"probability" Posts
Should You Stop Trading When Your Weekly or Daily Profit Goal Is Reached?
By Lawrence
Many traders choose to stop trading once a dollar based profit goal is reached. It is a safe guard against oneself from over trading. It also helps a trader from getting to aggressive due to emotional high triggered by reaching the profit goal too quickly. So is it a good idea to do this? I […]
Michael Mauboussin: The Success Equation – Untangling Skill and Luck
By Lawrence
An interesting talk based on the book “The Success Equation: Untangling Skill and Luck” by Michael Mauboussin. Mr. Mauboussin is managing director and head of Global Financial Strategies at Credit Suisse. It is a long talk for about an hour. You can get the book from Amazon.
Ionica Smeets: The Danger of Mixing Up Causality and Correlation
By Lawrence
Ms. Smeets’ great presentation of scientists and media mistakes of mixing up correlation with causality. It is what I warned traders and quants to-be all the time – if you do not know what causes the correlations, expect the statistical biases may disappear fasting than you think.
Veritasium: Would You Take This Bet?
By Lawrence
Real life experiment with people on rational decision making. Our human nature plays a big part in our lives on the decisions we make. Traders are especially haunted by our bias towards risk aversion as losses of any kind is almost automatically translated into a form of pain or threat. Being able to overcome that […]
Gerd Gigerenzer: Risk Literacy
By Lawrence
The importance of understanding probabilistic thinking in both our daily lives and in financial decisions.
What a Simple Bingo Game Can Teach Us?
By Lawrence
Kids playing with a MMORPG (in case you do not know what that is – it is the kind of game Wikipedia founder Jimmy Wales played and probably obsessed with many years ago) found a mini-game within the game that essentially plays like bingo. Each player can get a game board with 5X5 grid filled […]
Clarifications to Some Basic Concepts in Probability
By Lawrence
I wrote many articles on statistics over the years (Teaching a Grade 4 on Probability, Understanding the Market in a Statistical Way, etc.) and advocate traders to pay more attention to proper application of statistics in trading and model development. I came across this educational video by Peter Donnelly from TED that explains several basic […]
Market Bias Detective: S&P 500 Daytrading Time Map Vol. 2
| A collection of the time based statistical biases often mentioned in the daily commentary section on trading S&P 500 related instruments (e.g. e-mini S&P, SPY, etc.). Volume 2 focuses on weekly bias and strategic planning. | ||
| by Lawrence Chan | Price: $25 | Member: $20 |
Nasdaq 100 Down 2% Trading Setup
By Lawrence
On a day when Nasdaq 100 is down 2% from its previous day close, something very interesting is likely to happen within a day or two. Following is a table of Nasdaq 100 emini from September 2003 to March 2011 showing the statistics related to the 2% drop phenomenon.
Market Internals Update 2011-05-03
After I posted the breadth bias warning last week. Someone asked for some samples of the potential outcomes from history. Here they are. First one, the one that simply go sideway for a month. Second one, if there is a turn, it should happen quickly in first 2 weeks of May.