Does Probability exist?

[OddTrader]

You can derive a historical probability of an event x happening in the market from looking at history. However, since the distribution is not stationary i.e. it is not like roulette, your derived probability is subject to error in the future. This is how, for example, Long Term Capital Management destroyed themselves, by using historical data that since something had not happened before, there was no chance of it happening in the future.

Very well put!

Perhaps LTCM also encountered two other unexpected/ untested critical factors:

Cornering the markets unknowingly, and Reflexivity by the unified actions from other major competing players.

Just 2 cents!

 

[loyek590]

Depends on whether one is looking at numbers or behavior. If the latter, there is nothing that has not happened before. Charles Mackay can tell you all about it.

that's twice now you have got it. The idea is not to predict what the next number will be, but to predict how the bettor will bet on what the next number will be.

 

[OddTrader]

that's twice now you have got it. The idea is not to predict what the next number will be, but to predict how the bettor will bet on what the next number will be.

Genius! No doubt! Better than JH!

 

[loyek590]

that's twice now you have got it. The idea is not to predict what the next number will be, but to predict how the bettor will bet on what the next number will be.

so does probability exist? I'll leave that to the mathematicians, since I am not one. But will people probably do what they have always done? I say yes, because I am one.

 

[lucysparabola]

Can you explain me then why this works on 1000+ consecutive trades (2-3 years period)?
Will not post the number of good signals, but much higher than statistically expected in "random" scenario.
Same scenario's repeat over and over again. This would contradict what you wrote I think.
I don't use historical data, I use historical behaviour. So maybe the example I gave was not correct because I never watch prices, I watch the development of the market behaviour. If I have a signal I react, no matter where the price is, price is irrelevant to me.

it is so straightforward yet still so undiscovered by many. the framework matters, not the values within it.

 

[dbphoenix]

it is so straightforward yet still so undiscovered by many. the framework matters, not the values within it.

I don't know that it's undiscovered, though you may be right. Probably more the belief that the lessons of centuries no longer matter.

 

[i am nobody]

it is so straightforward yet still so undiscovered by many. the framework matters, not the values within it.

Yes, but tell it to nobody. I mean nobody else, because i am nobody, so you don't have to tell it to me because I know it already. I hope you understand what I mean.

 

[OddTrader]

I don't use historical data, I use historical behaviour.

Apparently this thread is more about Genius!

 

[dbphoenix]

Apparently this thread is more about Genius!

No, just about traders trading. Behavior. That is, after all, the purpose of an auction market: to facilitate trade.

 

[i am nobody]

Apparently this thread is more about Genius!

No not genius. Weird or different is a better description. If you use market behavior it is necessary to be weird or different. If not you are part of the market (or mass) behavior that you want to exploit. Being part of it makes it impossible to take advantage of it, because you should then exploit your own behavior. You should be different from the mass or not use market behavior strategies.