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aphie, Thanx for starting this interesting discussion of MA. You got me thinking about MA's so I thought I'd write up my observations and post them here. <b>Averaging assumes that data = "The true value" + "random noise"</b> That example of how slowly a nonadaptive MA closes a major gap...

The ideas come from a couple of chapters from Tom DeMark's 1997 book: "New Market Timing Techniques: Innovative Studies in Market Rhythm & Price Exhaustion" I've not read this book, and know nothing about ideas, but a description of the book is found at...

DeepHindsight's point about testing on random entries is good. You can go even further with it by synthesizing random price data and backtesting against that. <b>Backtest with random data</b>You can help gauge if your system is just "lucky" or flawed by backtesting on unbiased synthetic...

I'd like to amplify on Magna's point some more. One way to look at the situation is that a trader's mental or numerical model of future price action resides in a two dimensional space. <b>The first dimension is the expected future of movement</b> This dimension reflects whether the...

All trading assumes that the tradable is "mispriced" -- why would a trader enter a position on a perfectly priced security? With vega trading, the trader believes that they can predict future volatility with more accuracy than the options market has priced into the option. (This gets into the...

A market only needs liquidity if we assume that we must be able to execute market orders at every instant during the "trading" day (notice that they don't even call it an investing day!). Why couldn't we create an electronic market that accumulates all orders and does a giant match-up at the...

Hey, now that makes two of us :) All of my postings presume that the reader is interested in thinking about trading from a more explicit, rule-based, quantitative perspective. I personally mistrust intuition because I've spent too much time studying decision theory, biology, and cognitive...

<b>Pareto-Levy distribution :</b> The Pareto-Levy distribution follows a rather complex formula that describes an entire family of distributions that run the gamut from the usual normal distribution to the very fat-tailed Cauchy distribution. (Technically, these are what are called stable...

<b>RE: too many variables to find the deterministic motion:</b> I'm with darkhorse on this one. Although, I certainly do not believe that we can create a 100% accurate predictor of market action, we can create profitable predictors/rules for when to buy & sell. I especially like the notion of...

I too, would love a flat-tax system, but I fear that complexity is inevitable. If they tried to create a truly simplified tax code, people would immediately want all their well-intentioned tax-breaks back. And who can argue against encouraging retirement savings (IRA tax code), home...

Actually, I do NOT think that prices are random. I think they are complex mix of stochastic and deterministic components. The challenge for traders is to find and synchronize with the deterministic components of the price action while managing the risk associated with the random components of...

YIKES!:eek: It sounds like you might be talking about what is called UBI, UBIT or UBTI (Unrelated Business Taxable Income). UBTI occurs when a tax-exempt entity tries to hide the taxable gains of activities that are not directly tied to the entity's tax-exempt mission. It usually impacts...

I'm a stock trader, so you may be right about commodity traders. Just be careful as some of the Active Trader/Tech Analysis of Stocks & Commodities magazine articles that I have read mention that some tax preparers don't know how to handle trader's taxes and will lump cap gains into ordinary...

I think that most traders can avoid Social Security/FICA/Medicare Taxes if their "income" is based on cap gains, dividends, interest, etc. rather than earned or ordinary income. These taxes apply only to ordinary or earned income, not to capital gains. Now its a separate issue as to how you...

How come the old slogan got to be the first ballot entry? Worse, its getting unfair election advertising -- its being promoted in the window title of ET's home page (subliminal advertising!). Isn't there some law about campaigning too close to a polling place???? Maybe ET should hire Andersen...

A few more unofficial ideas: Elite Trader: Buy, Sell, or get the hell out of the way! Elite Trader: Meet the faces that will rip your face off Elite Trader: So many posts, so little time Elite Trader: Phat Forum Threads Elite Trader: Supporters of the Random Talk Hypothesis...

Darkhorse, Excellent question about complexity vs. horsepower.:) This is my favorite type of question -- a question that I thought I had the answer to until you asked it. Whether the optimal complexity of a trading system grows as the horsepower grows depends on the nature of the...

I like darkhorse's dichotomy of mechanical vs. discretionary traders (I'm in the mechanical camp myself) -- every trader needs to find approach that they feel comfortable with. My concern is that there are valid reasons for limiting the complexity of the trading approach (regardless of...

<b>Answer 1: Strong yes: </b> At first glance, it sure seems like these stocks have nonrandomly large numbers of downdays (compared to a naive expectation of 50:50 distribution of up:down days). Lets just look at the most extreme example: the case of LRCX and its extremely low 34 upday...

You pose an excellent question! This question illustrates a major issue in trading and the power of screening to mislead traders (that you pose this question suggests that you are aware of what I am talking about). Even if these four stocks have seemingly non-randomly high numbers of downdays...