Does Probability exist?

Thanks for answering my question. Allow me to paraphrase your view, so that I may get it right.

Based on your last couple of sentences, what I am inferring is that you trade looking more at the fundamentals, using probabilities to manage uncertainty in the eventual outcome. In a sense also, taking a bet that a view. May I just go one step deeper on how does one "quantity the future", resolving uncertainty into an absolute number, translated to the risk reward ratio of a trade. Follow on would be, then how should retail traders trade, you could keep it broad, in order to avoid it being challenged and bring the conversation off tangent. Let's keep it focus.

Side comment, I am seeing the contrast, which I believe is good and beneficial to all. Thanks to you, Db, and others who contributed.

ETA


marketsurfer said:
Hi, once again, thank you for this very substantive question-- first some background--

I was initially trained in the financial markets by a WD Gann and cycles adherent, This guy turned $10k into several million using these tactics so I was rather intrigued-- used the methods and made money--( this is all ducumented in in the surf report 2002-plus)
Joined the MTA and learned lots about TA etc. Thought it was the holy grail--- then i met a certain hedge fund manager who didn't believe in TA and we would argue and chat about it numerous times --- obviously, i would take the TA side--- then I realized that any success I had in the markets was despite using TA, not because of it. That there really wasn't any testable edge to TA and it was basically intuition then stopping out losers and letting winners run

guessing on direction by using past price DOES NOT increase the odds that a move will continue or end. If it did it could be quantified, then exploited untill that past price movement no longer has any predictive properties ( if it ever did) . In addition, markets morph to eliminate any edges anyway, so these folks using the same patterns for multiple years and claiming success are not telling the truth.

In addition, i have read Wyckoff and it is the most convoluted market material since WD Gann and Nostradamus. ANYTHING can be read into the material and its "right". hence my issue with the preachers. In addition, these same folks use terms like "odds" and "statistics" to provide a phony scientific aura to the material. Not to mention the use of terms like "auction market" which is true but from the point of view of a retail trader knowing this has no relevance whatsoever. But it SOUNDS GOOD and makes sense until put into action hence my zeal in notifying others about the danger of these ideas.

I don't believe the markets are random from an epistemological point of view, but I do from our perspective.

Price is the result of things happening, it is not the cause of itself. That is the logical error of TA in general. If it was not, one could quantify how many moves or series of moves in one direction will increase the odds of a move or series in the same or changed direction---

Ta is useful for description but has zero value for prediction,

Probability exists but it has to be quantafied to exist. It is not quantified by looking at charts therefore chart readers who use this term are misusing it.

peace, surf
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OddTrader said:
My apology, if you think in this way!
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I genuinely like the posts of IAM. Would be a shame to see a good poster hounded off the boards. Too many good posters have left ET already. Maybe you weren't being sarcastic? Don't agree with everything Surf writes but wouldn't want him to leave either.
 
benwm said:
I genuinely like the posts of IAM. Would be a shame to see a good poster hounded off the boards. Too many good posters have left ET already. Maybe you weren't being sarcastic? Don't agree with everything Surf writes but wouldn't want him to leave either.
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I am sorry, personally I don't see any issue with my sarcastic style.

BTW, I think your style of frankly speaking is good and positive! Much appreciated!
 
ETA said:
Thanks for answering my question. Allow me to paraphrase your view, so that I may get it right.

Based on your last couple of sentences, what I am inferring is that you trade looking more at the fundamentals, using probabilities to manage uncertainty in the eventual outcome. In a sense also, taking a bet that a view. May I just go one step deeper on how does one "quantity the future", resolving uncertainty into an absolute number, translated to the risk reward ratio of a trade. Follow on would be, then how should retail traders trade, you could keep it broad, in order to avoid it being challenged and bring the conversation off tangent. Let's keep it focus.

Side comment, I am seeing the contrast, which I believe is good and beneficial to all. Thanks to you, Db, and others who contributed.

ETA
More...

Sure, i apprieciate the opportunity. However, I don't believe DB answered your question, unless i missed it.

Yes, painted with broad strokes, you are correct. our system attempts to quantify fundamentals both economically and on the individual instrument level. we take over 100 factors that result in price movement, assign a weight (number) to each based on past instrument reaction to the same stimuli then plug this into a formula that provides a bearish to bullish bias on the instrument at the time--hence the Price Drivers. I am fortunate enough to have a group consisting of academic and finance pros who helped me develop this system. the more extreme the reading, the larger the trade, up to the max risk size of the account ( its controlled) and often the entry is done in stages ( livermorian market testing) but not always. Risk should then be controlled by using ATR either daily , weekly or monthly depending on a variety of factors one of which what releases, and other price moving events are expected in the future. But not always. Flexibilty remains key as fixed systems ALWAYS lose.

I couldn't believe that traders were using computer power to draw charts of price then guessing on the next permutation of price but using scientific words to describe what they were doing to attract others, make thrmselves feel better, or just ignorance. It seemed absurd to me. Like making a chart of roullette or something.

We firmly believe, and think it can be proven ipso facto that price DOES NOT predict future price-- this is so obvious to us despite the fractal illusion and other delusions of "price action" which has ruined many many traders.

surf
 
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marketsurfer said:
Sure, i apprieciate the opportunity. However, I don't believe DB answered your question, unless i missed it.

Yes, painted with broad strokes, you are correct. our system attempts to quantify fundamentals both economically and on the individual instrument level. we take over 100 factors that result in price movement, assign a weight (number) to each based on past instrument reaction to the same stimuli then plug this into a formula that provides a bearish to bullish bias on the instrument at the time--hence the Price Drivers. I am fortunate enough to have a group consisting of academic and finance pros who helped me develop this system. the more extreme the reading, the larger the trade, up to the max risk size of the account ( its controlled) and often the entry is done in stages ( livermorian market testing) but not always. Risk should then be controlled by using ATR either daily , weekly or monthly depending on a variety of factors one of which what releases, and other price moving events are expected in the future. But not always. Flexibilty remains key as fixed systems ALWAYS lose.

I couldn't believe that traders were using computer power to draw charts of price then guessing on the next permutation of price but using scientific words to describe what they were doing to attract others, make thrmselves feel better, or just ignorance. It seemed absurd to me. Like making a chart of roullette or something.

We firmly believe, and think it can be proven ipso facto that price DOES NOT predict future price-- this is so obvious to us despite the fractal illusion and other delusions of "price action" which has ruined many many traders.

surf
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You mentioned a couple of books that influenced you as a trader. I have a question.

I remember that you do not use historical price to forecast the future. In the book, evidence based TA, it uses historical price to design rules, that regulates a trader's entry and exit. It involved a lookback into history, Data mining is a form of utilizing historical price. What is the takeaway in this book?

ETA
 
ETA said:
You mentioned a couple of books that influenced you as a trader. I have a question.

I remember that you do not use historical price to forecast the future. In the book, evidence based TA, it uses historical price to design rules, that regulates a trader's entry and exit. It involved a lookback into history, Data mining is a form of utilizing historical price. What is the takeaway in this book?

ETA
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Aronson tests 6400 technical rules on the S&P 500 in a proper, scientific manner -- noting that NONE provide any statistical edge. The book clarifies the proper way to view TA-- if you use it.

In addition to making clear the inaccurate observations of price action TA traders that lead to their delusions. This is one way i know that the claims and teachings of these folks are completely wrong and ineffective.

Im curious to hear the scribblin price action folks response. What's your testing? Why do u believe what you do? Silence as expected. Personal attacks and platitudes don't count!!



surf

PS. I would look into the teachings of one of my direct mentors Victor Niederhoffer for some color on my thought process-- certainly not all of it, but its a starting point. If anyone is unfamiliar here is a decent primer http://www.wsj.com/articles/BL-FAB-2488
 
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