Is Daytrading a Random Event?
- Thread starter LelandC
- Start date
i find it remarkable that no one has mentioned that the markets may be CHAOTIC, not random.
(dark, you know anything about chaotic systems?)
ps "easy", these discussions are more chaotic than random.
(dark, you know anything about chaotic systems?)
ps "easy", these discussions are more chaotic than random.
faster:
i've mentioned that the markets are a chaotic / complex system multiple times on this board, as have others (and some have used the word chaotic within this very thread).
the simplest definition of a chaotic system is one that follows a given set of rules but has too many internal variables redefining outcome to allow for future prediction. Similar to weather patterns or water turbulence. A neverending series of patterns that always look similar but never exactly repeat.
As I have mentioned before in other words, chaotic systems are generally unpredictable however there will be inflection points within the activity of the system where the "next move" has a better than 50% probability of being pinpointed given certain if/then criteria being met.
i've mentioned that the markets are a chaotic / complex system multiple times on this board, as have others (and some have used the word chaotic within this very thread).
the simplest definition of a chaotic system is one that follows a given set of rules but has too many internal variables redefining outcome to allow for future prediction. Similar to weather patterns or water turbulence. A neverending series of patterns that always look similar but never exactly repeat.
As I have mentioned before in other words, chaotic systems are generally unpredictable however there will be inflection points within the activity of the system where the "next move" has a better than 50% probability of being pinpointed given certain if/then criteria being met.
I was just about to ask what the implications of a "chaotic" market would be. Your answer, for the most part, does a decent job of explaining that.
I think I understand what you are trying to say with that last paragraph, and if so, I agree, but the way you've written it gives a less than accurage description of the real world. We all know of trading systems that are "right" less than 50% of the time, yet make money.
I have to laugh when I read the chaos stuff.
For all practical purposes, a chaotic system appears random except to the most subtle of "tools." The only way to discover that a [posited] system is not random is by using sophsiticated "tools" like delay maps to find attractors, projections onto orthogonal coordinates to extract signal, hurst exponents to then find out if the instrument has the capacity to continue runs or has a tendency of moves to be followed by counter moves, etc, etc. Some of this analysis isn't even done on the time domain but in the frequency domain. I doubt anyone here is doing that.
FWIW, there are people out there that claim to be trading this way using sophisticated analysis along these lines. Everyone here has probably read "The Predictors" by Bass....
nitro
darkhorse : "As I have mentioned before in other words, chaotic systems are generally unpredictable however there will be inflection points within the activity of the system where the "next move" has a better than 50% probability of being pinpointed given certain if/then criteria being met."
daniel_m : "I think I understand what you are trying to say with that last paragraph, and if so, I agree, but the way you've written it gives a less than accurage description of the real world. We all know of trading systems that are "right" less than 50% of the time, yet make money."
Without proffering any opinion regarding the nature of the markets, there is no logical contradiction here. If darkhorse's premise regarding the "next move" were false, then there would be no systems making money.
daniel_m : "I think I understand what you are trying to say with that last paragraph, and if so, I agree, but the way you've written it gives a less than accurage description of the real world. We all know of trading systems that are "right" less than 50% of the time, yet make money."
Without proffering any opinion regarding the nature of the markets, there is no logical contradiction here. If darkhorse's premise regarding the "next move" were false, then there would be no systems making money.