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how you would a successful business. I also modified the software for horse and sports bettors as well as blackjack players, and those versions are used by most professional bettors here in Las Vegas. I discovered a statistical anomaly in the six-deck shoe game of blackjack, so in addition to trading, I play a lot of blackjack as well as sports betting. Having sophisticated money management software is also an absolute prerequisite for those activities. |
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Neal: You are generally known as not being a big fan of hypothetical trading or back-testing. Trading Chicago style means real trading, not ''paper trading." |
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Phantom: Unfortunately, we cannot decide hypothetically to go ahead and make our mortgage and automobile payments and hypothetically send our children through college, so I don't see the hypothetical advantage of back-testing a system. It really gives one a false sense of confidence. |
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Neal: Well, there are certain advantages traders should know about. |
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Phantom: Well, there is an advantage known as statistical advantage. This advantage occurs when the payoff in a game is structured to favor one of the players. For instance, in roulette, a casino will pay you 35 to 1 if you hit a number rather than the true payoff of 38 to 1. In this case, one of the players has obtained an advantage by altering, or manipulating, the true payoff for a wagering event. It is impossible for any trader to achieve a manipulated statistical advantage because no one can state categorically that a profitable trader will continue to be a profitable trader 5 or10 years from now. There are many stories of traders making millions of dollars only to lose it all at some later date. Likewise, traders who were unprofitable have suddenly become profitable only to become overconfident and arrogant and then return to unprofitability. In essence, future profitability or |
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