Trading, Ed Thorp and Fortune’s Formula
First, thank you to the many of you who entered last week’s stock chart contest. Many of you got the correct answer – SH, and a many were close by answering SDS. Answers were still coming in this morning and it really amazes me to see so many correct (and near correct answers). Good job everyone!
The first three individuals to send me the correct answer were:
Jack Briner
Mehir Iranin
John Bishop
Congratulations!
Danilo Torres, our Director of Operations, will email you today to claim your prize. And yes, that was a nice looking chart as a few of you mentioned!
Now onto business. For a number of years, I’ve recommended the book Fortune’s Formula to subscribers to our website and to the traders in our trading education programs. It’s one of my favorite books on trading and the markets. One of the key figures in the book is Ed Thorp, the mathematician who created card counting in the early 60’s in order to beat the casinos in blackjack. Professor Thorp then went on and made hundreds of millions of dollars in his hedge fund partnerships doing statistical arbitrage. His documented returns, over the past four decades remains one of the most impressive runs of performance in the world.
This weekend I came across some writings of Professor Thorp which I’d like to share with you. There has been very little published by him (he’s very low key) so this makes this finding even more special. Today I’ll share the first three pieces of his writings and tomorrow the next three. Then on Friday we will discuss them as it pertains to our trading and how we can potentially apply his ideas in the future.
I hope you enjoy reading these.
“A Mathemetician on Wall Street: Statistical Aribtrage”
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Larry Connors is CEO and Founder of TradingMarkets.com and Connors Research.