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Re: Money Management Stops



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This is not what the central limit theorm says, or means.  The central limit
theorm says, "As the sample size increases, the sampling distribution of
sample means approaces a normal distribution" (Elementary Statistics,
Seventh Edition.  Mario F. Triola, p.255)

This means that over time, the average of the sample means (averages)
approaces a normal distribution.

So, do 5 coin flip tests, each with 100 coin tosses, you might get results
like this:

1.  49 Heads, 51 Tails
2.  55 Heads, 45 Tails
3.  50 Heads, 50 Tails
4.  60 Heads, 40 Tails
5.  99 Heads, 1 Tails

Now, plot your Heads count out on a histogram and what do you see?  A normal
distribution.  That is all the central limit theorm says.  It says nothing,
or requires nothing about an individual coin toss.  Each toss still has a
probability of 50/50.

----- Original Message -----
From: "Harley Meyer" <meyer@xxxxxxxxxxx>
To: <metastock@xxxxxxxxxxxxx>
Sent: Thursday, April 13, 2000 3:42 PM
Subject: Re: Money Management Stops


> Not that I say much these days, but Mickey is not all that wrong. The
> central limit theorem is a key theory in probability. So using a fair
coin,
> the odds are  50 - 50 of getting a head or a tail. The theory, and I want
to
> underscore the theory, states that as the coin is flipped indefinitely and
> approaches infinity. The result will be a 1 in 2 chance of being heads.
But
> the actual event of flipping the coin can produce subsets that contain a
> long string of tails or heads. If a long string of tails occurs, then the
> central limit theorem would then require that the frequency of heads would
> need to increase. So as you look at the raw data the outcomes {H,T} is
only
> 50 - 50 in the limit. And as one member H or T increases in frequency. The
> other must eventually increase in frequency. The problem is that we don't
> know when.
>
> Not to speak for Mickey, but this is the observation that I understood he
> was conveying.
>
> However, one question I have is. What distribution are you using to build
> your statistics? Poison, Gamma, Normal, etc.?
>
> Harley
>
> ----- Original Message -----
>
>
>
> > Rubbish, Mickey.
> > While you still have a bankroll, buy a roll of pennies  and start
flipping
> > :o)
> >
> > Bob
> > -----Original Message-----
> > From: owner-metastock@xxxxxxxxxxxxx
> > [mailto:owner-metastock@xxxxxxxxxxxxx]On Behalf Of Michel Amelinckx
> > Sent: Thursday, April 13, 2000 11:10 AM
> > To: metastock@xxxxxxxxxxxxx
> > Subject: RE: Money Management Stops
> >
> >
> > Sorry but I by this "every time you have a losing trade the odds of your
> > next
> > trade goes up" I meant the PROBABILITY of next trade goes up. You always
> > have 50% odds.
> >
> > > If the success rate is 70%, it's true that there is about a
> > > 99% chance of
> > > having 4 losing trades in a row.  However, once you've
> > > already had 3 losing
> > > trades, the chance of the next trade being a success is still
> > > only 70%.
> >
> > No I don't agree, a system 70% prof. and having 3 consecutive losing
> > trades - the probability that the next trade will be a successful is
99%.
> > If you have a system that is 55% correct of the time. If you wait for 4
> > consecutive losers you have almost an 95% probability that the next
trade
> > will be successful.
> >
> > Same thing with roulette, they hate me in the casinos because if I play
> > roulette I play on red and black.  I wait till red (black)past 3 or 4
> times
> > in a row and then play on the other colour. And the longer you wait,
like
> 5
> > or 6 times on red (black) the higher the probability the next will be
the
> > other colour. Although 6 times the same colour is very rare. And this
they
> > don't like in casinos.
> >
> > Greetings
> >
> > Mickey
> >
> >
> > > -----Original Message-----
> > > From: owner-metastock@xxxxxxxxxxxxx
> > > [mailto:owner-metastock@xxxxxxxxxxxxx]On Behalf Of Randy Harmelink
> > > Sent: donderdag 13 april 2000 17:24
> > > To: metastock@xxxxxxxxxxxxx
> > > Subject: Re: Money Management Stops
> > >
> > >
> > > You can't use statistics that way.  An increase in
> > > probability only occurs
> > > if the events are dependent.
> > >
> > > For example, suppose you are trying to draw an ace of spades
> > > from a deck of
> > > cards.  If you continue to draw and discard cards that aren't
> > > the ace of
> > > spaces, your probability of drawing the ace of spades
> > > increases on each
> > > draw.  But if you put each drawn card back into the deck and
> > > reshuffle, your
> > > probability of drawing the ace of spades on a given draw will
> > > never change,
> > > no matter how many times you fail to draw it.
> > >
> > > If the success rate is 70%, it's true that there is about a
> > > 99% chance of
> > > having 4 losing trades in a row.  However, once you've
> > > already had 3 losing
> > > trades, the chance of the next trade being a success is still
> > > only 70%.
> > >
> > > Otherwise, it would be easy to develop a system to beat a
> > > roulette wheel.
> > > <G>
> > >
> > > ----- Original Message -----
> > > From: Michel Amelinckx <Michel.Amelinckx@xxxxxxxxxx>
> > > To: <metastock@xxxxxxxxxxxxx>
> > > Sent: Thursday, April 13, 2000 7:58 AM
> > > Subject: RE: Money Management Stops
> > >
> > >
> > > > And because you have such a great number of profitability,
> > > did you know
> > > that
> > > > every time you have a losing trade the odds of your next
> > > trade goes up.
> > > > 70% prof - after 2 consec losing trades - probability next
> > > trade will be a
> > > > winner is 91%
> > > > 70% prof - after 3 consec losing trades - probability next
> > > trade will be a
> > > > winner is 97%
> > > > 70% prof - after 4 consec losing trades - probability next
> > > trade will be a
> > > > winner is 99%
> > >
> > >
> > >
> >
>
>
>