?

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No I'm nobody special or famous just a day trader trying to make a living and I do wright quotes.

What if you scale down the size that you are trading? Or are you already trading 1 contract on the ES?

If you are trading less money then you will not have as much worry on your mind about losing.

Perhaps one day someone will set up a mini market on the E-mini to help traders overcome the problem that real money has with their trading. For example, an automated web site that allows traders to trade $1 per point and 25 cents per tick instead of $50 and $12.50.

This reduction of 50 times in size would mean that the trader is still earning and losing money but the amount would be trivial until they started ramping up the contracts.

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Originally posted by George Soros

What if you scale down the size that you are trading? Or are you already trading 1 contract on the ES?

If you are trading less money then you will not have as much worry on your mind about losing.

Perhaps one day someone will set up a mini market on the E-mini to help traders overcome the problem that real money has with their trading. For example, an automated web site that allows traders to trade $1 per point and 25 cents per tick instead of $50 and $12.50.

This reduction of 50 times in size would mean that the trader is still earning and losing money but the amount would be trivial until they started ramping up the contracts.

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No my strategy works all I have to do is fallow the plan.
as far as $1 per point is like playing .25 poker you loose more money that way

There is always a certain value at which it will not cause you undue concern and will still be enough that it will focus your attention.

For example, 25 cents per tick is not enough for you to take it seriously and so that is too little for you. $250 per tick might be too much for you to handle.

So the question is, at what value per tick would it not destroy your ability to concentrate and follow your plan yet still be of importance that you would not dismiss the amounts lost and gained as trivial?

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.