The market is a controlled dynamic system. - page 380
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
.
.
Judging by the log scale - did you also increase the lots? you could have failed simply by MM, even if you had the right strategy with a high positive MO
I even had a good MM even if I had a good strategy with high positive MM:
- Determine the loss on a failed trade and (optionally, because it is complicated) its probability.
- determine how many of these failures the balance can withstand (or the balance is adjusted to this number). This is always an integer, say Q, it's "technically safe" or "steps to the edge".
- No operation of yours should diminish it. Withdrawal of "cream" should not decrease the current Q, replenishment should increase it. Consequently, you should only increase the trade's lot if you have reached a certain limit. Violation of the rules turns the strategy into a gambling game "who will fail to return your account to zero, you or the market".
- If you display the aforementioned "bars" on the balance chart, they form a parabola with a quadratic growth. (and grow faster than the balance itself)
Therefore, the principle of lot=% of balance or equity leads to a logical fiasco. But it allows to enjoy the aesthetic pleasure of the curve and your own genius :-)
- trading with scanty lots, close to LOTSTEP, practically eliminates the possibility to build up volumes.
- As for the money you earned above the current "bar", if necessary, you can "borrow from the strategy", and it is neither warm nor cold from them. As for you, you may need to use them in another account or just until your paycheck arrives.
- At some point the distance to the next "bar" becomes quite large, unattainable in a reasonable time - this is the limit of the account's investment capacity, now only withdrawals...
Judging by the log scale - did you also increase the lots? you could have failed simply by MM, even with the right strategy with a high positive MO
I have two articles here about calculating optimal risk - the first and the second.
.
Judging by the log scale - did you also increase the lots? you could have failed simply by MM, even if you had the right strategy with a high positive MO
I may have gone wrong even if I had the right MM, even if I had a high positive MM:
- Determine the loss on an unsuccessful trade and (optionally, because it is complicated) its probability.
- You determine how many of these failures the balance can handle (or the balance is adjusted to this number). This is always an integer, say Q, that is "technical reliability" or "steps to the edge"
- No operation of yours should diminish it. Withdrawal of "cream" should not decrease the current Q, replenishment should increase it. Consequently, you should only increase the trade's lot if you have reached a certain limit. Violation of the rules turns the strategy into a gambling game "who will fail to balance your account first, you or the market".
- If you display the aforementioned "bars" on the balance chart, they form a parabola with a quadratic growth. (and grow faster than the balance itself).
This is why the lot=% of balance or equity principle leads to a logical fiasco. But it allows to enjoy the aesthetic pleasure of the curve and your own genius :-)
- Trading with tiny lots close to LOTSTEP virtually eliminates the opportunity to build up volumes.
- However, those funds that you earned above the current "bar" can, if necessary, be "borrowed from the strategy", it is neither warm nor cold from them. And you may need them in another account or just until your paycheck.
- At some point the distance to the next "bar" becomes quite large, unattainable in a reasonable time - this is the limit of the account's investment capacity, now only withdrawals...
You should not forget that the goals are different for real and demo accounts. If you forget about the goals, very reasonable demands can turn into its opposite.
I have two articles here about calculating optimal risk - the first and the second.
I have read your two articles in good faith, from start to finish, although without "pencil marks in the margin" and without checking the correctness of all intermediate calculations, but carefully enough to see the essence of your approach in considering both the market movements themselves and the trader's actions on those movements.
Apparently, if the initial theses you have adopted as axioms underlying your theory were true, then the conclusions of the theory would be correct. However, those theses are not true, they are false, they are wrong. And consequently, the conclusions based on them are, to put it mildly, not entirely credible. Although the results of the calculations ("corresponds to 1.5% risk per trade of capital") are within the accepted framework of risk management. But the fact is that risk-management is based on the same false assumptions. As they say, the circle is closed ;)
First false thesis : The market is random (a kind of primal chaos that has no regularities). This false thesis is untrue.
Second false thesis : A trader's actions are random (like a monkey mindlessly tapping the keys). This false thesis does not correspond to reality.
Third false thesis :"But as we know with symmetrical random rambling no profitable system is possible. " (this is a quote from your article). Where did this generalising "we know" come from, unproven and unsupported by anyone... Here you should not say "we know" but "we believe". Well, that's from another category ;)
(Actually, on a symmetrical SB a profitable system is possible. Making a profitable system is much easier on SB than on BP)
================
My approach is fundamentally different from yours. Consequently, the PM is different.
I have read your two articles in good faith, from beginning to end, although without "pencil marks in the margin" and without checking the correctness of all intermediate deductions, but carefully enough to see the essence of your approach in considering both the market movements themselves and the actions of the trader on these movements.
Apparently, if the initial theses you have adopted as axioms underlying your theory were true, then the conclusions of the theory would be correct. However, those theses are not true, they are false, they are wrong. And consequently, the conclusions based on them are, to put it mildly, not entirely credible. Although the results of the calculations ("corresponds to 1.5% risk per trade of capital") are within the accepted framework of risk management. But the fact is that risk-management is based on the same false assumptions. As they say, the circle is closed ;)
First false thesis : The market is random (like primary chaos, which has no regularities whatsoever). This false thesis is untrue.
Second false thesis : A trader's actions are random (like a monkey mindlessly tapping the keys). This false thesis does not correspond to reality.
Third false thesis :"But as we know with symmetrical random rambling no profitable system is possible. " (this is a quote from your article). Where did this generalising "we know" come from, unproven and unsupported by anyone... You should have said here not "we know" but "we believe". Well, that's from another category ;)
(Actually, on a symmetrical SB a profitable system is possible. Making a profitable system is much easier on SB than on BP)
================
My approach is fundamentally different from yours. Consequently, the PM is also different.
My theory is quite simple. In it, risk is a common sample value (like an average, for example). But its structure is more complex (than the average) and you have to resort to Monte Carlo simulation to obtain its distribution function. To select a particular value of risk, you must set the level of significance and take the quantile corresponding to it. Thus 1.5% is the value corresponding to a certain level of significance. This level can be increased and a larger value for the risk can be obtained, but it will lead to an increase in the probability that the system will give a small profit and/or a large drawdown, while remaining potentially profitable - this is approximately whatMaxim Kuznetsov wrote above.
1) In the behavior of markets, their uncertainty in the future is evident. The most common way to mathematically model this uncertainty - the probability theory. In this framework, prices are considered as a random process.
2) If prices are a random process, then the trader's capital is always a random process. Deterministic transformation of a random process is also a random process. Theoretically, this process can sometimes degenerate into a deterministic function. For example, at zero position it represents a constant)
3) With symmetric SB for any TS the capital will be a martingale - a process with constant mathematical expectation equal to the initial capital. This means that for any TS there will always be both profitable and loss-making realization of SB, and on the average there will always be zero capital gain (negative when the spread is taken into account). How this happens can easily be seen even with a "buy and hold" strategy.
The main thing in approaches to the market is profit, and it happens with some rather strange approaches)
My theory is quite simple. In it, risk is a regular sample value (like the mean, for example). But its construction is more complicated (than the mean) and you have to resort to Monte Carlo simulation to get its distribution function. To select a particular value of risk, you must set the level of significance and take the quantile corresponding to it. Thus 1.5% is the value corresponding to a certain level of significance. This level can be increased and a larger value for the risk can be obtained, but it will lead to an increase in the probability that the system will give a small profit and/or a large drawdown, while remaining potentially profitable - this is approximately whatMaxim Kuznetsov wrote above.
1) In the behavior of markets, their uncertainty in the future is evident. The most common way to mathematically model this uncertainty - the probability theory. In this framework, prices are considered as a random process.
2) If prices are a random process, then the trader's capital is always a random process. Deterministic transformation of a random process is also a random process. Theoretically, this process can sometimes degenerate into a deterministic function. For example, at zero position it represents a constant)
3) With symmetric SB for any TS the capital will be a martingale - a process with constant mathematical expectation equal to the initial capital. This means that for any TS there will always be both profitable and loss-making realization of SB, and on the average there will always be zero capital gain (negative when the spread is taken into account). How this happens can easily be seen even with a "buy and hold" strategy.
The main thing in approaches to the market is profit, and it happens with some rather strange approaches)
As far as I understand, by giving references to your articles, you wanted to hear my opinion on them, or am I mistaken, and you gave references to your articles as a guide to action?
1) You take the market model as S (i) = const + N(i), where N(i) is a random process. This is a very naive and flawed model.
Much closer to reality is the model of the market in the form of an additive mixture S(i) = G(i) + N(i), whereG(i) is a deterministic component, and N(i) is a random component. The role and importance of each component is different at different phases of the evolution of the process.
2) This point is bursting at the seams, see para. 1).
3) Here you contradict yourself: in the article you claim "impossibility", and now you talk about an available "possibility". The opportunity does exist, which refutes your claim of "impossibility".
ss
Your joke (if it was a joke) about signals from Mars seems inappropriate to me, because it is about something else, to put it mildly.
As I understand it, by referring to your articles, you wanted my opinion on them? Or am I mistaken, and you referred to your articles as a guide to action?
1) You take the market model as S (i) = const + N(i), where N(i) is a random process. This is a very naive and flawed model.
Much closer to reality is the model of the market in the form of an additive mixture S(i) = G(i) + N(i), whereG(i) is a deterministic component, and N(i) is a random component. The role and importance of each component is different at different phases of the evolution of the process.
2) This point is bursting at the seams, see p. 1).
3) Here you contradict yourself: in the article you claim "impossibility", and now you talk about an available "possibility". The opportunity does exist, which refutes your claim of "impossibility".
ss
Your joke (if it was a joke) about signals from Mars seems inappropriate to me, because it is about something else, to put it mildly.
The articles have been cited as another confirmation of the well-known fact that excessive risk can make a profitable strategy unprofitable.
The articles use the quite common model of trading results as a sequence of trades with independent equally distributed returns. The market model as such is not constructed - the only standard reasoning is given as to why trades can be considered as such (in a certain approximation).
I am not refuting the statement that it is impossible to earn on SB. I formalize it mathematically, so that those who wish can check it for themselves, using the theory of Ito's stochastic calculus.