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Mickey,
Larry Williams is a marketing genius. He and Ken Roberts have it "wired".
Be careful about wearing you're Larry Williams "badge of courage" too
proudly. The guy sharpens his teeth with a fine file.
Steve Karnish
Cedar Creek Trading
http://www.cedarcreektrading.com
----- Original Message -----
From: Michel Amelinckx <Michel.Amelinckx@xxxxxxxxxx>
To: <metastock@xxxxxxxxxxxxx>
Sent: Tuesday, April 18, 2000 8:18 AM
Subject: RE: Money Management Stops
> Your last part is very interesting Guy. Of course having consecutive
losses
> can always be a sign that your system stops functioning. But if we have a
> GOOD system and you tested and back tested it thoroughly over many
different
> market types and it is NOT OVEROPTIMIZED, shouldn't we believe in our
system
> and stick with it ? I guess you with all your experience can know. If
you
> have a GOOD system 70% prof. (tested & backtested well) and it shows 2 or
> more consecutive losses (which RARELY HAPPENS on such a system) what is
> mostly the outcome of the next trade in real live ? Is it mostly a losing
> trade and thus system stops working, means I'm completely wrong and so is
> LARRY WILLIAMS. Or is it mostly a winning trade, there is always the
> probability that it can be a losing trade but then next trade has higher
> probability. Of course to take this to your advantage you need to work
with
> stops other ways those trades take you out in no time.
>
> Al I was thinking is if you have a good thoroughly backtested system and
it
> is deviating through a consecutive loss, isn't there a way to take
advantage
> from in order for the system to come back to its mean ? Kevin don't be
> taking old cows out of the river now. I said that the roulette example was
> WRONG. I guess you guys never read books from LARRY WILLIAMS, which
SUPPOSE
> to be a very profitable trader who proved it already many times. Or is he
a
> gambler as you said because he uses it to its advantage.
>
> Greetings
> Mickey
>
> > -----Original Message-----
> > From: owner-metastock@xxxxxxxxxxxxx
> > [mailto:owner-metastock@xxxxxxxxxxxxx]On Behalf Of Guy Tann
> > Sent: dinsdag 18 april 2000 3:45
> > To: metastock@xxxxxxxxxxxxx
> > Subject: RE: Money Management Stops
> >
> >
> > Kevin
> >
> > I'm not sure whether I agree with any of the gambling
> > analogies when used
> > for comparison to trading the markets. My primary reason for
> > this is that
> > in gambling (roulette and craps are examples) your analogies are 100%
> > correct, IMHO. When compared to blackjack, there are some
> > variances based
> > upon the play of players before and after you that impact the
> > deck and the
> > play.
> >
> > When compared to trading the market, I don't think these analogies are
> > applicable at all. Again, that's just my opinion.
> >
> > I'll agree that it's possible to have 1,000 events go against
> > you in a row
> > and then have 1,000 go for you in a row. However, if in testing this
> > system, you ever decided to trade it, you would be broke in
> > no time at all.
> >
> > If on the other hand, you develop a system that is capable of
> > 80% profitable
> > trades, proper testing would give you some idea as to the
> > distribution of
> > these losing events.
> >
> > In our case, even when we develop a new weighting schema, we
> > back test the
> > system for 6 months, 5 years and 18 years. While we're
> > primarily interested
> > in the last 3 years, we also need to see how the system would
> > have done in
> > the real world over a longer period of time. Rather than
> > manufacturer a
> > random list of numbers going back many years, we just use the actual
> > market's performance over that longer period. In our case,
> > again, large
> > losses are exceedingly rare, thank goodness. Repetitive
> > losses are also
> > very rare. On average, for the past 15 years, we average no
> > more than 6 or
> > 7 losses a year while still maintaining our minimum
> > profitability ratio of
> > over 70%.
> >
> > If in back testing, we ever encounter repetitive losses of
> > the type you
> > describe, even while still maintaining good profitability, we
> > would never,
> > ever trade it. In all of our back testing, we take
> > repetitive losses into
> > consideration as well as the system's profitability. A
> > system that wipes
> > you out without giving you the opportunity to make a "come
> > back" is hardly a
> > system.
> >
> > Regards,
> >
> > Guy
> > Fax (630) 604-1589
> >
> > -----Original Message-----
> > From: owner-metastock@xxxxxxxxxxxxx
> > [mailto:owner-metastock@xxxxxxxxxxxxx]On
> > Behalf Of Kevin243@xxxxxxx
> > Sent: Monday, April 17, 2000 4:53 PM
> > To: metastock@xxxxxxxxxxxxx
> > Subject: Re: Money Management Stops
> >
> > The answer is no.
> >
> > It is completely possible to have a 1000 events go against
> > you in a row and
> > then have another 1000 go for you in a row.
> >
> > The point is that you could be wiped out before the reversion
> > back to the
> > mean.
> >
> > What you are describing is like doubling your bet each time you lose
> > figuring
> > eventually, you will win. Not true. You will eventually
> > find a streak that
> > breaks your bank first. Play long enough, and you will
> > eventually lose
> > everything. The house is counting out that. The house has a positive
> > expectancy, you the gambler does not.
> >
> > Kevin Campbell
> >
> > In a message dated 4/17/00 7:43:39 AM Central Daylight Time,
> > Michel.Amelinckx@xxxxxxxxxx writes:
> >
> > > Thanks for helping me out here. I guess my explanation was not very
> > > understandable. And the example of the roulette table was
> > even worse
> > > actually it was WRONG because of course you still have the
> > 0, so this was
> > > WRONG.
> > > What I just tried to say, like described here below is if
> > you have a
> > system
> > > with 70% prob. (of course these statistics are as good as
> > you test them)
> > and
> > > your system shows 4 or more LOSES IN A ROW. And because of
> > this it is
> > > deviating from your mean and thus the prob. of the next trade being
> > correct
> > > is higher. (There is of course a change that your system
> > stops working at
> > > that point)
> > > Is this incorrect ?
> > >
> > > Greetings
> > >
> > > Mickey
> > > B
> > >
> >
> >
>
>
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