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Welcome to PositiveSumTrading.com.  This blog and it’s content are meant to be educational and entertaining with regards to current market conditions and different ways to understand its actions.  Sometimes there will be links here to more technical and fundamental articles that will apply to the markets.  This is not a forecasting site.  There is nothing here that constitutes financial advice or investment, securities, or trade recommendations.  What you do with your money is your own business and all decisions and actions are solely your own.  The dialogue here is mostly meant to keep up to date with what is going on in the market and when appropriate we will write more in-depth articles about how to look at things in a way that is rational such that the trading game is a win-win for us participants. Research will be organized into focused labs, beginning with Cone Volatility Lab, a project studying empirical volatility cones, fat-tail behavior, and event-risk option pricing. Future areas may include efficient frontier portfolio construction, fixed income carry strategies, and portfolio-risk research. General educational research only. Not personalized investment advice.

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Monte Carlo Fallacy

At the roulette wheel at Le Grande Casino in Monte Carlo, Monaco, the color black came up 26 times in a row. The probability of the occurrence was 1 in 136,823,184The incident is cited as an illustration of the gambler’s fallacy, because after the wheel stopped at black ten straight times, casino patrons began betting large sums of money on red, on the logic that black could not possibly come up again. The odds of red or black coming up on any individual spin were the same each time—18 out of 37; to no surprise of statisticians, “the casino made several million francs that night”.

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