Misconceptions in trading probabilities

[tico]

Hi Folks,
I would like to put right a well worn concept concerning trading that seems to occur frequently in vids and on forums .The idea that if you just trade randomely you will end up at break even .This concept is then reinforced by likening trading to the flip of a coin or a colour on the roulette wheel .
The idea is nonsense of the highest order .You cannot apply dualistic dimensional probability to a multidimensional probability ( ie the coin and roulette example are dualistic and there can only be one of two outcomes which over a period of time even out) .
Randome trading will result in heavy losses before it will result in heavy gains ,it can have a number of outcomes not just one (break evens) .
The idea of random trading has also been related to negative/positive expectation . How anyone can relate the probability of a trading outcome to positive and negative expectation is beyond me .These are two entirely different concepts .
So for any newbies out there if anyone tells you that random trading will end up in a break even scenario just ignore and move on.
Kinders
Tico

[TraderX80]

lol, roulette, if punting on colours, has 3 outcomes and green 0 is the casinos edge.

[Big Bad Barney]

Surely a 100% efficient market with no overheads is exactly the same as a flip of a coin...? If you are saying that because there are more than 2 outcome that makes a difference? Not sure that holds true....A 20 sided dice will give you a distribution of 5% given enough rolls (law of large numbers)?

or are you saying that in the real world the market isn't 100% efficient and there are overheads?

If you are trading randomly, it is market efficiency that applies determinism?

Profit in trading is made by identifying inefficiency and bringing it back to efficiency (it's an important job!).... You can't do that if you're random about it,,

[Euler]

If you make your stake or return equalised to the odds, you will break even, with no commission. I monitor this across many markets to understand whether the returns I am seeing are due to variance or to the actual strategy itself.

[tico]

Hi all,
The old 'efficient market theory' always makes me smile .Bookies win via rigging the market ,if they rig it effectively for themselves can that be referred to as efficiency or a mathematical truth? .The whole of capitalism functions on rigged markets ,trading and betting is no different .
Kinders
Tico