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yes, but you said "uncorrelated" in your original post.

Mean and variances add for uncorrelated RVs. I don't see how -10% added to +40% will improve the results if they are completely uncorrelated: It should give you 30% return. Your variances will add too so it shouldn't help your draw down either. If there is a anti-correlated component, then the...

Why are you plotting this using discrete bins? Why not just plot the indicator versus next day return, and tell us the correlation coefficient? Then do the same for 100 sets of sampled data points (monte carlo) and get an idea about the error bars on that estimate?

Still couldn't avoid the huge drop PL in the fall of 2008...

What I meant by "signal" is the useful information in the data as opposed to the noise. What I meant by long term signal is this: a finite support signal can only contain wavelengths up to the window length and will lack frequencies lower than that. So a low pass filter on a windowed signal...

Simple answer: non-stationarity. The training data does not contain all information. It is also a form of overfitting. Your model thinks that all cases have been covered in the past data which is not true -- another symptom of optimizing when there is little to no long-term signal.

You mean second or higher order filters work, I guess. First order low pass = exponential moving average. So you are saying that going from first order to second order filters makes an unprofitable system become profitable. I suppose it's plausible, but I still haven't had the chance to check.

By the way, how did that C# mentorship go? Did you find someone and did that person complete the project? Thanks.

Actually that is sort of what I meant -- not so much for trading (day or swing) but more for balancing risk in a long-term portfolio of assets. My neighbor does not describe himself to be a trader but is a principal in a small financial firm that specializes in asset allocation. My guess is that...

I could be wrong but I think he means risk management in longer-term asset allocation strategies. I have a neighbor who does this type of work in NYC. Very dry and slow-paced, but lots of funds are doing this type of work I think.

Depending on how you look at it, I think capitalizing on people's "laziness" is not immoral. If your software tool does exactly what you advertise it to do (again I am NOT talking about actual trading algorithms like PAL, just tools for enabling your own analysis and design), then I think it's a...

I think selling tools (not trading algorithms) makes some sense if your trading profits are in the low 6 figures. It lets one diversify higher risk trading with a low risk income stream. But I guess if your trading brings in upper 6 figures or 7 figures, then it probably would not make sense to...

If anything the US is headed toward extreme right wing conservatism. What used to be centrist ideas are now declared socialism or even communism. Many of Reagan's policies and actions would be considered liberal and big government today. People in the US want their government services (including...

I think it boils down to timescales of impact to the economy. When you invent a new technology, or build a bridge or airport, you as the manufacturer or construction contractor not only made profits and employed people by doing so, bu you also created a lasting (potential) increase in the GDP...

what I don't get is who is drinking OJ made from concentrate anyway? All you can find in stores are "not from concentrate".

To me this assumption may be the sticking point: "We assume that on the time scale of interest, the price is driftless, and write ..." unless you have constructed a pair (or basket) trade that is mean reverting, i.e., its returns obey driftless Brownian motion. But otherwise, it is a...

Sure you can, it's called being informed and voting accordingly.

If I am told that making 10 million a year will lead to a 40% tax rate, whereas making 2 million will be 35%, I will still work hard to try to earn 10 million. At the same time, I would make sure the tax money is being spent on important things that the markets can't take care of: basic...

I am no socialist but would be fine with the Clinton tax rates. That would at least help fill the deficit hole we are in. In general, I think that the top tax rates should only apply to the very top of the income scale, i.e., income in the multiple millions. I think most of middle class, even...

You are right it has been repeatedly shown by economists that the laffer curve effect only happens at > 80% tax rate. Anything below that and there is no detectable reduction in "incentives" that lead to this purported reduced output. So as long as you are talking about 30-40% or even 50% tax...