Flip a coin for entry

[OddTrader]

Quote from bdixon619:

No, huh uh. Here is an example of deterministic chaos: http://monet.physik.unibas.ch/~elmer/pendulum/chaos.htm

The market behaves in much the same manner, swinging between up days/down days.

Q

Basically, a chaotic system generates behavior giving the appearance of complete randomness by means of a purely deterministic rule.
...
Scientifically speaking, chaos is only the appearance of randomness, not the real thing.

--- Complexification (John L Casti)

UQ

 

[bdixon619]

Quote from OddTrader:

Probably the system might be tradable and profitable, but its potential drawdown could first (50%) reach a level beyond expectation just before getting to a desired profitable level.

Accordingly, TA would be still a better approach in order to maximise ultilisation of capital and manage risk.

My point is if the system is deterministic then any entry would be okay because you know where that system is going to go. But, since the 'market system' is not predictable for any great length of time a 'random entry' will not help you in any sense because the market path cannot be determined.

I agree with what you say about TA, I enjoy TA.

 

[bdixon619]

Quote from OddTrader:

Q

Basically, a chaotic system generates behavior giving the appearance of complete randomness by means of a purely determinstic rule.
...
Scientifically speaking, chaos is only the appearance of randomness, not the real thing.

--- Complexification (John L Casti)

UQ

I don't think our definition of randomness is consistent here. To me, randomness as it applies to the market is the random deviation of prices around an average price. For this reason, perhaps, people are lured into using a coin-flipping strategy for entry, supposing that at some point they will experience mean-reversion and, thus, avoid catastrophic loss. However, the market proves over and over again its capability to produce just such catastrophes at all time scales. Therefore, the market is chaotic in nature: although it appears to be wholly incomprehensible it is acting the way it is supposed to act. From this point of view I would agree with your definition ala Casti.

 

[OddTrader]

Quote from bdixon619:

Thanks for your feedback.

Another quote from Casti:

" Here it's important to recall the difference between a chaotic process and the true randomness.

Chaos involves a deterministic mechanism that generates the apprearance of randomness; a genuine random process has no such deterministic underpinning.

So if we can convince ourselves that stock prices are chaotic, then there is a deterministic needle in the haystack to look for; otherwise there isn't. "

 

[dnaj65000]

next update will be near the end of the week.

 

[bdixon619]

Quote from OddTrader:

Quote from bdixon619:

Thanks for your feedback.

Another quote from Casti:

" Here it's important to recall the difference between a chaotic process and the true randomness.

Chaos involves a deterministic mechanism that generates the apprearance of randomness; a genuine random process has no such deterministic underpinning.

So if we can convince ourselves that stock prices are chaotic, then there is a deterministic needle in the haystack to look for; otherwise there isn't. "

No, I don't think so. I don't think it makes any difference how anyone thinks about the market, whether it is chaotic or random, it is all a matter of choice. For instance, several months ago I used Chebyshev's inequality to provide an estimation of how likely a market return was expected to occur. My assumption in doing that was that the market is a stochastic process i.e. that the return given me was variable around some average price. Using a statistical technique I could predict the chances of receiving that return based upon what had happened in the past. As long as market conditions don't change, statistically speaking, in the time frame in which you are trading and making predictions, then it doesn't matter that you refer to the market as being chaotic. It only matters that you can predict enough ahead to trade successfully. Which is why I like TA. TA's methods are statistical ways of looking at price and volume and organizing the randomness into pictures which we can use to trade successfully.

 

[OddTrader]

Quote from bdixon619:

It only matters that you can predict enough ahead to trade successfully.

Surely there would be many ways to Rome (or NY or else).

 

[dnaj65000]

Update at 65 samples

Wins: 18
Losses: 47
Win Ratio: 27.7%

Longs: 32
Shorts: 34
Ratio: 48.5%

Net: -27 pips (net of interest, spread, slippage)

 

[OddTrader]

Quote from dnaj65000:

Update at 65 samples

Wins: 18
Losses: 47
Win Ratio: 27.7%

Longs: 32
Shorts: 34
Ratio: 48.5%

Net: -27 pips (net of interest, spread, slippage)

2 cents:

imo, the entry part attaining 48.5% would be quite normal and acceptable for this system.

Perhaps certain improvement on the exit part (such as multiple contracts with various different targets) could be considered, particularly when the current targets of loss and profit were not determined/ based on any backtesting results.

 

[nononsense]

Quote from bdixon619:

I've discussed this before. That was before I learned it had been discussed long before:

Nobody Asked Me, But...Let us recall that the entire subject of statistical properties of stock prices, which led to random walks and efficient markets, started out with the studies of streaks (they're called runs and reversals) by Jones, Cowles and Davis, and that after the always amateurish and misguided work of a certain University of Chicago professor given to stereotypical results and outdated data, the subject has been considered often by others and written about with respect to individual stocks and markets, sometimes with great style on the site that the marqueeist Jubak writes upon, and that the methodologies of streak-based trading are followed by billions and billions of dollars overseen by quasi-scientific second-handers. A preliminary to considering streaks is to consider expectations after runs and breaks of run of varying lengths. And the work of Davis in the Analysis of Economic Time Series was a good start in that direction. As for streaks in racket sports...well, that's another story. --Vic

from http://www.dailyspeculations.com/index.htm

My contribution is here: http://www.futuresmag.com/industry/downloads/downloads.html

Look at the Spreadsheet for April 2002.

Hope you are not bored to death, lol.

Hey bdixon,

Thank you for your clarifictions. I also read your further posts.

Personnaly I don't have any theory about the market. I try to take it as it comes. In fact I also make my money with things like streaks or runs or whatever you like to call it, as long as they are profitable.

Now taking this simple statement on to a mathematical plane becomes much more problematic. As I said, I don't know whether the market is deterministic or of its chaotic variety or else stochastic.

Applying statistics and so to the market could make some sense if you have any basis for it.

Random processes, probability theory and so on are rigorously defined mathematical concepts. You can apply these "rigorously" to problems, most often theoretical, provided you know those properties as required by your mathematical tools.

Another possibility, but a much more tricky one, is to attempt applying probability theory and statistics to problems you don't comprehend, partially or totally. For example a deterministic system, possibly a chaotic one, that you don't have a model of, or perhaps only an incomplete model. Possibly this system might indeed have some stochastic components mixed in. This is how I see the market.

You will understand that I am a little wary if I encounter too obvious highbrow stuff in a "Flip a coin for entry thread" as related to markets.

Be good,

nononsense