Okay, this is going to be a longer post, responding to a number of people that wrote interesting comments. But first, can I please make one request:
Can we please try to retain a minimum of respect for each other in this discussion?If find it incredibly frustrating that it's completely normal to throw around insults to someones intelligence in here because he or she disagrees with you on one or the other matter. If somebody is simply wrong (in an obvious, mathematically provable way), explain why he is wrong. But if a number of people, many of which have an education in a relevant field (CS, math, anything else with statistics) disagree on a non-trivial matter, then
please keep in mind that you're poisoning the atmosphere and effectively contribute to reducing the signal/noise ratio if you throw around those insults.
That said, first reply:
Can't believe you smart math guys keep arguing against idiots about this invest/divest stuff instead of using your smarts to do something like this. (The irony is that those idiots are actually correct at the moment, because right now being invested is -EV by itself).
Some quick back of the envelope calculations to show why you should probably all just divest:
Wagered on site: 3.6M
Expected profit: 36 000
Actual profit: -3 000
Site is 39 000BTC under expectations. Now let us simplify and assume all bets made were 200BTC bets. (The actual situation will have less variance than this because most of nakowas volume has actually been on bets less than this.)
Total bets made 3.6M/200 = 18 000
Variance of 18 000 bets of 200BTC at 49.5%: 200 * sqrt(0.495*0.515*18000) = 13 500
Site currently running 39 000 / 13 500 = 2.88 st devations under expected.
Conclusion chance of the site running this poorly by chance: Way less than 1%.
You guys keep saying trust the math, but your conclusion is all messed up. The math is telling you to GTFO, chances of something being wrong here is so high that staying invested currently is -EV!
That's a strong statement backed by calculations. Thanks.
I'm not good enough in math to verify whether your calculation is correct, anyone else?
The problem, in my opinion: too many simplifying assumptions, therefore the result is somewhat off. For example, a large portion of the current cumulative site loss was caused by early nakowa wins, when we still used full kelly, and max profit was significantly larger than 200.
So here's a similar calculation that IMO makes slightly less simplyfing assumptions, about the likelihood of nakowa winnings yesterday:
Yesterday's amount wagered: 1.5M, a huge portion of which came from nakowa, whose bets where, by a vast majority, at max profit (180-190). The same calculation as above: (1500000*1%)/(180 * sqrt(0.495*0.515*8333)) = 1.8 standard deviations below expected profit.
Quite lucky? Sure. Enough to reject the null hypothesis (fair RNG, no cheating)? Not quite.
Note that this is also in line with
Peter R's results who keeps posting updates on the likelihood of nakowa's cumulative winnings.
Second reply:
[...]
As a first step, I'd try a 1.5% edge. It looks to me that 1% is obviously not enough. I'd also consider a commission on each divestment in order to have a bankroll that is more stable and not fluctuating like crazy like yesterday.
Opinions on this?
and
I can only assume the reason for this is the "invest/divest" day traders, including Dooglus (who divested when the house was up 3k), on average got lucky and screwed the ones like me who didn't divest. I'd say the "invest/divest daytraders" were gambling against those that did not divest, and the former won big time with a simple strategy: divest when you are up, invest again when the house is down.
I personally would prefer if we go on with a 1% house edge for now. It gives the site a competitive advantage which might otherwise be lost.
But about the other point (investment "daytrading") I agree. Which brings me to reply #3:
No you cannot, you are trying to time the market: a losing proposition. Staying invested throughout is the most profitable strategy. If you want to avoid a lot of variance you can divest. This is why Dooglus divested!
Lol. That must be why mechs is 25% down and stayed invested from July, while I made 10% profit yesterday
And the funniest part is that if I invest again today, I will make profit, again and again, while mechs will be waiting for weeks to break even :
This is outcome dependent thinking. You cannot generalize from a single case to the general case.
People this is not rocket science. I'm becoming extremely disappointed in people's overall intelligence
There's at least one mathematically sound reason why one might disagree with the claim that "daytrading" is entirely random. So, first, please stop throwing around insults against people's intelligence.
That reason, no matter how unlikely, is that if nakowa would actually be cheating (he hacked j-d, found a flaw in the RNG, whatever), then his winning patterns are not completely random either, so "daytrading" in consequence could become (partially) deterministic as well. Agreed?
Please note: I'm
not saying that's necessarily the case (that nakowa is cheating), but it's at least conceivable.
More importantly however, whatever you think the reason for this is, please look at nakowa's yesterday winning charts and tell me that there is no "exploitable" pattern to it:
At around bet 6000 or so, some people started a strategy that reversed investing/divesting at around the -2000/2000 mark (I was on j-d chat yesterday). Which turned out to be a rather profitable strategy.
Now, please read the following: Yes, I know. In the long, no such strategy can be profitable (unless nakowa's results are not random either). But yesterday, this sure tweaked the distribution of profits and losses.
So here's my opinion on this matter:
If you want to gamble on j-d, gamble. If you want to invest, make it an investment that lasts longer than a few minutes.Someone here said he sees very little harm done by investment daytrading: I disagree. In the short run, some successful "daytraders" will skew the distribution of profits/losses among investors, which makes the losing investors rather unhappy, which in the long run hurts the site, because they might take out their investment and not come back.
Additionally,
I see absolutely no benefits from investment daytrading. Again: if you want to gamble, you can do so by the gambling mechanism. I don't know where the idea comes from that the investment mechanism has to contain a gambling element as well, especially if (for the psychological reasons described above) it arguably hurts the site overall.
A possible solution:
I think a short, but noticeably invest/divest delay would be helpful.Here's how it could work: Divesting is always instantenous. Your initial invest is as well. But after any divest, another invest has to wait 1 hour. That's all.
You can still take out your investment whenever you want. You can still invest/divest several times a day. But "trading" swings when a whale is on the loose should become impossible.
Let me repeat one more time: Assuming the site works as intended (no cheating going on), then I know investment "trading" is -EV, just like gambling. But in the short term, strategies based on the winning patterns of a whale can fuck up the overall investment situation, and will make many investors understandably unhappy.
