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>Ira wrote:
>>
>> Your assumption is basically wrong. If you knew which were the bad
trades why
>> enter them to begin with. In cards and other games of chance the odds
are always
>> the same. So you can vary your bet size only if you can change the
probability of
>> success. This can be done in all games of chance and the markets. You
can never
>> change the odds.
>>
>How about Bayes Theorem? You can improve the odds after a wrong decision
>by discarding your second choice. Regards.
Seems to me he missed two other possibilities as well:
What about when all your trades have a positive expected return,
but you can define a subclass for which the expected return is even
better than the rest? You'd be silly not to take them all. Yet it
could well be argued that the higher-probability trades deserve
a larger bet than the others.
Also, what about a system in which profitable and unprofitable
trades tend to arrive in "runs?" If there's reason to believe that
after making one profit you now have a better chance of making
another, you might well want to bet more. But you may not want
to stand aside completely just because your last trade was a loss
and your chance of another loss is now higher. In this instance,
a rule that would let you bet larger when winning and smaller
when losing would make a lot of sense.
Owen Davies
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