Do you see patterns in Random Walks?

Quote from SrRuthenate:

Why not add something useful, even an intelligent question, instead of a whine?. If you or someone does, I'm SURE the MAESTRO, and others will be back... Personally I miss Icarus... Oh well the punching bag will do. I spent 2 years just on the 2 basic laws that are very simple. Harnessing the how will not be posted by anyone smart enough to crack the nut...for obvious reasons...
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I thought I made it abundantly clear that I do not possess neither the intelligence nor the knowledge to help the thread back on its track.

What you interpret as a whine, was intended to be a sincere thank you -- to posters such as yourself -- for stimulating the few brain cells I have left. I apologize for my momentarily lapse into courteousness...

Considering the quagmire in which this discussion took place, I found the banning of Icarus to be quite surprising...
 
Quote from Lornz:

[B the few brain cells I have left. I apologize for my momentarily lapse into courteousness...
. [/B]
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brain cells can be stimulated by high testosterone in the blood... Find a punching bag and hit hard! :)
 
Neurogenesis is better induced by performing aerobic exercise which requires balance; skateboarding comes to mind.

Why would I want to harm another being?
 
Let's assume you have developed setups for price charts, that have a mathematical win % per setup based on long term forward analysis.

Then by looking at real chart vs a random chart, I am now able to tell which chart is fake since I would see the setups not working on a random chart.

However, at times you can get a random chart that will look like a real chart, just like you can get some random price action on a real chart.

The goal being patient to wait for a real setup and pricing to behave rationally based on fear and greed. For example, on strong trends, the market goes down because everyone is in a fear and selling.

A perfect example, is the day I was trading the GBP/USD when bombs were going off in London. Price went down because in had to go to down.

However as Brooks says the interpretation of events can appear more quickly on a chart than in a news release. For example, lets assume you are trading RIMM and they release a profitable quarter, you may expect the stock to go up and place a buy order. However, you see the stock price then fall, and you are stopped out. The reason the stock fell could be due to not exceeding expectations or not giving good enough future guidance. None of these things are random, and once the big funds that actually move the stock's price with their large orders make up their minds, the price moves in that direction because it had to move in that direction.
 
Sometimes my backtested systems or my trading performance shows some positive or negative results, but the question is: is that a sign of some skill or validity of the system, or is it a random walk and I've just found a positive streak that has a life span of some finite time?
Here was an interesting paper on the subject: http://www.lmcm.com/868299.pdf
Mauboussin, Untangling Skill and Luck
There is some combination of skill and luck components that produce the end result. In reviewing backtest results or performance, it's important to figure out that combination.
If it is skill, is the skill attributed to the right reason? Ex, did it find the correct pattern or signal, or a random pattern but that happens at the right time of day to produce good results?
I recall in my one statistics class many years ago, it was all about, "were your test results truly something about the population, or did you get the results simply by random chance?".
 
If you make money for a week maybe it's because of luck. If you make money for a month that maybe too. If you make money for a year maybe you were lucky. If you make money for 10 years in a row only a stupid academic moron will run statistics to find out if you were lucky. This is a more interesting read.

Just an excerpt:

"It is a true achievement to be able to maintain a profit factor much greater than 1 for an extended period of time and the question whether there is luck involved is more [of] a metaphysical one than pragmatic. It is the wrong question to ask and actually a distracting issue away from the real issue..."
 
Quote from tim888:

If you make money for a week maybe it's because of luck. If you make money for a month that maybe too. If you make money for a year maybe you were lucky. If you make money for 10 years in a row only a stupid academic moron will run statistics to find out if you were lucky. This is a more interesting read.

Just an excerpt:

"It is a true achievement to be able to maintain a profit factor much greater than 1 for an extended period of time and the question whether there is luck involved is more [of] a metaphysical one than pragmatic. It is the wrong question to ask and actually a distracting issue away from the real issue..."
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Thank you for the more interesting read, this was my favorite excerpt:
"Thus, the real and important issue, given positive performance, is not whether there was luck or skill involved in achieving it, but what was the probability of ruin as a function of time."
That's what I'm more interested in, given the info I have up to now, trying to project forward, whether I should continue with my system or technique, or if it's time to look for a new one. I'll research more about my probability of ruin as a function of time.
 
Quote from Lornz:

It is a shame that this thread suffered an early demise. There was some genuinely interesting discussion, at least at some point.

I've long been thinking about the topics discussed, but not only with regard to trading. Neurology is a hobby of mine, and I am especially interested in consciousness. Quantum consciousness is a very interesting concept.

Like Samsara (?) my background is in philosophy, and that has limited my thinking to the abstractedness of it. But, I have recently returned to school to further expand my mathematical knowledge. The goal is to obtain a degree in physics; It's not too late, Samsara...

I just wanted to thank the various contributors to this thread, it was one of the better ones in a long time.
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Wow, congrats on having the fortitude and drive to go back to school for that -- very admirable. I agree fully with your thinking: there's a lot of critical material we miss by being outside the rigors of research. I actually have kinda considered doing the same for the last year or so (not for physics though).

I also think there's a mirror image to that deficit in those who do not venture outside their boundaries to question foundational things like what it means for a statement to be true. As with individual people, there are entire disciplines that piggyback their implicit claims to truth on the utility they provide or the earnings they garner.

It takes guts to be humble, but we all eventually get humbled in our own ways in time.

And as the other perceptive poster noted: samsara does totally suck.
 
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