Can monkey make money? ...my first post

Dear All,

I stumbled upon this forum through a google search and am amazed at the level of participation, quality of the discussion and the camaraderie. Kudos to Traderji!

I am not new to the stock market and have played the market with long term holdings. I have not done day trading or swing trading, though I am somewhat familiar with the techniques, through internet learning. I have also studied some Technical Analysis methods though I have not yet read any books on this. (I intend doing so. Suggestions welcome.) Through this first post I would like to raise a basic question I have, to which I have not been able to find an answer. Please bear with me if it is too simple or foolish.

Some years back, I read an article in a financial paper that spoke of a contest held for stock market experts. Each was asked to pick a portfolio that was followed through for a given period. The organisers entered a 'monkey' also into the contest - stocks were picked truly at random. At the end of the period, the monkey's portfolio won hands down. This is what I remember of that report. I laughed at it then, but it made a deep impression.

I have seen experienced traders in this forum claim that they lose 70% of the time, but still make a profit overall. This makes sense, because there is stop loss for the 70, but no stop profit for the other 30.

My point is this. Suppose I bring in a monkey to pick my stocks - stocks from a shortlist and entry points will be selected at random, long or short by throw of a coin, and stoploss at a fixed percentage. Favourable exit will be calibrated with a trailing stoploss at a fixed percentage. If I do a large number of trades, by law of averages, the trade should go my way half the time and against me, half the time. That is, stoploss should trigger half the time and trailing stoploss, the other half - with a few reaping very good profits.

In other words, monkey should be able to make money, when 90% of traders are said to be losing money. Am I missing something here? I am probably assuming trends all the time and it is possible that range bound movement would defeat this logic. I do not know enough about this, but wouldn't it be the case that even in a flat market, the trade can go against you only half the time?

Sorry about this long first post. I look forward to your tearing the monkey to pieces.

Greetings to all.
Varumun

Hi varumun
Welcome to this form of sharing knowledge and ideas freely. Your contributions will be much appreciated.

You have raised an interesting paradox.
In theory, if one simply shuffles 26 alphabets of english language and few symbols randomly grouping them together in various permutations and combinations , an idiot can produce classic like shakespere's.

Regards
Pankaj

Thanks Pankaj. My doubt is about the real effectiveness of Technical Analysis. I will go to that section and try to learn more.

He he he he . Hilarious !!!

Hi varumun
What I mean to say is that you cannot go wrong all the time and also can not be right all the time.BY gaining more knowledge one reduces the probability of things going wrong and increases the chances of going right.So you have taken a right decision to throw the monkey away by gaining knowledge.

One more thing.. Knowledge alone is not sufficient. You should have faith in yourself, then only one can endure trials and tribulations of any occupation.

Pankaj