Do you see patterns in Random Walks?
- Thread starter atlTrader666
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No, that is not the question. You fell into the trap the academics and the other empty heads set up for you. I do not need the academic sh*t, their tests, or anything they sell to get the grant money from the taxpayer pockets, a form of robbery that hss been going for years and nobody is willing to stop it.
The fact of the matter is that you will never be able to distinguish a deterministic trend from a random trend with the accuracy required for trading. You will always have TYPE I and TYPE II errors. Just trade the damn thing. This is what traders do. Who cares about the academic sh*t? They just confuse people.
Men trade. Boys ask mama whether this is random or not.
Academic shit? You realize 90 percent of what you take for granted in your day to day life is built through knowledge right? Much of this pursuit of knowledge is funded by government research grants. Who else would pay for a massive super computer that all students can access to run experiments? These are the same students industry wants for themselves as employees, yet private industry certainly wouldn't pay for this so that students can learn. That's why we have grants. Corporations and people don't invest on 20 year time scales, that is what government does and part of that is investing in our universities so we have educated people who can contribute to the economy.
As an example of the far reach of knowledge (what "Academics" build), Einstein discovered relativity, without it cell phones and GPS wouldn't work. He was an "academic". That's how science works. Someone discovers something that no-one really knows any applications for at the get go and then 50-100 years later it becomes part of something we need to make things work we use on a day to day basis.
I really don't understand this anti-intellectual mind-set traders have. Even if your assumption is true, that the market is totally random, its still an interesting and worthwhile pursuit to learn as much as one can about it as well as PROVE that this is the case. You haven't done any such thing yet, and you seem to reject all the logical tools needed to do so.
It's as if I said "building houses out of wood can be done without tools" and when anyone asks me to prove it I say "well all these carpenters are full of shit, and their tools are totally worthless, just do it".
As an example of the far reach of knowledge (what "Academics" build), Einstein discovered relativity, without it cell phones and GPS wouldn't work. He was an "academic". That's how science works. Someone discovers something that no-one really knows any applications for at the get go and then 50-100 years later it becomes part of something we need to make things work we use on a day to day basis.
I really don't understand this anti-intellectual mind-set traders have. Even if your assumption is true, that the market is totally random, its still an interesting and worthwhile pursuit to learn as much as one can about it as well as PROVE that this is the case. You haven't done any such thing yet, and you seem to reject all the logical tools needed to do so.
It's as if I said "building houses out of wood can be done without tools" and when anyone asks me to prove it I say "well all these carpenters are full of shit, and their tools are totally worthless, just do it".
well, you weren't that specific in your last post..
personally if I say sth which I don't necessarily share I use quotation marks or at least make some reference so that it's easy for the reader to distinguish between my beliefs and those of other parties
look at this quote: "Again, the fundamental flaw is that trends deny the random-walk theory. There are random trends and deterministic trends. The Hurst exponent cannot tell you which is which. This is the flaw. It is simple. I wonder why those people do not think of that before doing all that hard work." Isn't that obvious that you believe that there are random trends and deterministic trends ?? You also seem not to believe that the Hurst exponent can't tell which is which. My question is how do you know that?? How do you know there are random trends and deterministic trends ?? Where do you say here that it's somebody else's claim? Or perhaps the word 'flaw' also refers to the second sentence in the quotation ? I'm not trying to 'distort' anything here , just interested... anybody would
@ssrrkk, thanks for your answer
I do have a way to do this that works for me. It requires the convergence of 6 different factors, all objectively measurable, which I think is a reasonably small number, so I don't think I've just been curve-fitting, in the bad sense, all this time. As of now, I've got data on about 700 instances of this convergence, so it's getting up there in terms of statistical significance, I think. Even still I cannot say with certainty that the trends I consider random are really random. They may just have different characteristics from the trends I do trade and the reason I don't see those characteristics in real time is that I am not looking for them.
And, even the trends I consider tradeable by my rules sometimes fail to deliver a profit, i.e. my win rate is not 100%. Is it the case that perhaps I need to consider a 7th or 8th factor? For example, I don't do anything with volume and that might be a factor to consider and might help improve the model. Maybe, but at this point, my model is very accurate and I don't want to screw with it.
There is a bit of a paradox at the heart of academic research into market movements, though. Academics, at least in the papers I've seen, tend to test the most rudimentary models and draw conclusions from them about the market. But, there are a billion different ways to trade and successful traders are constantly seeking out the ones that work. When they find them, they don't run to academics and ask them to test that specific methodology, they keep the info to themselves. So, academics never really test the "good stuff".
Then, there is the other interesting facet of trading, which is that there really are no rules on what can and can't be the basis of a trading model. I don't mean that I think something completely spurious like astrology will work, but almost any piece of market data could be used in a trading model. What you use will be different from what I use and so on and you are really only limited by your own creativity in using the data.
I've never seen any academic papers that test my model specifically, so how can an academic say anything of value to me? If I gave him the model and he ran it back to beginning of trading history and found that it actually has only worked for the past couple of years (which just so happens to coincide with the time I've been monitoring it), that would be helpful to know. Other than that, though, I'm kind of on my own as regards to the validity of my approach. Only my P&L can verify that.
Academics basically stopped releasing seminal works in the 90's on mathematical finance. The stuff you see today is lower quality and/or sparse. It could be most of the ones doing the work went into trading themselves, or maybe quantitative finance since the rewards are larger. Either of those or the funding dried up.
Most of what you see today is hacks and con artists pushing some new set of indicators on you. This has always been a problem in finance fields, just look at all the "Educators" out there.
A quant is basically doing what an academic would do, but they keep all the information they gather to themselves or are obligated to by contract. Obviously they do something right otherwise we wouldn't see them making 100-200k a year plus bonuses and even more once they get more senior positions. I've looked into entry level quant positions and they start at 125k + bonuses.
Of course, this is your "feature" selection. Think of all market data as one large multidimensional space. You can select which dimensions you want to use for your model using a variety of methods. One for example would be to measure correlation in some regression (not necessarily linear).
That doesn't mean a PhD in mathematics or finance wouldn't have a better way to quantitatively look at information or develop models, or maybe they would look at it different enough it would open whole new doors to you. It just seems there seems to be no interest in that field these days, or the people who are interested get snatched up to be quants. You also have many traders who seem to push this totally anti-intellectual agenda and really don't even know the variety of mathematical tools they have available to them.
PnL obviously is the only metric we care about, but not necessarily the best to use. It could be your method will tank under certain circumstances another metric would expose. I am not saying you have a bad system, just throwing out there something to think about.
No, I do not realize that. People live on common sense, not academic knowledge. You totally misunderstood what I wrote. I meant research that is funded to prove that markets are random or not. Take it easy...
You really do not know what you are talking about. Einstein when he discovered Relativity he was working in a patent office as a clerk. He had no connection with academic life. Some people believe that had he any conneciton with the academic sh*t, he would have never invented it. It took about 50 years for Relativity to be accepted.
Now, cell phones do not use relativity. Neither GPS needs relativity. A modified Newtonian mechanics called MOND will do it. There is a lot of misunderstanding around. You are a carrier of the misunderstandings.
Actually, the most intellectual activity I know of is to prove academics wrong in this area. Random or non-random is a red herring to keep grants coming in.
I propose to you to learn the Pessimistic Meta-inducation principle. Everything these academics try to convince you is true now will probably be proven wrong in 50 years. Science is a rip-off. Do not confuse science with technology. Technology progresses on its own. Then scientists come and claim the technology. University professors take fat salaries and live confortable lives with your money. 99% of them do nothing that worths sh*t. We do not need so many universities. Read the later reports how an "A" is so easy to get if you pay. The West needs to compete with China otherwise the way you are thinking your boss will be a Chinese soon and you will have to forget the academic stuff and work in a factory for $2/day to keep alive. Get it? Too much academic sh*t in the West.
It doesn't matter if MOND explains it, relativity is originally what made it so we can adjust for the relativistic time differences between a GPS satellite and a point on the surface of the Earth. Furthermore, even if MOND explains it this is further proof that science is needed, which was my initial premise. Einstein IS an academic, it doesn't matter where he worked when he developed his theory. He spent decades as a professor.
Cell phones wouldn't work without a good understanding of electromagnetism, however I can see your point. I should have said satellite phones instead to relate to relativity. In this case, quantum mechanics comes into play as chip design is influenced by this. There would be no way to make the transistors work without understanding what is going on physically on a very small scale.
Science and technology are synonymous. Without science there would be no technology. I can't even believe I am hearing this cognitive dissonance here. Yes, going to the Moon only takes common sense, there is no need for math at all. Science discovers knowledge, Engineers use the knowledge to make products, and businessmen fund it. Engineers can also be scientists, and scientists and engineers can also be businessmen.
Cell phones wouldn't work without a good understanding of electromagnetism, however I can see your point. I should have said satellite phones instead to relate to relativity. In this case, quantum mechanics comes into play as chip design is influenced by this. There would be no way to make the transistors work without understanding what is going on physically on a very small scale.
Science and technology are synonymous. Without science there would be no technology. I can't even believe I am hearing this cognitive dissonance here. Yes, going to the Moon only takes common sense, there is no need for math at all. Science discovers knowledge, Engineers use the knowledge to make products, and businessmen fund it. Engineers can also be scientists, and scientists and engineers can also be businessmen.