Well, enough on that delusion. Let us now direct our attention to another, equally fascinating and baffling in supposedly grown-up people, the delusion of physicality. As I write the price of ES is 1433.25. Not 1433.pink or fluffy.25. It's a firm numerical value. We use hard numbers to measure time, position, velocity, mass, momentum, volume, pressure, mass flow rate, etc. And the market is characterized by time, price, "volume" (haha!), "depth" (double haha!), "liquidity" (don't make me say it), etc.
So there must be something inside there ticking and whirring, right? Huffing and chugging along with mathematically precise (to the tick) predictability. That's how our Joe makes his living, selling us on the idea that a single-order infinite impulse response filter is just the handy-dandy thing we need to get rich. Pay him a little more and he'll custom design an nth-order Kalman filter for you, just for you alone to regale your trading friends. Simply tell him how noisy (manipulative jinking) you think the market is, how laggy your connection is, how much meaurement error (slippage) there is, and voila! A system soundly based in signal estimation theory!
The sad fact is that the REAL market algorithms determine where the biggest fools took positions and where their stops are and what it takes to make them doubt and sweat and act impusively.
