A real edge hardly requires any testing

[dtrader98]

To be fair, I said “not much doubt”, but let’s say you thought you had a high chance of -2% and a low chance of +2% depending on what happens across earnings or similar. On one hand, it’ll be hard to get enough data to be sure the odds really are say 4:1 in your favor or whatever, but on the other hand, if you keep putting on the bearish trades and more than 2 go against you before you’re making money, you know something’s probably wrong with your model.

I actually see that as using a bayesian approach to statistics. Maybe not as formal, but still utilizing some form of statistics there. I can't say for certain how you formulated your priors (E(u_t+1|earnings) = -2%) > E(u_t+1|earnings) = +2%), but again, though it may not be formal, I would think there was a lot of historical data already that went into those formulations (led you to those beliefs).

FWIW, I am a bigger proponent of bayesian approaches over frequentist, when it comes to trading and markets.

 

[d08]

If the edge is not good enough, you will have to go for testing it out.

I've found mine through data and "testing". Also testing gives you invaluable metrics which you cannot find out by philosophizing while smoking a cigar.

 

[ma_trader]

Well, easier said than done. Only if it were that easy to find an "edge". Also how will you know if your edge is robust without testing?

An edge picked out of a chart like a head and shoulder pattern is much better than an edge brute-searched over a dataset , an edge should have a concept that can be exploited, testing is not going to give you a concept, a little different way of thinking you may say

 

[d08]

An edge picked out of a chart like a head and shoulder pattern is much better than an edge brute-searched over a dataset , an edge should have a concept that can be exploited, testing is not going to give you a concept, a little different way of thinking you may say

And that has massive subjective bias. You'll pick out the trades that worked for the pattern and quietly discard (or assign lower weight) to the ones that did not work out. I've done this myself many times. I stare at charts for hours and have one those epiphanies but when I actually crunch the numbers to remove my bias, the profitably is far lower or even negative.

 

[ph1l]

An edge picked out of a chart like a head and shoulder pattern is much better than an edge brute-searched over a dataset , an edge should have a concept that can be exploited, testing is not going to give you a concept, a little different way of thinking you may say

Testing might not provide a concept, but it can determine if a concept is likely invalid or possibly valid.

 

[ma_trader]

And that has massive subjective bias. You'll pick out the trades that worked for the pattern and quietly discard (or assign lower weight) to the ones that did not work out. I've done this myself many times. I stare at charts for hours and have one those epiphanies but when I actually crunch the numbers to remove my bias, the profitably is far lower or even negative.

Its not about picking and discarding, the pick should be enormously profitable than the discards.
The basic thing is working on data reveals low quality and sub standard edges, working on charts and on taming randomness produces wonderful results, that work.

You need to change the way you think i guess, but when you get it , you will know it.

 

[ma_trader]

Testing might not provide a concept, but it can determine if a concept is likely invalid or possibly valid.

This is about creating a concept and not discovering one.

 

[ma_trader]

I've found mine through data and "testing". Also testing gives you invaluable metrics which you cannot find out by philosophizing while smoking a cigar.

And i have found by turning the disadvantages of indicators into an advantages.

 

[ma_trader]

Testing might not provide a concept, but it can determine if a concept is likely invalid or possibly valid.

Testing to find an edge is like trying to break a password by brute force,
Finding an edge by chart exploration,derivation is like breaking the encryption of the password

 

[themickey]

Testing to find an edge is like trying to break a password by brute force,
Finding an edge by chart exploration,derivation is like breaking the encryption of the password

Quite frankly I have difficulty believing one word of your theories.