Do you see patterns in Random Walks?

[nfactorial]

Quote from goodgoing:

Those of you who insist that there are no patterns in the market and price action is random, how to you explain the recent performance of this blogger who is using simple patterns?

On 09/30/2011 he showed a price pattern in QQQ and he gave a down target of 5%. The target was hit two days after the call.

After the close of 10/03/2011 (on the day before yesterday) he showed two QQQ patterns and based on those and some other information from an indicator he called a positive close. Given that the market was down all day I thought that this time around he got it wrong but we had this late rally and rebound and his call was on the spot once more.

What do you say?

The path where those patterns were successful was one among many possible paths.

No one says you can't find successful patterns... I think you need better understanding of "randomness".

 

[goodgoing]

Quote from nfactorial:

I think you need better understanding of "randomness".

Could you offer your insight and understanding?

(No wiki links pls).

 

[ammo]

the herd travels across the plains randomly looking for food and water true or false

 

[SunTrader]

Havn't "herd" from the Maestro this week.

Might the disclosure of penny-stock company be a factor?

Just a random thought.

 

[nfactorial]

Quote from ammo:

the herd travels across the plains randomly looking for food and water true or false

False.

However each member of the herd keeps constant distance with its immediate neighbours and follows the center of gravity of the herd.
That's well enough for a profitable strategy.

 

[ammo]

Quote from nfactorial:

False.

However each member of the herd keeps constant distance with its immediate neighbours and follows the center of gravity of the herd.
That's well enough for a profitable strategy.

you are correct,the herd also uses its sense of smell for food and predators,ears,,eyesight,taste,ground vibration,and natural hereditary tendencies to survive,in the meanwhile appearing not too bright and random as practically every species has a natural predator,making it prey

 

[nfactorial]

Quote from goodgoing:

Could you offer your insight and understanding?

(No wiki links pls).

When you study a stochastic process you can't draw conclusions from observing a single run (realization)...

Let's say you're studying the coin toss process (A=head, B=tail).
Your run is AAAAABBBBB. Can you conclude that trend-following works on coin tossing?

Let's say you have a different (unknown) process with the same A and B. You've spotted a pattern:
When ABAB appears then you have high probability of B coming next.

How long should your run be if you want to prove that pattern holds true? 1000 draws? 100000 draws? infinite draws?

The answer is the length doesn't matter as you can't prove the pattern works. That's because you can't draw conclusions from a single run.

 

[intradaybill]

Quote from nfactorial:

Let's say you have a different (unknown) process with the same A and B. You've spotted a pattern:
When ABAB appears then you have high probability of B coming next.

How long should your run be if you want to prove that pattern holds true? 1000 draws? 100000 draws? infinite draws?

The answer is the length doesn't matter as you can't prove the pattern works. That's because you can't draw conclusions from a single run.

This question is answered in probability theory. Probability theory doesn't deal with "true". I don't know how you make these things up. Confidence intervals is the answer. "True" is the subject of religion and metaphysics.

 

[nfactorial]

Quote from intradaybill:

This question is answered in probability theory. Probability theory doesn't deal with "true". I don't know how you make these things up. Confidence intervals is the answer. "True" is the subject of religion and metaphysics.

Replace "true" with "profitable" then. Same problem.

 

[MAESTRO]

Quote from SunTrader:

Havn't "herd" from the Maestro this week.

Might the disclosure of penny-stock company be a factor?

Just a random thought.

I am in the hospital this week; having a minor surgery. I am proud of my company; I have built it from scratch and will be there as long as it takes to make it a huge success!

Cheers,
MAESTRO