Casino Trading by Phil Abel
The Monte Carlo simulation, a statistical technique used to
model the expected outcomes of a random series of events
such as a casino game, also has valuable applications in the
evaluation of a systematic trading program.
When you think of a successful trader,
what comes to mind? Chances are you
conjure up the image of a financial sage
like Warren Buffett or George Soros,
someone who can seemingly gaze into a
crystal ball and pick out a winner. Or maybe you picture a commodity pit trader, hardened and
wizened from days spent in battle on the exchange floor.
Now what if I told you a successful trader might have the
most in common with a casino manager? How can the proud
and noble trader possibly lower his self-image to equate it
with that of a gambling house? Indeed, the word gambling
has a most negative reputation.