Question for the pros: is a stable profitable EA a myth? - page 7
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I'd be very surprised if it's described.
Ganapathy Vidyamurthy "Pairs Trading" http://forex.kbpauk.ru/userfiles/135096-Vidyamurthy_.rar
I don't know if it's a trader or just passing by ))
Yes, any kind of martin.
By the way, on the subject of martingale.
The other day I decided to calculate the probability of loss-loss-loss-loss-profit series and their corresponding profits for a martingale-type MM based on several initial conditions:
1. the size of the first bet (in general one can ignore it, and take it as equal to one)
2. the coefficient of bet increase in case of losing (2, <2, >2)
3. the maximum number of steps (as the deposit is not infinite)
4. probability of a profitable trade (0.5, <0.5, >0.5)
Results:
When the probability of a profitable trade is 0.5(random entries without taking the spread into account) and any coefficient of increasing the bet the MO of the system does not change.
When the probability of a profitable trade is less than 0.5 (random inputs minus the spread) the MO of the system becomes abruptly negative and decreases with the increase of the bet increase coefficient.
Finally, when the probability of a profitable trade is more than 0.5 (grail) the MO of the system is positive and increases with the growth of the betting coefficient.
Conclusion: if the system does not give an advantage compared to random entries - this MM is useless or even harmful, because it sharply increases risks without increasing the MO of the system.
p.s. For those who want to play with parameters/check my conclusions the mathcad file is in the attachment.
I don't know if it's a trader or just passing by ))
Imho, "famous traders" usually refers to a slightly different contingent.
Not - important - but. If Vidyamurthy makes a fortune on his book and not on trading, his book will not become less or more valuable. The book will still explain pair trading, and it will still be profitable to some and not to others. That is all.
Not - important - but. If Vidyamurthy makes a fortune on his book, not on trading, his book will not become less or more valuable. The book will still contain couples trading, and it will still be profitable to some and not to others. That is all.
The book outlines one of the methods of paired trading. Vidyamurthy is a mathematician and therefore his book is worth reading. It is the natural nature of mathematicians to count and write about it, if a mathematician prints a book, it is a recognition of his success.
A book by a "famous trader" is not worth reading. The nature of traders is to trade, if he went to write books then as a trader he is unsuccessful, then why should you believe what he has written?
That is all.
For example, Gunn also wrote books, is he not a trader?
Conclusion: if the system does not give an advantage over random inputs, this MM is useless or even harmful, as it dramatically increases risk without increasing the MO of the system.
Unambiguously. But there are subtleties.
You considered independent trades, but in real life it is not always performed. If, for example, probability of profitable trade increases after one or two losing trades, then even if total probability of profitable trade is equal or less than 0.5 - i.e. for example for one profitable trade there are two losing ones all with equal stops/losses, MM system with increasing stakes will pull it to profit. Probably a significant plus.
A book by a "famous trader" is not worth reading. The nature of traders is to trade, if he has gone to write books, then as a trader he is unsuccessful, then why should we believe what he has written?
It's unambiguous. But there are subtleties.
You considered independent trades, but in real life this is not always the case. If, for example, probability of profitable trade increases after one or two losing trades, then even if total probability of profitable trade is equal or less than 0.5 - i.e., for example, one profitable trade has two losing trades all with equal stops/losses, MM system with increasing stakes will pull it to profit. Probably a significant plus.