Effects Of Volatility On Trading by Norman J. Brown
Tranquil Or Stormy?
Can trading results be similar to those of roulette betting? Find out here.
In my 2010 article “Trading Tradeoffs With Risk Vs. Reward,” I pointed out that trading with high values of R (a measure of the odds) and low values of bias (win ratio) leads to larger drawdowns (MDD) compared to that of trading with the converse. That led me to think about whether betting at a roulette wheel would yield similar results. I decided to investigate.
SCALPING OR TRENDING APPROACH?
Roulette offers two opposing approaches, among many other possibilities. One I will term scalping, since it goes for the big win, and the second I will term trending, which is a more sedate (low-volatility) betting style.