Predicting randomness

[cnms2]

Does anybody have knowledge of a trial to apply technical analysis to a Monte Carlo simulation?

 

[cnms2]

There are some interesting TA articles in the November issue of SFO Magazine. You can find it online too:
http://www.sfomag.com

 

[marketsurfer]

Quote from libertad:

Every price movement has a reason...and a place to go..

And is definitely not random...To suggest that price movement has no reason...can only come from a fool...

there is a reason, but the reason is only known in hindsight.

it is not random as random is commonly understood--however it is random within certain parameters.


it all goes back to what a very wise man shared with me---- if a coin flip comes up heads 5 times in a row, is this a heads trend??

surfer

 

[marketsurfer]

Quote from oddiduro:

I have concluded that there is no such thing as a trend. All patterns happen in hindsight. Taleb has something with his market views.

I am not marketsurfer

Seriously, my trading experience has shown me that trying to predict the direction is worse than flipping a coin and using good stops with risk management.

Let's talk yet again about whether we are not barking up the wrong tree with this prediction stuff.

Any pattern that can be shown to have worked in hindsight can also be shown to have NOT worked in hindsight, which means that the patterns we think we see have no predictive potential at all.

Regards
Oddi

nicely said, oddiduro.



surfer

 

[nicholaf]

Quote from kjkent1:

There's a difference between "random" and "unpredictable." A truly random event cannot be predicted, even if the observer is able to accurately measure every causal action operating upon the potential future effect.

A merely chaotic event is potentially predictable, because it is the product of completely measurable causal factors.

At the most fundamental level, uncertaintly in the universe is still an open question. The majority of theoretical physicists subscribe to the "Copenhagen Interpretation" of uncertainty, which holds that it is indeed impossible to simultaneously meausre both the speed and location of an electron, and therefore true randomness exists in the universe.

The minority, however, believes that there are other mathematically plausable explanations (e.g., "many-worlds uncertainty interpretation") that would permit simultaneous measurement, and that we simply arent yet able to implement the math with any physical technology. If true, then all things are measurable, and randomness is merely the product of insufficient data.

The above represents the "naturalistic" explanations for randomness and uncertainty. There is, of course, the "supernatural" explanation, which would be basically, that God created the universe, and therefore randomness exists or doesn't exist, depending upon God's requirements at any given moment.

If you accept this last theory, then you don't need any technical or fundamental tools to make money in the market. You need only prayer.

LOL.

 

[nicholaf]

Quote from marketsurfer:

there is a reason, but the reason is only known in hindsight.

it is not random as random is commonly understood--however it is random within certain parameters.


it all goes back to what a very wise man shared with me---- if a coin flip comes up heads 5 times in a row, is this a heads trend??

surfer

well if you take 1000 samples and do a lag 1 regression and there is a weak autoregression indication, that means the trial is biased

 

[Walther]

Quote from nicholaf:

KJKent,


The million dollar (maybe billion) question is how to project the price

Price cannot be projected forward with any meaningful accuracy.
Time when important price level will be established can be projected forward.

 

[cnms2]

Quote from Walther:
Price cannot be projected forward with any meaningful accuracy.
Time when important price level will be established can be projected forward.

Would you care to elaborate on your assertion that "Time when important price level will be established can be projected forward"?

 

[Equalizer]

Quote from marketsurfer:


it all goes back to what a very wise man shared with me---- if a coin flip comes up heads 5 times in a row, is this a heads trend??

surfer

I just love it when analogies are mis-used!

But tell me something Hank, is this really analogous? I mean, a coin flip is just that, some bored geezer tossing a coin. If it is a fair coin, and fair tossing method, and we assign a value of +1 for heads, and -1 for tails then the long term expected value is 0, i.e. 50% heads, 50% tails,

Price, on the other hand, can move by 0.25pts up or 0.75ps down, then gap up 2 points, etc, etc, and unfotunately, it isn't generated by some geezer tossing a coin, rather it is a consensus amongst a group of people, or computers programmed/operated by people, having different needs, different views, different utility and risk-profiles.
And lets add other info, like volume, transactions per unit time, volume per unit time, B-A-spread, etc.

"Ahh, yes" you might say, "but the ensemble effect appears to be random - don't we model prices by GBM?".
The key words being, "model", "appears".

The key questions being, "What is price", "what is random", "how can I profit from this"?

Something to think about...

 

[toe]

It is if its a two headed coin


Actually coin tossing is not an appropriate annalogy to the market because in a coin toss we have advanced knowlege of how the "observations" will be created, by a "fair" coin toss. In the markets, for all we know the "coin" might be slightly unfair, or worse it might fluctuate between fair and unfair (random and non-random).

Here's a thought. Insider traders dont believe in the random walk theory. I mean if the markets were truely random then if an insider trader buys a month before an announcement, he/she will be equally liable to suffer a loss as have a win.

Does that mean that the market was non-random to the insider trader, but random to the rest of us? No, it means that the markets may be partially, or even mostly random. But events do happen that can be foreseen by somebody.