Physics Vs Prediction in Trading

[rajesheck]

In physics, momentum is mass x velocity.
How are you defining and measuring momentum?

Are you saying that trial and error is the only type of problem solving that is being applied to the markets?

You use analogies of ‘live’ and ‘dead’. Are you expressing a belief that the market has characteristics of being organic and ‘alive’?


At the risk of being tangential to the points you are making, there are multiple patterns that shows up everyday as the sun rises, the two most easily discerned are - the catenary and ohlc.

What is your definition of pattern?


From my experience, momentum itself exhibits a pattern. It's symmetrical both long and short.

As for stop loss being a fixed loss, that's true. It also could be considered as a defined max loss prior to entry similar to options. Without a defined loss, while it's possible to wait out a trade to get to positive in any position, that is more a function of account size and conviction than trading skill.

Maybe I'm misunderstanding the points you are making.

Price, time and volume can be considered as parameters to be observed but there is no rigid rule.

Its my personal insight that market is just a product of trial and error method.

Dead = past. Live = present. All i mean to say is focus on what is happening now and timing the trade is more iimportant than predicting.

Yes momentum is also a pattern but i insist to focus on momentum than pattern itself.

I propose a dynamic signal as stoploss than a fixed loss which is more effective in reducing losses.

 

[Simples]

Price, time and volume can be considered as parameters to be observed but there is no rigid rule.

Its my personal insight that market is just a product of trial and error method.

Dead = past. Live = present. All i mean to say is focus on what is happening now and timing the trade is more iimportant than predicting.

Yes momentum is also a pattern but i insist to focus on momentum than pattern itself.

I propose a dynamic signal as stoploss than a fixed loss which is more effective in reducing losses.

I skimmed your explanation of graphs and buy/sell signals. Trial and error is indeed your way approaching the problem of trading. There exists countless other methods too. On the surface it does seem like a valid approach though I'm not sure how to estimate expectancy of your method. Though it can concievably work provided enough experience, dilligence and discipline.

Other method may incorporate more or less degrees of "prediction", though I think we should agree that the differences might be semantic. My logical "proof" of this is, think of a MTF version of your method, where higher TF could "predict"/anticipate lower TF bias. One higher TF bar could span very many lower TF bars, and thus lead to "prediction" within that lower/faster context. What matters more than the prediction though, is how to deal with it when it's blatantly wrong. There are several different ways for that as well.

 

[Sprout]

This seems to all be classical Newtonian thinking. Why not get with the times and add time to your equation? Get to at least the Einstein levels of physics, man.

Time must fit into your equations, else all you proffer is bunk.

Eno's great ! This song takes me back,...

Price, time and volume can be considered as parameters to be observed but there is no rigid rule.

Its my personal insight that market is just a product of trial and error method.

Dead = past. Live = present. All i mean to say is focus on what is happening now and timing the trade is more iimportant than predicting.

Yes momentum is also a pattern but i insist to focus on momentum than pattern itself.

I propose a dynamic signal as stoploss than a fixed loss which is more effective in reducing losses.

If price, time and volume are the parameters that you are measuring, and there is no rigid rule, I’m confused as to how you can equate it with physics which attempts to use math/geometry to quantify and formulate exactly that.


Here are other ways to approach problem solving other than trial and error.

https://simplicable.com/new/problem-solving


Behavioral flexibility in problem solving

 

[mbondy]

10% a month? how many top guns out there on retail and institutional level gain 10% a month each single month.

Anyone giving 2% a month, year after year is in the top 1% of traders.

Not so.

10% on a $10,000 account is a much different ballgame than 10% on a $10,000,000 account. It does not take a trading genius to make 10% on a small account, month after month. It does, however, take a lot of finesse to be able to pull those kind of returns on a much larger account.

 

[ironchef]

Price action is not predictable?

True for most people.

However, Renaissance Technologies would disagree.

Of course they see what others don't and do what others can not.

(Or maybe I do not understand what you are saying)

Do you really know they disagree and that they can predict from PA and not other means?

 

[ironchef]

Kind of anticipated this is gonna be interesting thread,but you disappointed me here!

If i only participated in this momentum or this momentum i would made money.
That's too shallow!

Me too. I thought he was talking about Newton's Laws when he mentioned Physics.

 

[fordewind]

Price, time and volume can be considered as parameters to be observed but there is no rigid rule.

Its my personal insight that market is just a product of trial and error method.

Dead = past. Live = present. All i mean to say is focus on what is happening now and timing the trade is more iimportant than predicting.

Yes momentum is also a pattern but i insist to focus on momentum than pattern itself.

I propose a dynamic signal as stoploss than a fixed loss which is more effective in reducing losses.

Patterns are prone to optical distortion, as if your looking at it through the fooking lens.Pattern trading is for the brain dead dummies.Timing and momentum is everything though.

 

[Chris Mac]

FIRST, there is actually no predictable pattern or stuff like that. Why?

Because price moves by simple trial and error method, nothing less and nothing more. All the bets are tested on real market. And that is why the supports and resistances all over the charts, either intraday or the positional trader's chart.

Price actions are not predictable. No pattern is a predictable pattern, no matter what. No technical charts and their signals going to work to meet any reasonable expectations because they all depend on some secret ingredient : predictable pattern.

SECOND, stoploss is actually a fixed loss, not something that stops loss. Fixed loss is not the wisest idea at all.

THIRD, when i say physics i mean the momentum on the chart. Of course the momentum can take off or die. The beauty is whenever you enter a trade on a fresh momentum it will make an attempt to take off. And then the take off may succeed or die. The dead momentum is mostly above the conventional stoploss.

The dead momentum is a signal to exit the trade with minimal or no loss, unlike the fixed loss by stoploss theory.

FOURTH, this posting basically is about transformation from dead patterns to live momentum. Sounds more practical? Well, its actually a blend of practicality and art. There is some amount of creative imagination needed to choose your momentum.

FIFTH... considering that stock trading is one of the most risky and nasty ruthless business... ROI anything less than 10% per month is not worth it. If someone tell you 2% is a decent one... just kick his ass. This view point gives clue whether we are successful in trading or not. If someone tell you he is a successful trader, ask what is his ROI per month.

SIXTH.....LEARN, UNLEARN and RELEARN. And never stop this learning process. "Let go" OR "Be ego".

(SEVENTH, if you are psychology savvy... the general trading psychology is... "Trial & Error method or approach")

LAST but not least... 99% of traders cannot appreciate this post. That makes me truly Elite. I have no intention to be with the crowd. I will not be surprised if no one likes this post.

Any business (including stock trading) demands two aspects : knowledge and creativity.

Lots of BS here. Title is misleading : I thought you will speak about physics and trading.
None there. Only BS.

There are two physics law that apply in trading : path of least resistance and momentum.
What does it imply?

1 path of least resistance
The more resistances (or supports), the more difficult to break. Price will have a tendancy to avoid resistances and return to the mean / median
2 momentum
Price can't stop or reverse immediatly. More volume / buying / selling power will imply a longer swing / rise / fall.

So if you apply these two physics law, you should easily understand you can at least predict on a short term basis direction of prices with a good probability, and trade adequatly.
Gaps are perfect examples.

CM

 

[rajesheck]

If price, time and volume are the parameters that you are measuring, and there is no rigid rule, I’m confused as to how you can equate it with physics which attempts to use math/geometry to quantify and formulate exactly that.

When i say "physics" i am insisting to consider the three dimensions of the chart : price, time and volume before any amount of prediction. People tend to become too much subjective in their predictions and become blind to happenings on chart."Physics" is a strong word to tell my message.

Here are other ways to approach problem solving other than trial and error.

https://simplicable.com/new/problem-solving

Behavioral flexibility in problem solving

In my opinion "trial & error method" is the closest match to stock charts.

 

[rajesheck]

Lots of BS here. Title is misleading : I thought you will speak about physics and trading.
None there. Only BS.

There are two physics law that apply in trading : path of least resistance and momentum.
What does it imply?

1 path of least resistance
The more resistances (or supports), the more difficult to break. Price will have a tendancy to avoid resistances and return to the mean / median
2 momentum
Price can't stop or reverse immediatly. More volume / buying / selling power will imply a longer swing / rise / fall.

So if you apply these two physics law, you should easily understand you can at least predict on a short term basis direction of prices with a good probability, and trade adequatly.
Gaps are perfect examples.

CM

In stock market greed and fear are the two forces which physical laws cannot understand. When i said "physics" here in this thread i meant these two emotional forces that are tested and reflected on chart as trends, ranges and momentum. Trial and error method is the closest reality as far as my observation.