Statistics for Traders
Statistics is one of the most misunderstood and abused subject in mathematics (and science). The reason is something we can all easily understand – statistics is something we can all sort of relating to but counter-intuitive when applied in event by event situations.
Our brains are wired that way so that our ancestors can survive in nature. Since human has not evolved into any better forms for quite some time, yet our civilization is advancing in such a pace that even our computers are outdated every year or two, our minds are not that cooperative when it comes to making decisions that are drastically different from the ones that our ancestors faced. The ability to adapt our minds in making proper trading decisions boils down to our ability in applying logical thinking and statistical analysis properly.
It all sounds so complicated but in reality all you have to do is to take time understanding some basic concepts in statistics, then utilize the distilled rules and concepts to make better trading decisions, as oppose to relying on our gut feelings.
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Minor Change In A Game
Lately, Canada's national lottery game Lotto 6/49 increased its price per entry from $2 to $3. Promotional materials suggested that to compensate for the necessary change there is now a guaranteed price draw of one million dollars every draw. Well, s ...
Lately, Canada's national lottery game Lotto 6/49 increased its price per entry from $2 to $3. Promotional materials suggested that to compensate for the necessary change there is now a guaranteed price draw of one million dollars every draw. Well, s ...
Misunderstanding of Trading System Designs
Most retail traders misunderstand that trading systems are created by ad hoc grinding in trying out all kinds of rules to see if a system is profitable (or whatever metric you like to use as the performance yardstick). Here is a short summary of the ...
Most retail traders misunderstand that trading systems are created by ad hoc grinding in trying out all kinds of rules to see if a system is profitable (or whatever metric you like to use as the performance yardstick). Here is a short summary of the ...
Moving Average Is More Than What You Think - Part 2
We now know that moving average can be measured more effectively when average bar range is used as the yardstick. How do we utilitize this information? If You Like Channel If you like using channel, it is obvious that our understanding of the ...
We now know that moving average can be measured more effectively when average bar range is used as the yardstick. How do we utilitize this information? If You Like Channel If you like using channel, it is obvious that our understanding of the ...
Moving Average Is More Than What You Think - Part 3
Some readers are very forthcoming, they simply email me and complained to me for wasting their time in talking about moving average as something that is useful at all. I replied through email asking for their patience and wrapped up this third instal ...
Some readers are very forthcoming, they simply email me and complained to me for wasting their time in talking about moving average as something that is useful at all. I replied through email asking for their patience and wrapped up this third instal ...
Nasdaq 100 Down 2% Trading Setup 
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.
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Outside Gap Behaviour, Then and Now
Many traders who daytrade emini S&P probably are familiar with the gap fill bias. What I am going to show here is how a particular type of gap fill, outside gap, has changed over time. Gaps are created when a market open at a price different from ...
Many traders who daytrade emini S&P probably are familiar with the gap fill bias. What I am going to show here is how a particular type of gap fill, outside gap, has changed over time. Gaps are created when a market open at a price different from ...
Pigeonhole Principle and the Trap of Higher Win Rate
Most of the time, we see traders focus heavily on higher winning rate and at all cost keeping it that way by various measures. System traders and rookie system creators are also obsessed with higher win rate. Is higher win rate really that important? ...
Most of the time, we see traders focus heavily on higher winning rate and at all cost keeping it that way by various measures. System traders and rookie system creators are also obsessed with higher win rate. Is higher win rate really that important? ...
Post Hectic Environment Period
After the turbulent period of June to mid-August 2007, as mentioned in the previous article, the explosive growth in real-time data has retreated some what. Here is an update about the current situation. Before and After Before June 2007, the e ...
After the turbulent period of June to mid-August 2007, as mentioned in the previous article, the explosive growth in real-time data has retreated some what. Here is an update about the current situation. Before and After Before June 2007, the e ...
Quantum Mechanics and HFT
Quantum Mechanics sounds like it has nothing to do with High-Frequency Trading (HFT) except the fact that they both have sound bites coming from an alien planet. However, if you examine the concept of HFT closely, you would be surprise that some prin ...
Quantum Mechanics sounds like it has nothing to do with High-Frequency Trading (HFT) except the fact that they both have sound bites coming from an alien planet. However, if you examine the concept of HFT closely, you would be surprise that some prin ...
Range Based Look Back Technique
Indicator traders and trading system designers often use stock indicators from their trading platforms to construct their trading engagement methods and trading models. There are two problems when approaching the markets this way. First, you are usin ...
Indicator traders and trading system designers often use stock indicators from their trading platforms to construct their trading engagement methods and trading models. There are two problems when approaching the markets this way. First, you are usin ...
