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=========================================   Thursday, February 14, 2002
 
The Derivative Method - Q and A on ROHP and TTS

Hello everyone,

Happy Valentine's Day!

Thank you for your interest on the TTS (Trade Tuner System) and ROHP (Right Opportunity High Profit) systems announced last week.  As one customer mentioned, ROHP has the fairest money back guarantee, as neither yourselves or we (Edmond and I) know what the results of the Hamburg SpielBank permanences will show two weeks AFTER your purchase of ROHP.  So, first of all, you don't need to spend a penny to test the system.  Secondly, should it fail your tests during those two weeks, your money is returned, no questions asked.  You have absolutely nothing to lose, but a lot to gain when you see how the system performs.

Most inquiries on ROHP were based on the number of sessions won and the bankroll required.  Here is a Q and A:

Q:   Edmond,

A few questions concerning your ROHP system. I do not live close to casinos and have to travel about nine hours. Usually I stay for about three to five days.
Why can't I play like 20 sessions per day or maybe 10? I think I am one of the most patient persons I have ever met :-)

What type bankroll for black chips please?
Thanks.

A: I understand your practical problem.
You could indeed play several sessions a day in your case, although it will be a bit tougher to concentrate that long.

I'm glad to hear you are a very patient person, because that's the main requirement to use this system.

Whatever chip value is comfortable to you could be used: you'll need 30 units bankroll for playing with a progression and 10 units for flat betting.

Greetings,

Edmond Petitjean

Click to order.

Since the TTS - Trade Tuner System is the very first trading system announced at Let's Talk Winning, it aroused a big interest.  Here are the answers to some of your inquiries:

Q: I would like to learn to trade Forex, and I thought you would either have
some experience, or you would know someone who does.

A: It makes no difference for TTS what you trade.
TTS will have the same excellent results for forex as for other markets.

Q: I'm a trader from Italy, and I'm researching a new trading system and I see your TTS in the Letstalkwinning's site.
I'd like to know if you have a track record available and if you trade using your own system.

A: You'll love TTS because of its simplicity, low stress (remember the relaxed roulette principle) and high yield.
Of course I'm actively trading my own system: it grew out of a necessity in the first place.
I also bought lots of expensive systems with beautifull bells and whistles, only to see them go down each time when I tried them for real.
I'm mainly trading options (on the Dutch market) and not longer ago then this morning, I made 25% profit in one hour (!) with a Philips call option, because everybody was scared by the bad news that came out on Philips today, but NOT TTS! TTS told me to buy CALLS! And right it was.
Please find included a track record example for the SP500.

Q: I saw your track record and I have one question, please don't get me wrong, I'm just curious... If your system has generated so much money (509000$ are much money) why do you mind to sell the system itself?

A: That's what using my system would have produced on the sp500.
I didn'tactually trade it, because it is still well above my trading capital possibilities.
It is the result of literally following TTS during one year on the sp500.

As I told you the result of a very recent trade (this morning): it produced 25% in a little less then 1 hour!
The reason I'm selling the system is exactly to raise my available capital quicker, so that I can progressively take bigger positions.

The period (a few years) that I used to develop and finalize my system was a VERY expensive one, because you can only truly learn trading by doing it with real money.
So I learned through lots of ups and downs, to come out with a finished system: so you and other customers won't have to go through the same ordeal to master it.
You'll get a ready to use set of rules, built in concrete.

Please note: ONE modest trade will pay your investment in this course more than back.

Qs: Frequency of trades?  Winning Percentage?  Stop Loss Amount?
How do you use it now - what time frame and which stocks/commodities & why?

As: My own trading frequency is about 1/week on options of the Amsterdam Exchange (AEX).

Winning percentage is about 90%.

Even better: maximum accepted losses in option (which I mainly trade) is 50%.
That means that I easily make 50% 9 times out of 10 and lose 50% 1 time out of 10: you don't have to be a mathematical genius to understand the very positive results coming out of this.

Because I mainly trade options, my stop loss is simple: 50% of the option premium.
I'm trading options because this allows me to perfectly control losses AND not to be bothered by initial whipsawing.

When you order TTS, I'll also tell you how to combine it with a special software, so that you'll NEVER lose (accidental losses are ALWAYS recovered).

My time frame is a few days.

Another time frame when using stocks is a few weeks. TTS doesn't care what your time frame is: it can be minutes or months, the principle stays exactly the same.
When I want to trade futures (on commodities), I do it in an entirely safe way by buying options on the futures.

Buying TTS will make your life as a trader very simple AND very profitable: NO stress, NO complicated decisions, NO doubts AND lots of easy profits.

This system was born out of my frustration with existing systems.

Q: Is it a 100% mechanical method (Step 1, Step 2, etc.)?

A: Yes, you only have to follow a few clear and simple steps.

Q: Does it rely mostly on chart reading? What if one's chart reading skills and
technical analysis powers are not that efficient? Many times it seems that
chart reading is a lot easier "after the fact."

A: TTS will transform you into a real chartist, even if you have never seen or understood a chart. 

What scares you is the kind of charts where you see lots of complicated indicators, cluttered all over the screen.   This is only to hide a total lack of understanding from the program designers.

With TTS, you'll see a very clear screen before your eyes, with only two or three things to look at. 

Q: If one were applying the method to one of the indices (SPX, OEX, DOW), how
many signals or trades per month would you probably get?

A: It depends entirely on your time scale.  Will you trade intraday, short swing trades or longer?   Let's suppose that you use daily bars.  This will produce around 4 trades per month.

Q: My interest in the program would be more directed toward the various indices and not individual equities. Approximately how much time each day does one need
to devote to the method?

A: There is no difference in trading indexes or equities or commodities with this method.  If you are only following a few indexes, it should take about 5 minutes each day to decide what to do.

Q: If trading the indices, what type of return would one be looking for on a monthly
basis?

A: If you would trade for example the SP500 full contract, you could expect around 40 points profit = US$10,000.  This can of course not be guaranteed, but is reasonable.

Q: I understand the author will offer tech support via email. In addition to email
support, does he also offer phone support?

A: Support is done via e-mail (edmond.petitjean@skynet.be), as this is the most convenient way.

Click to order.

The Derivative Method

As per your requests and as posted in the discussion forum, here is the full documentation of the Derivative Method.   This method was posted in the forum within 7 sessions, was open for discussion and has given the participants lots of thoughts.  We will include some of your comments also at the end of the description.

The Derivative Method takes ANY betting system, analyzes it and converts it into a surely winning system.  It's not anything magical.  It simply provides you guidance on how to extract the winning portion of a betting system that you may have developed yourself or purchased it somewhere. 

So, it really adds a third dimension to a system, the first two dimensions being the betting selection and the second one the type of progression or the use of flat bets.

Our ultimate goal is to have a system work for us on the long run as consistently as possible.

A system wins consistently between two failure points. Unfortunately there is a casino edge, and because of that edge, the failure points cause you to lose more units that the units you have accumulated profits from.

The derivative method has a solution for that.

People who know calculus know about the calculation of minimum and maximum points of a curve. In simple English terms we will refer to those points as the failure points of our system.

In mathematical terms if you have an equation of the type y=ax+b and x is our failure point, if you find the derivative of that equation the x disappears. Wouldn't be nice if we can make the failure points of our system simply disappear?

If our failure points repeats right away, this is what we will refer to as level 2 equation or y=ax**2 (square) + bx + c. This requires a double derivative where the x will again disappear.

Put that in English, if we know where our system fails, we can start betting right after it fails. This is like the first derivative.

If we encounter a back-to-back loss, we start betting right after two consecutive failures. This is like the second derivative.

How long do we bet for? This depends on the system's curve and the frequency of failure points. A good simulation shows that frequency. We sample the minimum and maximum occurrences of those events as well.

Let's have a concrete example. Let's take a system, ANY system.

The system I will take as an example is the following:

You bet on 2 dozens at the same time. Any betting selection of your choice: the same as the last 2, one different than the last one and the previous one, the one that lost and the previous one, the one that won and the previous one, two random dozens, etc., it really doesn't matter.

A betting selection is accompanied by a progression. Take a steep one -  a 3 step progression: you bet one unit on each dozen, if you lose, you triple and bet 3 units on each dozen, if you lose our second bet, you triple again and bet 9 units on each dozen. This ensures that if you win within the 3 steps you will come up 1 unit ahead. If you lose all 3 bets you are down 1+1+3+3+9+9=26 units, which will be considered as the failing point of this system.

So we start betting and say we get the following Win/Lose sequence:

L W L L W L W W W L W W L W L L W L L W W W W L W, etc. So far we are 14 units ahead, as we had no 3 L's in a row. Suddenly, kaboom we get L L L and our 14 units become 14-26 = -12 units. This is what would happen if we would use the system from any point until the failure point.

Now let's look at the whole series over again with more bets: L W L L W L W W W L W W L W L L W L L W W W W L W L L L L W L L W L W W W W L W W W L W W L W L L W.

We know we have one failure point in the middle of our series and that lowers our net profit by 26 units.

According to the derivative method, we know how to identify this failure point of this particular system:  simply the appearance of 3 or more L's in the series.

The following paragraph is for math gurus: if you were to plot the graph of this system, you would get a zig-zag saw type of graph with linearly increasing profits (during winning bets) and a sudden drop of 26 units during a failure point.  The derivative of this graph would normalize it in such a way that you would get a step by step increasing graph, which would reflect our consistent winnings.

In simple terms the above shows that if we bet between failure points, we win consistently.

In the first level of this method, we start betting right after the appearance of 3 L's.

In the above series, we make 13 units.

Had we played the whole series with no interruptions and no waiting for failure points we would end up with +27 - 26 = only 1 unit profit.

This is fine until we encounter another failing point.

Now we are at a stage that we have two failure points.

A sample session is the following:

L L W L W W W L L L W L W W W L W W L W W L L L.

If we play the whole series without the derivative method, we win 4 units, then we lose 26, then we win 8 units, then we lose 26 units again. Overall we lose.

The derivative method identifies two failure points in the above series. We also observe 8 winning runs between the two failure points.

The question is how many winning runs can we have between failure points and what is a "safe" number that we can bet on?

This is where a simulation or the observation of real spins either in Zumma book or Hamburg Spielbank archive comes handy. We never said winning is easy work. It takes hours of research to reach conclusions.

Let's say we run a 10,000 bet simulation and detect that between two failure points we can have a minimum of 3 winning runs and a maximum of 18 winning runs.

So a safe method is to bet for 3 bets right after a failure point, get 3 units profit and wait for the next failure point (3 L's and more). Then bet another 3 bets, get another 3 units, wait for the next failure point without betting and so on.

This seems to be good for 10,000 bets.

Then we run a 100,000 bet simulation and we observe that the minimum winning runs between two failure points are reduced to either 1 winning bet or no winning bet, that is two consecutive failure points back to back.

So, now are at a stage that we have run 100,000 bet simulations and we saw that there are a few back to back losing runs.

It is possible that up to now, we may have gathered enough cumulative profit units, so at this stage losing 26 units will still leave us ahead.

However, it may also not be the case. Therefore we go into the second level of the derivative. In mathematical terms, we go into the second derivative of the curve, so the power of 2 of the x variable will vanish.

In simple terms, the second derivative looks for a consecutive back-to-back loss, i.e.

W L W L L L L W L L L L L W.

Note that if we have 3 consecutive L's we lose the run, and we don't bet until the next W. Then we start betting again. This will make sure any sequence of 3 or more L's is only 1 losing run and not multiple.

After the W, we encounter 3 or more L's. This is what's meant with 2 consecutive losing runs.

To avoid this, the second level of the derivative looks for such a back-to-back loss and we start betting only after having encountered two consecutive losing runs.

We run another simulation of 200,000 bets or spins. This time we look for 2 consecutive losses and the number of winning runs we have between 2 consecutive losing runs. We determine again their minimum and maximum values. Say, they are 12 and 57 respectively.

So our betting system becomes: wait for two consecutive losing runs and bet for 12 times. Gather 12 units and wait for the next appearance of two consecutive losing runs.  Then bet again for 12 units, win them and wait for the next appearance of two consecutive losing runs, etc.

This may take 20-30 thousand bets. After all we want to beat the casino game on the long run, don't we?

Now, we run a 500,000 bet simulation, as we approach our final destination to win any casino game with any system on the long run.

You must have started to get a feel how "long" this long run can take.

So, after half a million bet simulation, guess what we encounter: 3 back-to-back losses and maybe even 4 back-to-back losses:

W L L L L W L L L L L W L L L L L W ...

Yes, they may happen once or twice in half a million decisions. But who knows you won't be the one encountering them? We want to be absolutely safe and sure of our system.

And we come to the third or fourth level of the derivative method. The fourth power of the x will disappear if you derive the function 4 times.

In simple terms, within all decisions you look for 3 or 4 consecutive back-to-back losses and start betting only then. It may take you a very long time to see such a situation. But when you encounter it, you go for it. You bet one unit, probably the highest allowed and you win. You have beaten the casino game and you have done so on the long run, no matter how long it took you to achieve this goal.

The derivative method proves what it means to win on the long run and it does achieve it.   Otherwise, if you apply a system as is, with no interruptions, and without analysis of its failure points, you will win during its winning runs, you will lose during its losing points, your profits will fluctuate up and down, unless, of course, your system has a solid built in money management strategy, which cuts your losses to a minimum and maximizes your profits.

The following few steps would summarize the Derivative Method:

- Simulate your system for over a million decisions - a computer definitely helps.
- Find out the frequency of your failing points.
- Find out the number of winning runs between failing points.
- Find out the maximum number of consecutive back-to-back losses.
- Start betting only after the maximum number of consecutive back-to-back losses are encountered, bet for the minimum number of winning runs and win.

There were some comments at the discussion board, as one customer concluded:

"I think the main conclusion to the derivative method is this. In order to win at gambling, you need to have the following characteristics:

- patience, in order to wait for good betting conditions
- a good understanding of the odds and mathematics, so that you can make good and realistic goals
- goals, in order to make you play in a sensible and profitable manner
- a good plan of attack, in order to give you some sort of edge over the casino
- a good size bankroll, in order to play and make up for any losses that will occur."

with which I definitely agree.

I hope you find the method useful and can combine it with your systems.  You can apply the method at any level.   In the first level, it simply means to start betting after having encountered a failing point in your system.  In the second level, you start betting after two back-to-back failing points.  And if you know how many back-to-back losses your system can have, you have converted your system into a consistently winning one.

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Wishing you all the best,
Until next week,
Izak

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