My Some Research

[ultra7]

I have so far, as a beginner, was a newbie, and still consider myself as one. But Im somewhat happy to see me a Full Member as of today. Thanks Moneytec.

I consider what I have learnt and wish to come up to some my own concluding points for my Stage 1.

With all respect to everyone's systems, success, no offence whatseover intended, and I finally conclude to myself, as follows:

"All trade opinions and systems, are a basic function in Probability."

So I would mean that if a system is 50% profitable in backtest, I would consider a coin-flip the same.

Since the whole Probability theory as I read on my own was started by a gambler, for gambling purposes some centuries ago, I will think that probability studies is going one of my next few directions, without wholly implying that the forex market is some gambling zone.

These are my thoughts of basic principle:

1) For every Sell/Buy call, C, there is a motivation behind. This motivation, m is nothing but a probability, P(m).

IOW, P(m) ---> C.

Some interesting derivations and implications of my first principle:
1) By the logic table, if P(m) is false, C can be either true of false.

This first principle suggests that a call can be made without any m, as much as a call can be made with one, because P(m) = 0 nonetheless exist, and even the case P(m) was a falsehood, induced. It is very strong induction, at the same time, I will see what can break this induction.

2) If C is an event that occurs, the consequent is another probabilty P(c).
C---> P(c)
By the same reasoning if C was a falsehood, P(c) may still occur.

The second one suggests even if I had not taken a call, there is a still a consequent. The market still moves up or down. But my second principle will suggest to me that this is nothing but another probability. IOW, its not an event, as respectful as a C.

3) If P(m) = P(c), then C must exist, and further P(m) = P(c) is never 0.
This is common sense.

Thats the geez for my newbie graduating thesis.

So, this is where I am heading next,
psychology of probabilistic gambling....

(while I am in this pits....*urrghhh**)


ultra7

*All contents here are original, my own and is only meant to be educational. I bear no responsibilities if anyone crumbles into pieces, vanishes or dissolve in thin air due to whatever reasons I cant think of right now....

good Luck (=P(m) ), to everyone!

[novice]

Difference between gambling and speculating

P (gamble) < 50%

P (speculation) > 50%

where a success is a breakeven or better trade

In practice cost need to be included

So

P (gamble) < 65%

P (speculation) > 65%

where a success is a breakeven or better trade

Assuming a 15% cost base (e.g. slippage, brokerage, data, chart, books, wages etc)

That is just the probability for a singal trade

What about a system?

A winning system:

P (win) * average size of a win > P (loss) * average size of a loss

sub in the probabilty from above assume a 1:1 risk to reward for example 100 point stop loss 100 point profit target

For a gamble:

P (win 35%) * 100 > P (loss 65%) * 100

35 points is not greater than 65 points

For a speculation

65 points is grater than 35 points (a winnig system if you ONLY trade when the odds are in you favour (i.e. follow you system))

Could tally costs at the end rather than the start but putting them first forces you to look at them.

Can adapt the elements of a system (i.e. probability of a success, stop loss and profit taking to judge whether it will be a sucess. i.e. entry signals, stop loss points, profit taking points)