Predicting randomness

[kjkent1]

Quote from nitro:

This game makes no sense.

It is obvious that at all time, each share's "Fair Value" is $.09 (in theory there is $900 chasing my 100 shares at time Tzero, so if I want everyone's money I have to make sure that I don't sell them for less than about .09 at time Tzero. By symmetry that condition holds for everone else too). Why would anyone bid more than $.09 for shares at time Tzero, and why would anyone offer their shares for less than $.09? In a real stock market, value is almost never based purely on psychology as earnings and dividends and book value eventually enter the equation (as well as things like how much my money can earn in a risk free asset.) How does this game even get started? The only way this game can get started is if someone breaks the symmetry and bids more than .09 or offers their shares for less than .09 for 1 share, at which point FV may change dynamically for those shares, but FV is always apparent - something that is clearly not true in a non-closed system like a real stock market.

Furthermore, if someone ends up with all the money, why is that considered winnning? What happened to all the shares? Do you mean he ends up with all the money and all the shares? In a real stock market someone may have all my money but I have all the shares which means I can easily convert my shares back to cash assuming a liquid market and a non bankrupt company.

My guess is you left something out.

nitro

PS - the way I would do it would be to set up an options market on those shares witha nice spread and act as a market maker

I left nothing out.

You assume that the real stock market is substantially different than my game, when, in fact, it is not -- the real market and the game are nearly identical.

On any given market day, only X dollars and Y shares are available for trading in all securities accounts. The game starts and ends with the opening and closing bells, and in between, the objective is to accumulate as much of the available cash by trading cash for shares and shares for cash. And, the ideal trader is flat at the open and at the close.

So, you made your calculation about what you would pay for a given share of stock, and you cannot fathom why anyone would trade under less favorable conditions. But, you know that in the real market, people routinely do just that -- they trade with little regard for the average value of a share, and consequently, the value of an average share constantly changes throughout the day. This fact, permits you to buy and sell under more favorable conditions than what would be available if everyone only traded at the average price.

Now, what will happen if you consistently buy and sell under conditions that are more favorable than the average? There is only one possible answer to this question, and it is irrefutable.

Then answer is that you will make more money than the average.

So, if the market is theoretically random and thus a 50/50 proposition in the long run, then a person who consistently does better than average will make money -- while the person who consistently does worse, will lose.

Game over.

 

[FanOfFridays]

Quote from kjkent1:



On any given market day [in the real market], the ideal trader is flat at the open and at the close.

You mean the ideal daytrader, I assume.

I am not sure how this translates to a market which is being actively traded in all time frames.

I too had some conceptual problems with this game.

 

[trade4succes]

Quote from kjkent1:

I left nothing out.

You assume that the real stock market is substantially different than my game, when, in fact, it is not -- the real market and the game are nearly identical.

On any given market day, only X dollars and Y shares are available for trading in all securities accounts. The game starts and ends with the opening and closing bells, and in between, the objective is to accumulate as much of the available cash by trading cash for shares and shares for cash. And, the ideal trader is flat at the open and at the close.

So, you made your calculation about what you would pay for a given share of stock, and you cannot fathom why anyone would trade under less favorable conditions. But, you know that in the real market, people routinely do just that -- they trade with little regard for the average value of a share, and consequently, the value of an average share constantly changes throughout the day. This fact, permits you to buy and sell under more favorable conditions than what would be available if everyone only traded at the average price.

Now, what will happen if you consistently buy and sell under conditions that are more favorable than the average? There is only one possible answer to this question, and it is irrefutable.

Then answer is that you will make more money than the average.

So, if the market is theoretically random and thus a 50/50 proposition in the long run, then a person who consistently does better than average will make money -- while the person who consistently does worse, will lose.

Game over.

In real life, this means you play the regression to the mean game?

 

[vital-statistix]

Quote from trade4succes:

In real life, this means you play the regression to the mean game?

Which results in "game over" when the the move is a "fat tail". To those who follow the "means game": Thank you for your unavoidable donation to the markets.



SOCRATES

There is a very fine line dividing sense from nonsense.
The great majority are unaware of its existence, or, choose to ignore it. Consequently they succeed in misdirecting themselves to choose the wrong side of this line, for reasons best known to themselves. This is a source of amazement to those very few able to correctly logically deduce and reason, viewing nearly everything you will encounter here as nonsense, pure nonsense, that the majority ultimately embrace.

 

[Grob109]

Quote from trade4succes:

In real life, this means you play the regression to the mean game?

While we can't expect some types to get the game, we can and do expect the winning minority to get it.

The are questions that anyone could raise and they come on what look like trite or superficial levels, but they do lead people to become winners by an ever deepening iterative processof raisng deeper subtendant questions.

Getting stuck along the way is what is most common as this thread tells us.

What I like most about the game is that it is a game of truths. The path is not difficult, either, as seen by the essence of the game.

Raising the Q's have been done for a long time. It's not a trite 39 stepper but moreso a set of Q's that have to be addressed to play the game in order to extend well well beyond the 39 common steps.

The humor of arguing nonessentials is a common pastime. Finding that the two sides of an argument based upon two misunderstandings is, perhaps, the most common argument of all.

I see 22 questions that define a path much longer than the 39 steps often posted. To warm up for discussions in this thread, find eight of the first 22 answers.

 

[nicholaf]

Quote from kjkent1:

I left nothing out.

You assume that the real stock market is substantially different than my game, when, in fact, it is not -- the real market and the game are nearly identical.

On any given market day, only X dollars and Y shares are available for trading in all securities accounts. The game starts and ends with the opening and closing bells, and in between, the objective is to accumulate as much of the available cash by trading cash for shares and shares for cash. And, the ideal trader is flat at the open and at the close.

So, you made your calculation about what you would pay for a given share of stock, and you cannot fathom why anyone would trade under less favorable conditions. But, you know that in the real market, people routinely do just that -- they trade with little regard for the average value of a share, and consequently, the value of an average share constantly changes throughout the day. This fact, permits you to buy and sell under more favorable conditions than what would be available if everyone only traded at the average price.

Now, what will happen if you consistently buy and sell under conditions that are more favorable than the average? There is only one possible answer to this question, and it is irrefutable.

Then answer is that you will make more money than the average.

So, if the market is theoretically random and thus a 50/50 proposition in the long run, then a person who consistently does better than average will make money -- while the person who consistently does worse, will lose.

Game over.

just sounds like you are describing a market maker

 

[vital-statistix]

Quote from Grob109:

While we can't expect some types to get the game, we can and do expect the winning minority to get it.

The are questions that anyone could raise and they come on what look like trite or superficial levels, but they do lead people to become winners by an ever deepening iterative processof raisng deeper subtendant questions.

Getting stuck along the way is what is most common as this thread tells us.

What I like most about the game is that it is a game of truths. The path is not difficult, either, as seen by the essence of the game.

Raising the Q's have been done for a long time. It's not a trite 39 stepper but moreso a set of Q's that have to be addressed to play the game in order to extend well well beyond the 39 common steps.

The humor of arguing nonessentials is a common pastime. Finding that the two sides of an argument based upon two misunderstandings is, perhaps, the most common argument of all.

I see 22 questions that define a path much longer than the 39 steps often posted. To warm up for discussions in this thread, find eight of the first 22 answers.

Mumble, jumble, front run them, suck them in and take their money. Well done Jack!

 

[duard]

Quote from oddiduro:

We all see trends, but we only see them in hindsight. That is what I humbly submit to you. The future is a random event, the variables are impossible to calulate.

I assume all the traders here make money, and I presume that we all have different ways to view the market as well.

The problem with your argument is that "fat tails" exist. Harvest those and you have found the holy grail.

 

[kjkent1]

Quote from traderNik:

You mean the ideal daytrader, I assume.

I am not sure how this translates to a market which is being actively traded in all time frames.

I too had some conceptual problems with this game.

Yes, I meant the ideal daytrader, primarily because being flat overnight is the ideal of someone seeking to avoid the risk of not being able to react to external events when the market can't be traded.

However, even if the game is played every day, nothing has changed. Everyone comes back into the market exactly where they left off. Even if the marketmakers/specialists set a gap price overnight, if you are routinely on both sides of the market, then you will not be adversely or positively affected by any overnight action.

 

[kjkent1]

Quote from trade4succes:

In real life, this means you play the regression to the mean game?

Your statement is not self explanatory, so I can't answer without more information.