Just got a stats book...

J

JezLiberty

this one: Cartoon Guide to Statistics

...and the first page I open, first sentence I read to browse through it says...

[...]this explains why the normal is everywhere: stock market fluctuations, student weights[...]

Oh dear! Should I just throw it away...

well I guess the theory might be well and entertainingly explained... I'll just have to ignore the errors in its application.
 
Why would you throw it away? It has been pretty well established that a trending market can have its price fluctuate within 2 standard deviations (95%) of an average. That's not the trick. The trick is making money on breakouts (the remaining 5% and can give big profits) and identifying trend changes (which can kill your profitability).

I have been successful enough for my tastes trading trending markets and entering around an EMA and setting exits and stops around some multiple of a standard deviation. I smooth both of these somewhat but as long as I have the trend right - I usually squeeze out a few points. As long as I keep up my success rate (10 for 12, 14% over last 6 months) I am happy.

Note - I'm a swing trader. I do not have the time to invest in day trading.
 
Just finished the book and in all honesty it was not bad at all as an introduction/refresher into "classical stats"

The format makes it much more attractive than a standard textbook also!

Planning on diving into more complex stuff such as robust methodologies / non-normal distributions, non-parametric approaches, etc. with further books, but that is definitely a good starter book.

I just bought Statistics Unplugged as a follow-up (it was recommended by Sluggo at Trading Blox forum) and seems to have excellent feedback!

Will let you know...

PS: this was just a quick stab at the whole "establishment" using the normal and similar concepts in financial analysis - sorry this must be some of Taleb's arrogance that rubs on me ;-)
(I'm quite a fan of his...)
 
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