While watching a Mark Douglas trading psychology seminar (dvd), I remembered the discussion about whether financial time series were dependent or independent (sample without replacement x sample with replacement).

He makes a good, clear point, although talking from another framework:

"There's no connection with the outcome of this "now" moment opportunity with any opportunity in the past - even if you're using the same signals: the traders that are operating in the market now are not the same traders that operated the last time."

It's so simple we (I) forget it.

The idea seems to be this paradox: while it's impossible for every trader, investor, manager to be at the same time doing the same thing as before, (and therefore previous opportunities are not related to the present one), somehow the edge as defined by your work (statistical, technical, fundamental) will remain its winning % and manifest it in a series of trades.

The paradox is that individual trades are random, while series of trades maintaining the edge win%.

So his advice is:

a. Have a system

b. Follow the system without emphasis on the distribution of individual trades.





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