Predicting randomness
- Thread starter oddiduro
- Start date
A prediction is nothing more than an educated guess, based on previous information. Now, if you give me a guy who just makes random guesses, but he has a 75% correctness ratio, I will take him!
But you have been sidesteping my arguments, so here is for the last time in short:
Let's say 3 out of my 4 predictions tend to be good. Than you can say the probability of my average prediction is 75%. That is way higher than what you would get just by randomly guessing, thus :
1. I must have an ability to predict or
2. I am an incredibly lucky guy and should play the lottery.
Since I don't belive in long term luck, I vote for #1. As long as you can not come up with new arguments, I am done with the discussion....
The statement is self-explanatory (axiomatic if you like). Elaboration would involve discussion of its consequences. Taleb's book (Fooled by Randomness) does a pretty thorough job of that.
Whether or not the statement itself is true is another matter entirely.
I contend that it PROBABLY is - or to be more precise, the probability that it is true is close to 1.
Quote from Pekelo:
A prediction is nothing more than an educated guess, based on previous information. Now, if you give me a guy who just makes random guesses, but he has a 75% correctness ratio, I will take him!
But you have been sidesteping my arguments, so here is for the last time in short:
Let's say 3 out of my 4 predictions tend to be good. Than you can say the probability of my average prediction is 75%. That is way higher than what you would get just by randomly guessing, thus :
1. I must have an ability to predict or
2. I am an incredibly lucky guy and should play the lottery.
Since I don't belive in long term luck, I vote for #1. As long as you can not come up with new arguments, I am done with the discussion....
Predict what the the market will be up? Lets say you get the direction right 75% of the time. But you only make 20 points. but when you get it wrong you lose 80 points. You are on a hiding to nothing.
You need to predict direction as well as size of move.
Hi oddiduro,
I am extremely flattered by your invitation to make a contribution for future generations coming to visit to consult this worthy thread. As I am afraid not to be able to match the heap of wisdom already piled up, I'll do a quickie by cut & pasting something out of "Extraordinary Beliefs or the Madness of Crowds" (about 1870). McKay quotes Jonathan Swift (1667-1745) on market wizardry. This may stand for another couple of centuries (unless nitro definitely cracks the nut on inadmissable market misbehavior).
"Subscribers here by thousands float, and jostle one another down, Each paddling in his leaky boat, and here they fish for gold and drown. Now buried in the depths below. New mounted up to heaven again, they reel and stagger to and fro, At their wits' end. like drunken men. Meantime, secure on Garraway cliffs, A savage race, by shipwrecks fed, Lie waiting for the foundered skiffs, and strip the bodies of the dead."
Most people seem to forget that the long term bias of the market is up. Therefor the easiest way to trade trend would be on the upside. Saying this I do not say however that it is impossible to make money on downtrends. Just that it is more risk (unlimited risk).
The markets can never be completely random in the short term. It becomes MORE random yes, but not perfect. If so then we can just give up trading at least.
ORM
The markets can never be completely random in the short term. It becomes MORE random yes, but not perfect. If so then we can just give up trading at least.
ORM
Quote from nimrod:
The statement is self-explanatory (axiomatic if you like). Elaboration would involve discussion of its consequences. Taleb's book (Fooled by Randomness) does a pretty thorough job of that.
Whether or not the statement itself is true is another matter entirely.
I contend that it PROBABLY is - or to be more precise, the probability that it is true is close to 1.
I would have said it has no sense, but...
