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Hi Kim,
>Just curious, how many times do you have to expect to have to toss the coin
>to get 20 consecutive heads or tails? I have a feeling that it might require
>a very large number of trades to see that happen ( on average).
>thanks for an interesting and informative post
In terms of probabilities there is no way to determine when it will happen.
When you read in the newspaper that ON AVERAGE there are 3 accidents out of
950.000 car trips, then it might happen to a newbie on the very first day
he drives, or - never.
I tested how long it takes to to get 20 consecutive heads or tails, and in
10.000 iterations it happend on run
1: 4658
2: never
3: 318
and so on.
But if I would run the test for one month, I am sure we will find no
pattern. It also might happen on the first 100 iterations.
When you are trading you should assume your max. Drawdown will ocur during
the first few weeks.
See a discussion on the "gambler's fallacy" (i.e. after a string of
red/losses, green/profits is bound to come out) at
http://www.iitm.com/tips/Tips-MM.htm (Van Tharps "Tips on Money Management
& Position Sizing")
Regards & have a nice weekend,
Thomas
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Thomas Pfluegl, Rudersdorf 8, A - 4212 Neumarkt
Austria Tel. ++ 43 - (0) 7941 - 8106
http://keplerweb.oeh.uni-linz.ac.at/trading/index.html
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Austria/Europe --> high mountains --> Mozart --> no kangaroos
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