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YES!!!! What a fascinating thread! It makes sifting through the other 250
deleted emails all worthwhile. Like a good trend on a choppy day.
But I am a little shocked. All of you traders responding but I don't get the
impression that any of you are actually gamblers. Are you? Any craps players
out there?
>From Richard McCall's web site (author of "The Way of the Warrior Trader") I
was clued into the similarities between craps and trading. So, I went out and
bought and read about 10 books on playing craps. BTW, the best of the lot is
John Patrick's "Craps." Replace "casino" with "market" and "dice" with
"commodity" and you have an incredible trading book! (As Patrick keeps
hammering home: bankroll, money management, discipline.) What an eye opener.
(Taleb's new book, "Fooled by Randomness" is also a major treat along the same
vein! Thank you again Mark Douglas for "The Disciplined Trader.")
Anyway, the beauty of it is that while I have had plenty of statistics training
and spent weeks creating Monte Carlo coin betting and crap simulators in Excel
and thus the ex-military-German-Virgo-math-lover me hates typing it, I have to
say: both sides are right. It is a real paradox. And it is what makes both
trading and gambling a mind bender and stirs up so many emotions. On one hand,
you have randomness. On the other, within randomness there appear trends. You
can do it in Excel or just throw the dice for 30 minutes and jot down what you
get. In craps, it's chop or hot or cold. In the markets, whipsaw or trend up or
trend down.
The beauty of craps, or roulette or coin tosses is that in those endeavors,
winners don't enter the arena thinking they are smart enough to figure out what
should happen. I get the impression however from CNN, talk in the clubs, and
mail lists that most traders, especially beginners like me, are trying to.
Mostly randomness, but trends and some patterns show up. But even those can
randomly reverse, slow down, stop, etc. Having been in a room of gamblers and a
room of day traders, I saw little difference between the losing gamblers
screaming at the dice to do what they "figure out should happen" or the losing
traders screaming at the screen to do what they "figure out should happen."
When I can be relaxed, at-ease and fixation free in that paradox, I'll call
myself a professional trader and my account will happily reflect it.
I LOVE THIS STUFF!
You folks are great.
--- David Folster <mr_bond@xxxxxxxxx> wrote:
> Perhaps someone who knows could explain this probability question to me.
>
> Curious as to whether that simple roulette system mark spoke about could
> work consistently, I decided to try it out for myself. I went to one of
> those "play for fun" casinos and, starting with a bankroll of $2000, decided
> to be a bit more conservative and wait for four in a row of one color to
> come up before betting the opposite color. If I lost, I would double up and
> bet the same color again, and so forth until my color came up. Well, this
> worked fabulouly for the first while. I was betting in $50 increments and
> had increased my acount all the way up to $2900. This was great!
>
> But then I hit a string of 10 blacks in a row, and the betting limit (of
> which I was previously unaware) kicked in and so I was only able to bet
> $1000 instead of $1600 (actually I would only have been able to bet the rest
> of my bankroll, which was 1400). Anyhow, after that, I quit with $2400 in
> my account.
>
> So the next day I was discussing with this with my brother in law, who is a
> programmer and has taken probability and statistics in university. But I
> was not able to wrap my pea brain around what he told me. He said that my
> betting system wasn't valid because each bet was an event independent of
> previous events and that my next bet would therefore always have a 50/50
> chance of going my way. Yet when I asked him what the odds of one color
> coming up, say, 5 times in a row, he said that the chance of that happening
> was about 3% (.5 * .5 * .5 * .5 * .5).
>
> Now in my mind, these two different probabilities are measuring the *same
> event*. So how, on the one hand, can my probability of winning be only 50%,
> and on the other hand, just 3%?
>
> I just can't figure this out. Anyone?
>
> Dave
>
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