Mark Douglas says if you have an “edge” you are being the house instead of being the gambler when you are trading.
"To think in probabilities, you have to create a mental framework or mind-set that is consistent with the underlying principles of a probabilistic environment. A probabilistic mind-set pertaining to trading consists of five fundamental truths:
Anything can happen;
You don’t need to know what is going to happen next in order to make money;
There is a random distribution between wins and losses for any given set of variables that define an [B]edge[/B];
An [B]edge[/B] is nothing more than an indication of a higher probability of one thing happening over another;
Every moment in the market is unique."
There must be over a hundred trading systems presented on BabyPips. What is not presented are systems that state their “edge” or expectancy. Backtests are not reliable for numerous reasons such as flawed data and “cherry picked” examples.
Traders do not ask about the “edge” often enough. If you have read this far, please do yourself and your fellow traders a huge favor and post the simple question, “what is the edge or expectancy of this system?” in every system or method thread. If you do not get a straight answer, move on. Caveat emptor. To paraphrase, “the best trader is an informed trader.” If you do not know the “edge” of the system, you are not informed. It is time to separate the wheat from the chaff.
This is not an indictment against those who have shared systems and methods. Most of them have done so with the best of intentions. But let us traders act responsibly and use the readily available information to ask the tough questions instead of being dazzled by fancy charts or popularity. Our money is at stake!
The only way to be the house is to have the “edge” in your favor, otherwise you are just gambling.
Why don’t more people think like this? I’ll tell you why…
Those that challenge a thread starter with tough questions usually encounter hostile treatment. What do you think would happen if those questions were posted in “The finest in trend trading” thread? If I were to do it, there would be an outrage! Look what happen to Jaquille’s thread. It was closed. People called him all kinds of names. All because he dared to question the existence of trend.
At least half of the threads would be eliminated. That would not sit well with many. Now that I think of it, I should call it the [B]TRADING B.S. DETECTOR[/B]! If someone refuses to answer the questions, you know it is B.S. Though the idea of detecting B.S. is not original:
Basically, we should DEMAND PROOF of each and every system or method. Enough of the B.S. and posturing. A timestamped chart showing the entry posted [B]BEFORE [/B]it is triggered and another chart posted showing what happened shows who the real traders are versus the wannabes. Anyone can show charts where you could have made hundreds of pips [B]AFTER THE FACT.[/B]
It’s human nature to look for the easy way. Though one doesn’t have to take leave of common sense while looking.
Thank you Master Tang for triggering my memory of the Real Estate B.S. Detector List!!!
Denounce those who disagree with them as “negative thinkers” or “dream stealers.” Virtually all Communist governments came to power through revolution. Whenever any citizen of a Communist country criticizes the government, they are denounced and prosecuted for being “counterrevolutionary.” The phrase “negative thinker” is to real-estate investment what “counterrevolutionary” is to Communism: a meaningless accusation that can be leveled at anyone who disagrees with the accuser. Pyramid sales scheme pushers prefer the phrase “dream stealer” to put down anyone who tries to talk sense to their “cult members.”
It is one form of an intellectually-dishonest debate tactic known as “name calling.” Intellectually-honest debate tactics involve identifying errors or omissions in facts or logic. The B.S. artists who condemn “negative thinking” cannot define it. It you ask for an example, they will be forced to choose some statement of fact. For example, the statement, “It looks like rain,” might be denounced as negative thinking. But if it really does look like rain, and the group is deciding whether to set up a graduation ceremony in the stadium or the gym, what is the person supposed to say?
The Sunday, 5/23/04 Dilbert comic strip showed a good illustration of this. Dilbert was denounced by the pointy-haired boss for being too negative. He asked when and was reminded that he criticized ideas like “the perpetual motion clothes dryer.” When he protested they were lousy ideas, he was again accused of being “negative.”
Overemphasis on the negative aspects of many different things is a bad habit. But the trick is in defining “overemphasis.” In fact, the typical user of the negative-thinking accusation has a hair trigger and uses it against any critic, not just against the chronically depressed. Underemphasis or ignoring adverse facts or logic is probably a worse bad habit because such persons are more likely to get themselves in trouble. The correct posture is to seek the truth, whether welcome or unwelcome, and to accept that, sometimes, the truth hurts.
Warning signs that suggest deception. Based on the book by Carl Sagan, The Demon Haunted World. The following are suggested as tools for testing arguments and detecting fallacious or fraudulent arguments:
Wherever possible there must be independent confirmation of the facts.
Encourage substantive debate on the evidence by knowledgeable proponents of all points of view.
Arguments from authority carry little weight (in science there are no “authorities”).
Spin more than one hypothesis - don’t simply run with the first idea that caught your fancy.
Try not to get overly attached to a hypothesis just because it’s yours
Does this sound like [I]the way things are [/I]or the [I]the way they should be[/I]?
The following are suggested as tools for testing arguments and detecting fallacious or fraudulent arguments:
* Wherever possible there must be independent confirmation of the facts
* Encourage substantive debate on the evidence by knowledgeable proponents of all points of view.
* Arguments from authority carry little weight (in science there are no "authorities").
* Spin more than one hypothesis - don't simply run with the first idea that caught your fancy.
* Try not to get overly attached to a hypothesis just because it's yours.
* Quantify, wherever possible.
* If there is a chain of argument every link in the chain must work.
* "Occam's razor" - if there are two hypothesis that explain the data equally well choose the simpler.
* Ask whether the hypothesis can, at least in principle, be falsified (shown to be false by some unambiguous test). In other words, it is testable? Can others duplicate the experiment and get the same result?
Additional issues are
* Conduct control experiments - especially "double blind" experiments where the person taking measurements is not aware of the test and control subjects.
* Check for confounding factors - separate the variables.
Common fallacies of logic and rhetoric
* Ad hominem - attacking the arguer and not the argument.
* Argument from "authority".
* Argument from adverse consequences (putting pressure on the decision maker by pointing out dire consequences of an "unfavourable" decision).
* Appeal to ignorance (absence of evidence is not evidence of absence).
* Special pleading (typically referring to god's will).
* Begging the question (assuming an answer in the way the question is phrased).
* Observational selection (counting the hits and forgetting the misses).
* Statistics of small numbers (such as drawing conclusions from inadequate sample sizes).
* Misunderstanding the nature of statistics (President Eisenhower expressing astonishment and alarm on discovering that fully half of all Americans have below average intelligence!)
* Inconsistency (e.g. military expenditures based on worst case scenarios but scientific projections on environmental dangers thriftily ignored because they are not "proved").
* Non sequitur - "it does not follow" - the logic falls down.
* Post hoc, ergo propter hoc - "it happened after so it was caused by" - confusion of cause and effect.
* Meaningless question ("what happens when an irresistible force meets an immovable object?).
* Excluded middle - considering only the two extremes in a range of possibilities (making the "other side" look worse than it really is).
* Short-term v. long-term - a subset of excluded middle ("why pursue fundamental science when we have so huge a budget deficit?").
* Slippery slope - a subset of excluded middle - unwarranted extrapolation of the effects (give an inch and they will take a mile).
* Confusion of correlation and causation.
* Straw man - caricaturing (or stereotyping) a position to make it easier to attack..
* Suppressed evidence or half-truths.
* Weasel words - for example, use of euphemisms for war such as "police action" to get around limitations on Presidential powers. "An important art of politicians is to find new names for institutions which under old names have become odious to the public"
[I][B]“War is Peace, Freedom is Slavery, Ignorance is Strength”[/B][/I] - 1984
LOL I was thinking half the threads would be eliminated because people might actually do a little homework, and not post silly questions in the form of threads.
Laziness won’t ever make someone a good trader.
Funny how perspective sometimes gets introspective isn’t it?
I would respectfully submit that Jaquille’s thread was not closed because of the question of trend existence. If that were the case it would have been closed after the first post.
Questioning a flat earth no longer brings burnings at the stake.
What is skepticism? It’s nothing very esoteric. We encounter it every day. When we buy a used car, if we are the least bit wise we will exert some residual skeptical powers—whatever our education has left to us. You could say, “Here’s an honest-looking fellow. I’ll just take whatever he offers me.” Or you might say, “Well, I’ve heard that occasionally there are small deceptions involved in the sale of a used car, perhaps inadvertent on the part of the salesperson,” and then you do something. You kick the tires, you open the doors, you look under the hood. (You might go through the motions even if you don’t know what is supposed to be under the hood, or you might bring a mechanically inclined friend.) You know that some skepticism is required, and you understand why. It’s upsetting that you might have to disagree with the used-car salesman or ask him questions that he is reluctant to answer. [I]There is at least a small degree of interpersonal confrontation involved in the purchase of a used car and nobody claims it is especially pleasant. But there is a good reason for it—because if you don’t exercise some minimal skepticism, if you have an absolutely untrammeled credulity, there is probably some price you will have to pay later. Then you’ll wish you had made a small investment of skepticism early.[/I]
I asked PipCrawler to add the following to the forum rules:
Please add these to the forum rules
The 10 rules for Intellectual Honesty in Debate:
1.Do not overstate the power of your argument
2.Show a willingness to publicly acknowledge that reasonable alternative viewpoints exist
3.Be willing to publicly acknowledge and question one’s own assumptions and biases
4.Be willing to publicly acknowledge where your argument is weak
5.Be willing to publicly acknowledge when you are wrong
6.Demonstrate consistency
7.Address the argument instead of attacking the person making the argument
8.When addressing an argument, do not misrepresent it
9.Show a commitment to critical thinking
10.Be willing to publicly acknowledge when a point or criticism is good
Interesting you should mention this. That was my attempt in the daily hi low thread. To determine an objective probability of price move. It’s about half way complete though. So haven’t determined the edge percent yet, if there is one. Only forward testing will tell for sure.
