Great Macro - Technical blog

http://neoflytox.com

 

http://www.elitetrader.com/vb/showthread.php?s=&threadid=249172&perpage=6&pagenumber=1

Top endurance challenges

http://www.findingdulcinea.com/features/feature-articles/2008/september/The-World-s-Five-Hardest-Races.html

http://www.cnngo.com/explorations/escape/worlds-toughest-endurance-challenges-152211

http://www.forbes.com/2005/03/30/cx_ns_0330feat_ls.html

http://www.toptentopten.com/topten/most+challenging+races+in+the+world

http://ashotofadrenaline.net/8-most-insane-endurance-events-in-the-world

http://listverse.com/2010/04/13/10-grueling-endurance-events/

http://jonny-smartblog.blogspot.com/2012/06/top-10-hardest-endurance-events.html

 

 

 

 

 

About profitable systems

Jun 11, 2012 18:23

Fudomyo know your wave Member Since Apr 2009   1,874 Posts

I disagree that profitable systems are shared. Most of everything that appears on the internet has nothing to do with a profitable system.There's the illusion of profitable systems being shared. Like the Sam Seiden stuff, VSA, Market Profile. All of these are not profitable systems. They are glorified dart throwing. Dart throwing always comes with the disclaimer of psychology attached. A profitable system involves a completely different metric than slapping an indicator on a chart or supply demand levels or virgin points of control. A profitable system involves understanding what the actual machine is, the inefficiencies of the machine that are a constant, and how to exploit those inefficiencies as the machine interacts with fundamental forces. Once you understand the underlying mechanics, it isn't something that works or doesn't work under certain market conditions, it always works within an expanded metric of trends and a contracted metric of ranges. When people make statements that systems worked and stop working, it's because they're looking at a minute aspect of market functionality and using some type of historical averaging to guess what price will do next. This is an effect of limited knowledge. It's also is a pitfall of system building because often people spend vast amounts of time trying to perfect things that have limited functionality or trying to learn things that are too wishy washy (like Elliot Wave) For any system to be constantly profitable it needs to be built on constants that are irrefutable under any condition. When someone uncovers this, the logical response is to guard it and make boatloads of money with it. These traders aren't employed by some online school to do webinars like Sam Seiden or hawking software like Tom Williams. They didn't make their money forming institutes like Gann or Elliot, or publishing equally fuzzy tomes on Order Flow. Every business has it's inner workings. A few people who work hard enough to get to the core of it, and thousands more people set up tents around it to sell formulas and recipes. Separating the two is essential to finding the answer. __________________ Alpha is Zero Sum. http://www.forexfactory.com/showthread.php?p=5747681#post5747681

About home schools and educations

Definitely homeschool if you can! Look for homeschooling groups in your area that pool resources, but avoid groups with religious or political affiliations. You want your child(ren) to learn to think, not become domesticated puppets. A good non-sectarian homeschoolers group will have excellent resources. The group we worked with had parents who were professors/researchers at the local university, entrepreneurs, artists/performers (including a traveling circus family who offered classes in acrobatics and juggling when they were in the area). We had a library of books and other resources such as microscopes. We arranged for field trips which were truly engaging because the groups of children were very small, allowing for very in-depth hands-on experiences.

Do a lot of research to help you get over the idea that homeschooling requires textbooks (most textbooks are gawdawful), teaching to standardized tests (nice little robot creation device there), or 6 hours a day of work. The reason public school days have to be so long is because the majority of time is spent managing the behavior of large groups. One of the worst side effects of our public miseducation system (don't get me wrong, there are few, but very few, decent public schools) besides teaching children to take tests instead of to think creatively, is the conditioning of ADD and ADHD behavior through the combined mechanism of jumping from one subject to the next and allowing children to subsist on junk food all the while.

Here are three excellent books covering various aspects of education:

Free Range Learning by Laura Grace Weldon

The Underground History of American Education by John Taylor Gatto (former NY State and NYC Teacher of the Year)

The Unschooled Mind by Howard Gardner

Also, I recommend reading The Everything Toltec Wisdom Book, which I found to be very thought-provoking.

All the best to you, B!

World interest rates

http://www.tradingeconomics.com/interest-rates-list-by-country?c=major

 

http://www.fxstreet.com/fundamental/interest-rates-table/

Trader path

Trading is hardcore......

It will test you with every new trade, every second you are in the trade......

If you want to succeed, you must do everything on your own.

Forget all the books and seminars and stuff in forums, you have learned --- and start to think for yourself and analyze the markets.

1. You must becom a scientist, to research the price behaviour.
2. you must create trading plans.
3. you must backtest your plans, with over hundreds of examles.
4. you must trade them in real time.
5. you must always learn your own rules and try to understand them.
6. you must start to trade with your own real money.
7. you must face the greed and fear, what comes, when you trade with your real money.

8. you must master the discipline quest.

9. you must train yourself everyday. pschological and strategies backtesting.

10. you must feel good about it.

11. you must understand you are now a constant money making trader.

12. you must make money and safe money.

This is hardcore !!!

If you start now, doing this fulltime, it will take you easily another 4 years.

Thats my way, its the only way.

Good luck

Interesting blog on trading and guants

http://largecaptrader.wordpress.com/

WTSAO all links

http://nsxprime.com/forums/showpost.php?p=1257880&postcount=2731

http://nsxprime.com/forums/showpost.php?p=1339302&postcount=2785

http://nsxprime.com/forums/showpost.php?p=1263110&postcount=2743

http://nsxprime.com/forums/showpost.php?p=1358057&postcount=2807

http://nsxprime.com/forums/showpost.php?p=1354590&postcount=2801

http://nsxprime.com/forums/showpost.php?p=1364756&postcount=2825

http://nsxprime.com/forums/showpost.php?p=1379474&postcount=2829

http://jubakpicks.com/

http://www.aaii.com/

http://www.smallcapnetwork.com/

Market edges

Ok, thank you for your openess.

Answer to 1: that is correct - but there is no need to.

Answer to 2: that is correct too - fibo-hits for example occur as often as they don't in the long run, so a no-go as well (as are most indicator based occurrences).

Answer to 3: stop-hunts as they might be referred to happen as often intentionally as they happen coincidentally because of position taking that has its root in either hedges, position liqiuidation or large option related volatility.

Real inefficiencies are based on volatility breakouts, price behaviour relative to market open (in fx cash an artificial value, except sunday), and price behaviour relative to most recent high's and lows.

One other universally applicable truth about any tradable market is that large ranges (or large ranging days) are preceeded by small ranges (or small ranging days) and vice versa. That means its an occurrence you can bank on - over and over again. How you transform that into your rules (which is an indispensable process) is up to you, of course.

Daily volatility can be measured by calculating the difference between the day's high and the close. If that value increases out of recent proportion, trend changes are happening.

regards
daytrading

Targeting pips

I do not agree that pip goal has no effect on expectancy.

For equidistant 1000 pip goal, the house edge is 1 - (1000 - 2) / (1000 + 2) = 0.4%
For equidistant 100 pip goal, the house edge is 1 - (100 - 2) / (100 + 2) = 3.9%
For equidistant 10 pip goal, the house edge is 1 - (10 - 2) / (10 + 2) = 33.3%

To overcome the house edge for 1000 pip goal, our win% has to be at least 50.1%
To overcome the house edge for 100 pip goal, our win% has to be at least 51.0%
To overcome the house edge for 10 pip goal, tour win% has to be at least 60.0%

Obviously it is much easier to beat the house edge if you have greater pip goal.

Trading edge an casino

Firstly, there is a difference between 'automated' and 'mechanical' - but to answer your question about trade handling, yes, every trade is handled in precisely the same way.

When you step into a casino to play the roulette wheel, you have already lost because the casino has the statistical edge.

Good traders don't think how to beat the casino - instead they think like the casino and construct edges. Every casino 'knows' their edge even when they pay out to a great amount of people who play a little bit of 'red or black' or 'even vs uneven'.

Ultimately, the casino is in the game non stop and with the 'zero' in the wheel, the law of large numbers puts the odds in the casino's favour.

The casino uses money management as well. There is a limit to every game, hence the casino knows the maximum downside - which is always smaller than the ultimate upside.

The casino also uses risk management - for the odd clever guy who comes into the casino to count cards in black jack - if he wins too often for their taste, he will get kicked out.

The casino (like a good hedge fund) uses diversication in the portfolio. There are many games in the casino from slot machines to black jack tables to roulette etc. All have a statistical advantage over the player - some smaller some larger, but always in favour of the casino. So, even if in one night here and there, a payout happens on one of the one-armed bandits, the other games (or strategies) will cover for that (small) loss.

Even if the game looks like complete luck to the observer (like rolling dice), ultimately there is no luck involved - since bet size and rules of the game ensure that in the long run the casino wins.

Games like the ones you find in casinos have been created in the same way that modern portfolio managers create strategies with precise rules - whether those rules have more emphasize on the money management and less on the (precise) entry of a market (more discretionary one could argue) in order to catch bigger moves less often, or whether the entry and exit are precision made to capture an advantage over very many trades (throws of the dice) does really not matter and is more of an individual choice.

And yes, this is a relatively simplyfied way of explaining it - roulette probabilities are fixed for eternity unlike market behaviour (you will always find 37 numbers on the wheel, 18 red, 18 black, and one green), that is why you never see a casino go bust. In the financial markets, edges can be created but have to be carefully monitored in terms of results over time. Should results fall outside 'regular' parameters (either too negative or too positive), something might be about to change.

Behavioural finance

http://www.behaviouralfinance.net/

Academic research about Orders

Statistical identification with hidden Markov models of large order splitting strategies in an equity market

http://arxiv.org/abs/1003.2981

Asymetric Information and the Foreign-Exchange Spreads of Global Custody Banks

http://people.brandeis.edu/~cosler/

Mr Forex about order flow

Quote:

Originally Posted by Pdat100 In my eyes, there are actually two questions: The first is the one most dealt with here, how do we recognize the move with or without access to the tape?

By monitoring/calculating inst. benchmarks on different time periods.
Here you can see their intentions on specific dynamic price levels.
And that is where you also want jump on.

Quote:

Originally Posted by Pdat100 And, second, once recognized (we can't know how deep is the iceberg), are we to stay out of the market or try to fade/shade - as the maneuver can sometimes be fast and sharp and other times long and persistent. Now, here's the thing, even if you recognized the iceberg, you would still need to assess its impact on price (PA). Actually I would argue that this is the more complex question.

The procedure is:
if the institution(s) want buy f.e. the YEN and have a deadline (3 hours) for order execution, it can go like that:

enough liquidity available: normal price impact,smooth price action/impact
less liquidity: price rallys,orders get executed more often on smaller time periods

Quote:

Originally Posted by Pdat100 In fact, same goes for options expiration plays. If only one side drives the price (to or away from the strike price) that would have been easy. Alas, in practice, what you see around the strike areas is a fight between two or more elephants. How can anyone know in advance which side is to prevail?

I don't watch options.

Quote:

Originally Posted by Pdat100 I would argue that this is the more important issue: a solid set of criteria to assess an institutional move impact on price. Are we back in VSA realm or what?

No VSA.
You mostly don't get favorable prices because the move has already started.

http://corp.bankofamerica.com/public/public.portal?_pd_page_label=equities/ets/agencyalgo

wise stock trader about order flow

Pip, I'm a long-time stocks trader (15 years and counting). In stocks you have accurate T/S and Levels and you can use computers to quantify OF and execution/cancellation of orders. Everything is "clear" at least when compared to FX. Guess what? Stock pros have come up to all sort of gimmicks to hide their intentions in the clear and even having a L2 book, a T/S etc (and there're markets where T/S are much more accurate as well as L2 as opposed to US market), you can't be always sure what's going to happen.

The outcome is that OF-T/S-L2 has some predictive value, but that value is very limited in time and expires moments after being obtained (that is: your window lasts seconds or fractions of the second, hence the need for good execution).

What you need to do is move to the next level. You must absorb all information that is given to you and then "sync with the market". Man I know this will sound as voodoo, black-magic, witch-hunting etc to most of you, but when you get there you'll understand.

Like a pro piano player, you look at the music sheet and don't need to read each and every note. You can "feel" what the composer wanted from you: and you execute. Learn the music, forget the music, play!

Same goes for trading. You float in the ocean of information, rumors, charts etc. You must sync with this ocean. You must feel what others are doing and you must know where to put your bets to profit from other people actions. Let me say it again: You don't focus on the market. You focus on people. People generate orders. People are driven by their emotions. People use techniques to help them control their emotions, so you need to understand those techniques too.

I think this is what DS refers to when he talks about a state of mind. It's not easy to obtain and it's only partially mechanical. Some of it is on a subconscious level somewhere inside our brain (which btw is the best neural-net computer you can get). This state comes from a deep understanding of all the ingredients that make up the market. Market mechanics, order placement, S/R, and different strategies all make up for this.

So how can you do it? I can give you direction. It's not much different to what you have already read thousands of times.

Take a chart of a cross. Look at different time frames. Identify S/R levels (you don't need to draw them, just paint them in your mind). Think about M/A, Fibs, high/lows and other potential areas. Orders tend to cluster around these areas. You don't need to see orders. All you need to know is that they're there (being in the L2 book, in the brockers private books, in the heads of the traders doesn't matter... they're there even if they're hidden). Experience and knowledge can help you.

Now watch what price action is when price reaches those areas: Is there an acceleration ? Is there hesitation ? What the speed is ? What the direction is ? Is there oil poured on the fire ?

Look at different TF and try to feel what each trader might be thinking when starring at the same chart. Would they be buying ? Selling ? Panicking ? You get the idea.

That's all. KISS. Now go and profit.

http://www.forexfactory.com/showpost.php?p=3852614&postcount=902

Darkstar II

I'd like to try and clarify a few things...

First off, what Scotty is doing is one way to trade orderflow, but it isn't THE way. The truth is, there is no ONE way to trade orderflow.

As I've said before, orderflow trading is a mindset. The common thread that ties it all together is making decisions based on future orders. Sometimes those orders come from fundamental factors (econ reports or headlines), sometimes from technical (trend lines or fibs), sometimes there are simply no more orders to support the continuation of a trend (exhaustion).

What people like Sauron and Pip are hung up on is the fact that we have no time and sales. There is also no way of getting a brokers real time book, so they conclude that there is no way to front run big orders. They have a valid point, but they are missing the forest for the trees.

This isn't about front running (in the traditional sense). The truth is, as a retail trader there is zero opportunity to know when Toyota is going to make a block purchase of yen. So looking for a way to do it is a fool’s errand.

What’s also a fools errand is assuming that a fib or a trend line will "cause" price to do anything. All the technical patterns, tools, and indicators are arbitrary constructs humans project onto the market in an effort to understand what is likely to happen. Price doesn't give a crap about a trend line or a fib, but humans do. It's the humans acting on these patterns and indicators by placing orders that impact price.

It may seem like splitting hairs, but I can't tell you how many people genuinely think a trend line or an S&R level CAUSES price to reverse. Raise your hand if you have ever put your entry order 5 pips ahead of the trend line with your stop 5 pips beyond it. If you have you know exactly what I mean.

The flip side has a group of people who assume that fundamental factors cause prices to move. Whether its predicated on the idea that markets are efficient or that securities have some intrinsic value, I'm not sure. What I do know is that all the fundamental factors point to the euro falling, yet it's up 500 or so pips and rising.

Neither school of thought is capable of producing long term profits. I know there will be people who disagree with me on that, but I can point to the simple fact that if either were viable, someone who learned the principles out of a book would be able to instantly become profitable when trading. Even with 80k members at forex factory, I can't think of anybody who has been profitable from day one.

It takes years to learn how to trade because there is a subliminal message in the market that has to be learned from experience. Which trend line bounce should be taken and which should be skipped? What news is going to drive price through an S&R to start a trend? If you've been profitable for any length of time you know it's the trades you skip which lead to bankable profits.

The concept of order flow seeks to focus a traders attention on the subliminal message. By constantly asking yourself what is going to compel traders to enter and where, you cut right past all the TA/FA bullshit to what really matters... the orders.

Instead of trading because there is a trend line, you examine what happens to price when the trend line is reached. You figure out that 9 times in 10 price penetrates the fib level before reversing. And that price often reverses right at the point where people "should" place their stops. And that no matter what the fundamental story, if the COT is breaking records, a cataclysmic reversal is inevitable.

At the end of the day, an experienced order flow trader doesn't need to see the actual orders to know what’s about to happen. If you know why a majority of people will want to trade in the future then you can get in ahead of them and profit. It's really that simple...

http://www.forexfactory.com/showpost.php?p=3827892&postcount=883

Dark Star order flow

Orderflow trading in a nutshell:

1)Find the stops and fade them.

2)Find the barrier options and push into them.

3)Find pockets with a lack of open interest and gap them.

4)Find a sequence of stops spaced 10-25 pips apart and prepare to put your kids through college.

What you need? A prime broker currenex/ebs account, IFR, Oanda open interest, some friends on the inside of a large bank or brokerage, a proper understanding of risk management, and most importantly; your psychological issues completely resolved.

Its not an EA type of system. Even having the above, your still going to fail until you have developed a keen sense of the market. Intuition plays a huge part so if your stuck in the mathematical world of EA's and if-then-else logic, don't waste your time. Trading is an art, not a science.

Why am I telling you this? I really don't know, but I won't be giving you any more. Ever.

Do with it what you will.

http://www.forexfactory.com/showpost.php?p=3095398&postcount=643

the truth about profitable trading

This is my first post, and I don't foresee myself becoming a regular poster (although I wouldn't bet against it either). That said, I have learned a great deal from this place and the realizations that it has helped elucidate, that I felt it incumbent upon myself to share some of the some of my conceptual beliefs.

As with any good disclaimer, please note that these are only my views, and that many may find success or failure doing drastically different things. I am by no means making categorical statements, but merely expounding on some of my market beliefs. Some may find them trite, some may find them helpful, and some may find them ludicrous. Also, I am not interested in sharing my systems, or any of the specific methods that I use. As with most areas of life, I find it very gratifying to help steer motivated people to viable sources of information that will positively impact their learning, but very much resent doing the work for them.

I think that it is impossible to ever 'predict' the movements of the market. Its funny, when people ask me something like "what do you think the dollar is going to do in whatever period of time", I always say that I have no idea. This sometimes causes people to look at me with disbelief, presumably wondering how someone who seemingly has such impressive returns knows so little about what the market may do. Ironically, it was that very realization - and figuring out to how translate that into a practicable, mechanical format - that finally afforded the kind of profitability that I wanted. And this is a statement that many, many traders would disagree with, which is precisely why I think that the vast majority fail to make significant money, and why the analysts seem wrong nearly as often as they are right. When you first see that certain technical trading setups go a certain direction more often than not, you start to subconsciously believe that any such setup WILL or SHOULD go in that direction, instead of that it merely has a slightly higher than x% chance of going in that direction. It is a key distinction that most traders - including many great technical guys that I have known, who are able to expertly read the complexities of price movements, and who sometimes even give theoretical lipservice to these very concepts - fail to ever substantively realize, or at least effectively put into practice.

It is ultimately about ego. So many get caught up in trying to be so clever with their charts and indicators, in an effort to win all the time. I certainty did myself, revelling in my winning trades and chastising myself for the losers. "I should have seen the resistance at 1.3729, and it was obviously breaking out of the trendline, espechially when I draw it like that. How could I have missed that factor - I'll never make that mistake again." This, however, implicitly assumes you are somehow responsible for that loss; that you were somehow ever actually in control of what the market was going to do. It is a dangerous mentality to have, and one that is unfortunately born from the equally instrumental realization that you can actually make money from trading the market. I even think the basic tool of drawing a support or resistance line on a chart is potentially hazardous, as its exact placement is really so arbitrary, but once you put it there it suddenly seems so authoritative - like a constraint that you have craftily imposed upon the market. I prefer to passively OBSERVE concepts like support and resistance in the functioning of my systems, rather than trading based on my imperfect, arbitrary, and surely biased understanding of their specific placements. Unlike many traders, I don't even set targets for trades, since I believe that even that would be forecasting. I exit the trade reactively when the market tells me to. It could be at a large profit, a small profit, breakeven, or a small loss - and I couldn't care less about which one it turns out to be on any given trade; only that the statistical outcome over many, many trades is within the appropriate range. One of the shrewdest statements that I ever heard on this was that the only way to make a million dollars in trading (as opposed to investing) is to make 10 million dollars and lose 9 million dollars (in concept, at least: some of you may well be making 10 million and losing only 8, or 7, or 6.2...)

In essence, one could view this as a debate between proactive and reactive modes of thinking. In many - if not most - areas of life, proactive behaviors are rewarded. CEOs and heads of industry are generally proactive people - decision makers who exercise control over their situations and environments. It is the reactive people that society generally doesn't reward: the guy who waits for life to present him an opportunity rather than actively trying to create one. I myself am a control freak - a trait which served me well in life until I encountered the insanity of the markets. I wanted so desperately to control them - to be smart, to be right, to win, to see the complexities in a movement that others 'foolishly' missed and bask in the resulting accolades - and nearly drove myself crazy in the process. My closing advice is not to do this, although I think it is almost an inevitability of the learning process - I am forever envious of those that don't have to go through this, or who can somehow consistantly profit from it. In short, it is understanding that randomness and making money from the market aren't nearly as mutually exclusive as it would intuitively seem. To the diversified 'buy and hold' guys as to many an active trader, they are seemingly incommensurable opinions - but I have found that it is a complete surrender to the randomness of any one trade that allows for a grounded confidence in a statistically significant outcome over many instances.

edge and luck

That is certainly a fair point. Obviously the question of what even constitutes a recovery sequence (or necessary percentage return) where you would resume live/full risk trading is debatable. Again, this will largely be an issue of risk tolerance, but one would presumably need to see a recovery that would be statistically similar to how your system would perform if your edge was still functioning. For me, I would want to see a new equity high in the paper traded results. Moreover, I would be concerned not only with the the account reaching a hypothetical new account high, but equally with the specific makeup of the trades and the time required to achieve it. All of this would be important in making a determination of whether your system was still operating with an edge.

Of course, this could take a long time, or perhaps never happen at all. If your edge had deteriorated or never existed, then you would paper trade the system into further drawdown and never trade it live again.

But, to your example, imagine that the system completely recovered on a paper traded basis - complete with every statistical verification that would give confidence that your edge was still functioning. Then imagine that when you resumed live trading you hit another drawdown that was outside of expectation. What then? Well, in that situation I would again stop at a preconceived point, and would be very weary about continuing to trade that system again. Yes, you could always reach that point of drawdown, stop live trading, paper trade a subsequent recovery, resume live trading only to have another drawdown that was statistically unsound. That system, at its most catastrophic, would have lost the trader x% from the first drawdown and a subsequent x% from the second drawdown. It would be very unpleasant, but at least it would be controlled, and certainly not catastrophic. The more conservative your risk management, the less you could potentially lose even in both drawdowns. If, say, 20% was your statistical cut off, you would lose a worst case total of 36% from your peak equity. If this occurred on day 1 (just to make the example even more improbable) you would have lost 36% of your principal, rather than merely giving back profits.

If it sounds like I am agreeing with you, it is because I am - its just that it doesn't really agitate me. Sure, it could happen, but with a good edge, a good system, enough data to formulate reasonable expectations, and conservative enough position risk, it becomes increasingly unlikely. The trader that prepares himself properly and still completely fails - having been slowly bled from unsound drawdown after unsound drawdown, only to devise new systems and have it happen all over again until he is broke - would be extremely unlucky indeed. So, there you go, you need some luck, but adequate preparation surely negates the need for a constant fixation on it. Most who fail in this industry are not like the unfortunate character I just described above; they fail for a myraid of other more inane reasons. And most that do meet those characteristics, I would imagine, haven't failed - or at least not yet...

http://www.forexfactory.com/showpost.php?p=2506456&postcount=578

Drawdown in MTS trading

Every trading methodology has a point where if there are x consecutive loses, the account will either be wiped out or the drawdown will be so large that the return required to recover would be unpalatable (50% drawdown requiring 100% return, for instance - although this is largely personal). As Hanover points out, the length of this potential sequence is purely a function of position risk.

Regardless, no amount of money management can prevent this unlucky series of trades; it can only decrease the probability of its occurrence. However, if one has a comprehensive understanding of their strategy - including statistical data based on a large enough sample size - it doesn't need to feel like this fearful quest to maximize profits before the impending catastrophe. For example, lets say you have a trading system, with thousands of trades worth of data, where based on Monte carlo simulations you find a 99% confidence level of not exceeding a 25% drawdown. Could you exceed 25% drawdown at any given time? Sure. Assuming that you trade your system over an infinite period of time it will almost certainly fail completely, but what is the 'likely' time frame for such a failure? Within 5 years, 10 years, 100 years? The probability, and thus the length, of a sequence necessary to destroy one's account is completely under the trader's control. At certain position sizing levels, the likelihood of it occurring within a trader's lifetime can be extremely small - at such small levels, the chance of your edge deteriorating (or your system's ability to adaptively capture it) becomes a much more likely culprit for eventual failure than that unlucky sequence...

The bottom line is that we can never deal in certainty. Anything can always happen, and things can suddenly change in unforeseen ways. This is the case with most things in life that, unlike casinos, aren't confined to static probabilities. The casino could theoretically fail if that extremely low probability (in the casino's case) losing streak was to occur; as traders, we could fail either as a result of:

1) a functioning edge but detrimental losing streak
2) no edge/diminishing edge.

What matters is that you are aware of this, and know what you would do in any potential situation. You would know that when you reach a certain drawdown level you are outside of expectation and should either stop trading completely or cut risk significantly while you continue to at least paper trade the strategy to see if it does ultimately recover. If it does, then you can resume trading; if not, thnn at least you only lost x% of your account, and hopefully achieved significant net profit regardless. Use position sizing to trade a system that has drawdown expectations that are tolerable for you; then, even if you exceed them in that catastrophic event - be it an unlucky sequence or a failed/non-existent edge - you haven't lost something that you weren't prepared to lose.

Personally, I tend to be more conservative, and like to have the probability of even a 15% drawdown be very low, but this is obviously just my comfort zone. I find it fascinating how different traders approach this question. I remember a certain fairly prominent trader on this forum who allegedly ran up an account 1000% in a year, risking - if I remember correctly - 8% on each trade. He was so immodestly certain that, based on testing, his system would continue to work - even though during testing it had some incredible drawdowns. I didn't even doubt the quality of his testing, but his certitude was ridiculous, especially after the live year. At 8% risk, you don't need THAT many losing trades to destroy you. Of course, it all crashed and burned, and his future posts were somewhat more humble.

I think that is really what Tdion is getting at: that sense of certainty that many seem to have, and how it is completely unfounded. I get that and I agree. At the same time, the hysteria surrounding luck in trading is overdone. Know what to expect as an acceptable worst-case, the likelihood of it happening, and what to do if it does happen within your trading career.