From: gts (gts_2000@yahoo.com)
Date: Thu Jun 12 2003 - 08:10:04 MDT
Dennis Fantoni wrote:
> You mentioned a statistical test of a trading system. My plan is to
> divide my historic data into several sets, and then test and build my
> systems using only one set of data.
Good. You are thinking correctly here. You can use one set to "curve-fit"
the data, and another set to test your curve-fit to determine whether it
persists through time. No real need for a third set of data. It is important
that your test be for statistical significance rather than only for
profit/loss. If you don't know stat then you should learn it. The basic
tests are not too complicated.
> Fun, that You mention gambling (on the wrong side of the
> counter) as a possible venue of income. I have found several
> non-effective markets in gambling and have profited from a few,
> although not much money. If it is possible to get a positive income
> from gambling , it should be possible to live on investing too, given
> a reasonable amount of capital for investment. Or perhaps the stock
> markets are effective but gambling markets are not? If so - how can
> that be?
In the early 80's I made my living counting cards at the blackjack tables in
Reno and Las Vegas. I played cards for an entire year, seven days per week.
It was my business. In fact I decided to become an investment advisor while
sitting at a blackjack table in Reno. I was ahead for the night by about
$5,000. The dealer asked me what I would do with my winnings if I were to
win $50,000. I said, "Well, I guess I would invest it in the stockmarket."
The dealer asked if I knew anything about the market. I answered, "No, not
really, but now that you mention it I really think I should learn about the
stockmarket. I think I would be good at it." I went home and started
studying to get my series 7 general securities broker license. The rest is
history. I was a broker for 12 years.
Blackjack is the only beatable game in the casino, so don't waste your time
trying to find gambling systems for other games. Even blackjack is difficult
now as the casinos have become wise to card-counting. Even back then, 20
years ago, I was barred from playing cards in six casinos. The casino bosses
would tap me on the shoulder and say "Excuse me, sir, but we have decided
that we no longer wish to have you as a blackjack customer. You're welcome
to play slots or craps or any other game but blackjack." They're even
tougher now than they were then. In fact it is almost impossible now even to
find a beatable game; the pit bosses and some of the dealers are trained in
card-counting so they can detect it more easily and evict the counters
before they make any money. They also shuffle early and use other tactics to
thwart the counters.
As I mentioned my statistical project these days is horse racing. I read an
interesting research report in a statistics journal about an apparent
inefficiency in paramutual betting at the track: it seems that the most
boring and conservative bets, (show bets on heavy favorites), have bigger
pay-offs than they should have in an efficient market for bets. The
statistics suggest that novices tend to bet on long shots for the sheer
thrill and entertainment value, creating an opportunity for professionals to
make a profit on the favorites.
-gts
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