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VT says:
People are always looking for the "real" secrets of trading success,
but their mental biases always have them looking in the wrong places
and at the wrong things. Consequently, they search for magical
trading systems with 75% accuracy or better or for great entry
systems that they think will help them pick the right stock. Picking
the right stock has nothing to do with success and neither does the
accuracy of your stock picking.
He also acknowledges this at
http://www.iitm.com/seminars/Trading-game.htm
"I have found the game to very helpful, and I've played it over and
over again with different money management programs. It's one thing
to read about the mind traps that traders create regarding
probabilities and the gambler's fallacy, or to read that random
number series can contain protracted winning and losing streaks, but
playing a simulation that feels like trading really drives home the
lessons about disciple, systems, and expectancy. Playing the game
over time helps reinforce the idea that you get the same probability
distributions as everyone else, and that your trading plan will need
to address this fact through money management, position sizing,
trading rules etc.
I have found that it also helps you change the way you frame the
activity of trading, because the game focuses on systems results and
strips away entries, setups and the other false control illusions
that traders inevitably get wrapped up in. At first it didn't feel
like trading, because it didn't focus on the things that I did when
I traded, but gradually it did.
It dawned on me that I might not be focusing on the right areas. The
opportunity to view a trading system as the random distribution of
hundreds or thousands of independent trials changed my view about my
ability to "change the markets", and focusing on maximizing system
outcomes has given me a fresh perspective on trading, systems
development, and risk. —Alan Stevens, Boulder CO
This is what Dr. Alexander elder says in "Trading for a Living" - an
international best seller:
Successful trading depends on 3 Ms - Mind, Method, Money.
Mind refers to your trading Psychology. Your must follow certain
Psychological rules that lead to winning when faithfully applied and
avoid pitfalls that become death traps for most losers.
Method refers to how you find your trades - how you decide what to
buy and sell. Each trader needs a method for specific stocks,
options, or futures as well as rules for "pulling the trigger" -
deciding exactly when to buy and sell.
Money refers to how you manage your capital. You may have a
brilliant trading system, but if your MM is poor, you are guaranteed
to lose money. A single unlucky trade can destroy your account if
MM is not in place.
People ask me sometimes which of the 3 is most important. I
answer - imagine sitting on a 3 legged stool. It is pretty stable,
but try getting comfortable sitting on that stool after taking away
any of its 3 legs. Now please tell me which of the 3 legs is most
important?
VT considers Method as "false control illusions", while AE considers
it as an integral part of any successful system.
Draw your own conclusions.
rgds, Pal
--- In amibroker@xxxxxxxxxxxxxxx, Franco Gornati
<francogornati@xxxx> wrote:
> quanttrader714 wrote:
>
> > Where are you getting random systems from? Van Tharp
specifically
> > says that a system must have a positive expectancy to make
money. In
> > other words, an edge. Nothing random about that. Does this
mean the
> > concept of randomness has no valid role to play? Absolutely not.
>
> Mark, expectancy is only drawn from a *random* variable. You
should know
> its distribution. How do you know its distribution? It's
subjective, it
> doesn't 'exist', you guess it, it depends on information.
> Be careful not to confuse randomness with zero expectancy.
>
> Franco
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