Predicting randomness

Quote from dan05:

Hi Jesse,

By chance I do have that same book. As I used to think like you do, I did some basic research on chaos theory, and the markets before trading this Chaotic Indicator.

Check this paragraph from that same book.

"On the surface, a chaotic system behaves much like a random one. Think about computer models of the Earth's weather system, which are chaotic and so suffer from the butterfly effect. Run the computer model starting from some chosen state, and you get a pleasant, sunny day a month later. Run the same computer model starting from some chosen state plus one flap of a butterfly's wing surely an indistinguishable state in any conceivable practical experiment - and now you get a blizzard. Isn't that what a random system does? Yes but the timescale is wrong. The 'randomness' arises on large timescales - here months. The distinction between determinacy or randomness takes place on short timescales; indeed it should be immediate. After a day that flapping wing may just alter the local pressure by a tenth of a millibar. After a second, it may just alter the local pressure by a ten billionth of a millibar. And indeed in the computer models that's just what happens. It takes time for the errors to grow and we can quantify that time using the Liapunov exponent. So we can safely say that on short timescales the computer model of the weather is not random: it is deterministic (but chaotic). "


I believe what he is trying to say is that on short term, in this case the wheather is predictable but on long term, the error grow exponentially.

Now going back to the markets, and the model I'm trading, check Fridays prediction.

This is the prediction made by the system at 11:15, in black line, and what finally happened in Red.

<img src="http://www.tradingpro.com/images/charts/20060901-NASDAQL.gif">

Clearly, this is not a 2 o 3 months prediction, but it is OK for intraday trading. In this case, I went LONG till 1:00. And then SHORT till 3:00. I had some heat to suffer at 1:00 but nothing to worry about.

Now this is another example from Friday. This is the Russell 2000 prediction, displayed at 12:00. This was the prediction for a 4 hours market path.
<img src="http://www.tradingpro.com/images/charts/20060901-RUSSELL2000L.gif">

I'm far from being a Chaos expert, but I read some books on the theory and how it is applied to market predictions. I care less what the inner workings of these guys black box is, as far as I can make money with it. From my experience their model DO predict the market, and I've seen it many many times.

I've logged their trades during some months at this Journal.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=70418&perpage=6&pagenumber=1

They recomend some books at

http://www.tradingpro.com/Research.html

If you are interested in doing some research I would suggest specially the first

http://www.amazon.com/Predictors-Th...=pd_bbs_1/102-5590381-8988955?ie=UTF8&s=books

and

http://www.amazon.com/Chaos-Order-C...=pd_bbs_1/102-5590381-8988955?ie=UTF8&s=books


I've also seen a film, that can give you a quick inside of the theory.
http://www.amazon.com/Bank-Robert-C...ef=pd_bbs_1/102-5590381-8988955?ie=UTF8&s=dvd


I generaly trust more books, than Films, but anyway the technology described in The Bank is very similar to what PredictionLabs offers.

Take care.

"Tradingpro system seems to be back on track. Did you see yesterdays prediction !"

You must be joking, due to free advertising on ET, Mr Promoter.

:D

http://www.elitetrader.com/vb/showthread.php?s=&postid=1187463#post1187463

Quote from dan05:

Hi FlyingSquirrel,

So you are getting ready for the season !

Tradingpro system seems to be back on track. Did you see yesterdays prediction !

Quite a good fiting during half of the day.

<img src="http://www.tradingpro.com/images/charts/20060901-NASDAQL.gif">


<img src="http://www.tradingpro.com/images/charts/20060901-RUSSELL2000L.gif">

With respect to the speed in recovering, I undestand that when the market changes its regime, like it did, is like if the market moved to a new "unknown vectorial space", where the model has less data to be able to predict. So we had to wait for the model, to populate with new data. Watching the charts improve their fitting, I'm sure we are there. We`ll see how the next week performs, but drawdowns where ok.

Take care.
 
Quote from steve46:

You know I am wrong occasionally. I do make mistakes. Certainly that was my typo

Well I just hate to be the one to tell you... but

saying 12.5% instead of 25% is not a typo... it's just sloppy math :)
 
You know that kind of comment doesn't show much character..

You have very little to say about the subject, and a lot to say about a simple mistake...

As you can see we are substantially different kinds of folks.

You have a wonderful life..

Steve
 
Quote from steve46:

You know that kind of comment doesn't show much character..

You have very little to say about the subject, and a lot to say about a simple mistake...

As you can see we are substantially different kinds of folks.

You have a wonderful life..

Steve
Lets talk about character then Steve, trying to pass off shoddy calculations as typo's most certainly goes directly to the heart of "character"
so you can stop psychologically projecting your own unconscious material onto everyone else and look in the mirror if you really want to develop a modicum of character
 
Yes you continue to harp on the fact that I made a mistake..Thats the kind of thing that child does...I've posted here a lot and each time I made a mistake I said so..To me it matters not whether it was a typo or sloppy math, either way it is a mistake and I am responsible...

Now that we have done that...I have to wonder why you want to continue with this rather than the arguement at hand? In my view its because you are a professional asshole. That is to say, you have decided to make this your profession for the day..and you do a wonderful job of it...

So lets keep talking about my mistake..Are there any other elements of my mistake that an asshole like you would like to emphasize? I'd like to hear more about it, especially from someone who I assume has never made one...

You want to talk, lets talk
 
Quote from steve46:

Yes you continue to harp on the fact that I made a mistake..Thats the kind of thing that child does...I've posted here a lot and each time I made a mistake I said so..To me it matters not whether it was a typo or sloppy math, either way it is a mistake and I am responsible...
You know full well that a typo is a typing mistake, but what you tried to hide was a calculation mistake, an embarrassing one considering your entire argument hung on your math... dont get pissy with me because you tried to denigrate everyone and ended up making a fool of yourself
 
I will let you know what is and what isn't a typo..

and since you insist on acting like a prick, let me recommend that you go find a book and read up on variance, monte carlo methods and anything else that you need to get you back on track...Finally and for good measure..

Go fuck yourself...Are we clear?

and now, I would love to tell you to go fuck yourself a few more times, but I am going to get some dinner...Let me get one more in there while I am eating

Go fuck yourself....

There we go

Lovely talking with you..

Steve

Edit:

Oh and that book, I have changed my mind..When you get it, don't read it, instead shove it...
 
If I may...

Steve is not proposing that each coin flip ("fair" coin) is not independent. He has already stated that. It's basic stats.

Steve's bet is on runs and the odds of completing runs after the series is started. If given better than fair odds of completing the run, he, or anyone, would take them in a second. That's called an edge.

Also, I believe Steve's viewpoint is from that of what I believe a professional gambler would do. Professional gamblers don't gamble - they put on bets ("risk" in market parlance) - that they know from experience, or math, will have an edge if repeated many times. If a pro gambler noticed something peculiar about a run of numbers, or blackjack wins, or craps passes, or whatever, they would investigate.

Yes, they know the odds and stats and house edge of every game, but when something isn't "right" they might just jump in, figuring the game is rigged. Casinos also investigate happenings that stretch the limits of probability. It costs them money, otherwise.

Well, that's my take. Good trading to all.
 
Quote from trader28:

Ahhh yes, profanity, the last refuge of he who has lost the debate :)

I didn't lose the debate, just my temper...

This is the way I speak and post..

I suggest you put me on ignore..I will do the same for you..

Steve
 
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