Predicting randomness
- Thread starter oddiduro
- Start date
odd,
please provide a brief overview of "jack's" method for those of us who have no idea what you are talking about.
thanks !
surfer
Quote from Cheese:
This is interesting and is part of the big answer.
The Holy Grail does not appear after a sudden push through the dense undergrowth and jungle. After a long journey its shadowy outline first begins to be glimpsed, eventually it becomes clearer and at long last you stand before it and can grasp its handles.
Raw data will not admit you to the Holy Gail no matter what you do with the data. So this eventually will defeat almost all challengers for this sacred trophy.
And raw data across more than one market will keep you even further away. But the secret of the Holy Grail is a paradox. You gain the trophy through one market you completely come to master but the Holy Grail when attained grants you permission to master all markets.
Another masterful post
Quote from marketsurfer:
odd,
please provide a brief overview of "jack's" method for those of us who have no idea what you are talking about.
thanks !
surfer
Very brief overview....
Jack believes that volume leads price. He measures volume with a concept called "dryup", which is a low water mark for volume. This low water mark can be defined in a variety of ways. One way is to take the lowest 5 min bar during the open thru about 11:30 for 10 days. For example: the lowest volume of a 5 minute bar is 2000 trades over a 10 day average. When you see a 5 minute bar hit 2000 the market is in dry-up. If the next bar has 800 trades over the first minute, then the pro-rata volume exceeds dry-up of the preceding bar. If the MACD and Stoc confirm the trade, and price is improving, then take the trade.
If the volume of bar reaches dry-up, it is an alert to begin to monitor this market.
If on a prorata method, volume exceeds dry-up, and price is improving, and the trend is up(as defined by the 5,13,6 MACD being postive), and price are closing near the highs of thier ranges ( as defined by the 14,1,3 Stoc being > 80) then the instument in question is a buy.
After being bought, if volume does not reach First Rising Volume ( defined as dry-up * 2) then the trade is be exited.
Did you get all that
Quote from oddiduro:
Very brief overview....
Did you get all that
yes, i understand what you are saying. interesting tactic. who is this jack? like a woodie type character?? anything else you can add to the tactic or directive where i can find more data would be apprieciated.
thanks !
surfer
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Quote from Perseus:
My point was sort of missed. It is this: markets don't drive themselves, they are largely event driven (the fundamentals)
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You mentioned that markets are driven by fundamentals, but I would argue that this isn't always the case. In fact one of the best opportunities for traders occurs when a market starts to get driven by emotion as opposed to fundamentals. Another point would be that in fact, there isn't one stock on any American exchange that is valued fundamentally; they are all valued speculatively, aren't they? That's what P/E ratio shows. If markets were 'fundamentally fundamental', then there would be no speculative value and we wouldn't have to look at people's responses to events, would we?
Hi Nik,
The market is always 'driven' in some part by emotion, that's part of the nonlinearity of humans. I am simply saying that the markets need some connection to an underlying entity and the 'event's of that entity will feed the human response which can be greatly exaggerated due to its nonlinear and interconnected (think feedback loops) nature.
I don't think it is possible to derive a fundamental value to anything as the very idea of value is subjective, people are just betting on perceived relative returns.
When I say fundamental, i don't mean in the typical sense of figuring out supply and demand. I simply mean some event that impacts people's perceptions. It could be as simple as an IPO and all I am really saying is that markets need to be connected to the external world for the participants to get their cues.
Your point though is what I mean by a 'news free' market in between external driving events, it is where I am targetting to trade. Then all we have is people, their money, and their weird ways....lol.
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Perseus:
But in this case we have two coupled nonlinear systems that take input from a highly nonlinear world: the financial system, and the human response to events (irrational most of the time). The system itself (people+markets) is nonrandom but highly nonlinear (if you have enough information about it and nobody ever does), but the external events that drive it can add even more unpredictability making the whole thing quite hopeless in the exact sense.
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I am not 100% clear on this distinction; that is, the one between the markets and the 'external events that drive (them)'. To me, we cannot analyze 'the markets' as i.e. linear or nonlinear or random or efficient or whatever independently of the external events that drive them. If the two 'coupled nonlinear systems' you refer to are supposed to be 'the markets and human response to events', I would say that they are closer to being one and the same, or that the markets are an artifact of human responses to events.
I have a feeling that this will end up being a semantical issue. I just had to point this out because it struck me while I was reading your post.
I understand what you mean, however I feel that even if people were rational and predictable then the markets would still not be. That is just the nature of a very complicated system like a market. Let me give you an example- the weather is just the sum of the actions of interacting individual particles (molecules) that are very predictable and understandable all in themsleves, but when you put them together you get a highly nonlinear system.
I once read about how the EMINI system spiked down all by itself due to pre-placed stop orders- an example of how nonlinearity can manifest itself without emotion.
Now imagine that every molecule in the atomosphere could be 'irrational' - weather predicting just got a lot harder.
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Perseus:
I think the best people can do, (in terms of predicting) is 1) look for situations where it takes some time for all participants to respond. Then if you think you know what they will do (in the aggregate average sense) you can front run them
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Agreed. This is why people can make money trading the markets, or one of the reasons. It takes time for people to react. And the old cycles of accumulation and distribution are still in place, and probably operating just like they did in the days of Larry Livingston. That is why Reminiscences is such a great read for newbs. His accounts of being hired to move blocks of stock into the public's hands was a huge revelation for me. We've also heard how 'the public' is always the last into a market even if there isn't active distribution going on, and this can be played as well.
In fact there are many different situations like this that can be played, some based on fundamental information and others based on assumptions about human behaviour. The market gives us information, and we act on it.
The markets are predictable... just like it's predictable that when I say I have posted my last on a thread, I will show up again.
its always a matter of the precision of your prediction though, just like the weather. Its easy to predict the weather one hour from now, but three weeks from now is a crap shoot other than using climatology.
I would be willing to bet you $20 that the shorter term predictions on this board are more accurate than the longer term ones. I would also be willing to bet you another 20 that you are not willing to perform the exhaustive study, lol. I know I am not.
Quote from Perseus:
My point was sort of missed. It is this: markets don't drive themselves, they are largely event driven (the fundamentals)
--------------------------------------------------------------------------------
You mentioned that markets are driven by fundamentals, but I would argue that this isn't always the case. In fact one of the best opportunities for traders occurs when a market starts to get driven by emotion as opposed to fundamentals. Another point would be that in fact, there isn't one stock on any American exchange that is valued fundamentally; they are all valued speculatively, aren't they? That's what P/E ratio shows. If markets were 'fundamentally fundamental', then there would be no speculative value and we wouldn't have to look at people's responses to events, would we?
Hi Nik,
The market is always 'driven' in some part by emotion, that's part of the nonlinearity of humans. I am simply saying that the markets need some connection to an underlying entity and the 'event's of that entity will feed the human response which can be greatly exaggerated due to its nonlinear and interconnected (think feedback loops) nature.
I don't think it is possible to derive a fundamental value to anything as the very idea of value is subjective, people are just betting on perceived relative returns.
When I say fundamental, i don't mean in the typical sense of figuring out supply and demand. I simply mean some event that impacts people's perceptions. It could be as simple as an IPO and all I am really saying is that markets need to be connected to the external world for the participants to get their cues.
Your point though is what I mean by a 'news free' market in between external driving events, it is where I am targetting to trade. Then all we have is people, their money, and their weird ways....lol.
--------------------------------------------------------------------------------
Perseus:
But in this case we have two coupled nonlinear systems that take input from a highly nonlinear world: the financial system, and the human response to events (irrational most of the time). The system itself (people+markets) is nonrandom but highly nonlinear (if you have enough information about it and nobody ever does), but the external events that drive it can add even more unpredictability making the whole thing quite hopeless in the exact sense.
--------------------------------------------------------------------------------
I am not 100% clear on this distinction; that is, the one between the markets and the 'external events that drive (them)'. To me, we cannot analyze 'the markets' as i.e. linear or nonlinear or random or efficient or whatever independently of the external events that drive them. If the two 'coupled nonlinear systems' you refer to are supposed to be 'the markets and human response to events', I would say that they are closer to being one and the same, or that the markets are an artifact of human responses to events.
I have a feeling that this will end up being a semantical issue. I just had to point this out because it struck me while I was reading your post.
I understand what you mean, however I feel that even if people were rational and predictable then the markets would still not be. That is just the nature of a very complicated system like a market. Let me give you an example- the weather is just the sum of the actions of interacting individual particles (molecules) that are very predictable and understandable all in themsleves, but when you put them together you get a highly nonlinear system.
I once read about how the EMINI system spiked down all by itself due to pre-placed stop orders- an example of how nonlinearity can manifest itself without emotion.
Now imagine that every molecule in the atomosphere could be 'irrational' - weather predicting just got a lot harder.
--------------------------------------------------------------------------------
Perseus:
I think the best people can do, (in terms of predicting) is 1) look for situations where it takes some time for all participants to respond. Then if you think you know what they will do (in the aggregate average sense) you can front run them
--------------------------------------------------------------------------------
Agreed. This is why people can make money trading the markets, or one of the reasons. It takes time for people to react. And the old cycles of accumulation and distribution are still in place, and probably operating just like they did in the days of Larry Livingston. That is why Reminiscences is such a great read for newbs. His accounts of being hired to move blocks of stock into the public's hands was a huge revelation for me. We've also heard how 'the public' is always the last into a market even if there isn't active distribution going on, and this can be played as well.
In fact there are many different situations like this that can be played, some based on fundamental information and others based on assumptions about human behaviour. The market gives us information, and we act on it.
The markets are predictable... just like it's predictable that when I say I have posted my last on a thread, I will show up again.
its always a matter of the precision of your prediction though, just like the weather. Its easy to predict the weather one hour from now, but three weeks from now is a crap shoot other than using climatology.
I would be willing to bet you $20 that the shorter term predictions on this board are more accurate than the longer term ones. I would also be willing to bet you another 20 that you are not willing to perform the exhaustive study, lol. I know I am not.
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Quote from Perseus:
Human behavior is not predictable, i disagree.
the events that drive human behavior are not predictable, nor is the exact response to those events.
hurricane Katrina and 9/11 are examples. your own response to a given event may differ depending on all circumstances.
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Hmmm, I'll throw this one out there... I will bet you any amount of money that there will be at least one more post to this thread after this one. I'm predicting that a human out there somewhere will respond either to someone else's post or perhaps even this one.
yes yes I know, you know what I meant though. In any event I do maintain there are times that human behavior in the markets is predictable, I just think you gotta be damn fast to take advantage of it. But saying that there are times that human behavior is predictable (to a high degree of statistical accuracy) is not saying that human behavior is globally predictable as the previous poster implied.
Quote from Perseus:
Human behavior is not predictable, i disagree.
the events that drive human behavior are not predictable, nor is the exact response to those events.
hurricane Katrina and 9/11 are examples. your own response to a given event may differ depending on all circumstances.
--------------------------------------------------------------------------------
Hmmm, I'll throw this one out there... I will bet you any amount of money that there will be at least one more post to this thread after this one. I'm predicting that a human out there somewhere will respond either to someone else's post or perhaps even this one.
yes yes I know, you know what I meant though. In any event I do maintain there are times that human behavior in the markets is predictable, I just think you gotta be damn fast to take advantage of it. But saying that there are times that human behavior is predictable (to a high degree of statistical accuracy) is not saying that human behavior is globally predictable as the previous poster implied.