Predicting randomness
- Thread starter oddiduro
- Start date
--------------------------------------------------------------------------------
Quote from Perseus:
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. [/B]
--------------------------------------------------------------------------------
Allow me to disagree. A position trader has no need to be as accurate to the tick as a daytrader. Therefore a position trader has just as high of a chance to make a profitable prediction as a daytrader.
edit: actually i am referring to something you didn't say, but still i'd like to make the clarification.
I am not going to agree or disagree as trading and predicting are not exactly the same animal. Just keeping my comment to predicting, I would love to have the numbers to look at.
Your comment is well taken, I don't understand all you are trying to say but it goes along with my belief that the system which requires coarser predictions to work will be more robust.
Quote from Perseus:
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. [/B]
--------------------------------------------------------------------------------
Allow me to disagree. A position trader has no need to be as accurate to the tick as a daytrader. Therefore a position trader has just as high of a chance to make a profitable prediction as a daytrader.
edit: actually i am referring to something you didn't say, but still i'd like to make the clarification.
I am not going to agree or disagree as trading and predicting are not exactly the same animal. Just keeping my comment to predicting, I would love to have the numbers to look at.
Your comment is well taken, I don't understand all you are trying to say but it goes along with my belief that the system which requires coarser predictions to work will be more robust.
Ok, these are some honest questions and comments, please don't take them otherwise. I'm participating in the discussion mostly to clarify and focus my own strategies or change them if necessary.
You say you have to be "damn fast" to take advantage of it. Why?
I don't see it that way. I've been successful in life with what some people might see as "going with the flow", and specifically some people here might call my trading style sloppy. I disagree.
I'm a forest type of person, not to say I don't look at a few trees here and there, but I start with the big picture and work down.
How this fits into the discussion is I look for opportunities based on how I think other people are going to act.
Here are some specific examples:
I love someone like Jim Cramer because he gets people to act. I just don't go willy nilly into a stock he mentions, but I often will play a stock he recommends. I don't have to be quick to the trigger. If he pumps what I feel is a non-quality stock with little institutional support I'll let it peak and try to ride it back down until it settles again. But I'll play him other ways too.
Take a look at Microsoft. I've made an absolute killing on it this month with both leaps and regular old day trading 5 - 20 cent gains on the stock. I played the stock because I feel it has little downside and with XBox coming out people have historically driven the price up before a product release and toward the end of the year.
How about something as stupid as a Nike corporate jet that's having landing gear trouble? That was on tv for a couple hours before the landing, giving someone plently of time to prepare a short term trading strategy.
How about a long term example? More people are getting old. Old people need more medical care. Old people or the government on their behalf are going to pay for medical care rather than die. United Health Group as had a very nice run based on that premise.
Perhaps you are talking about something completely different, but my contention is the market is 100% affected by long term and short term human behavior. Some human behavior is very predictable, and some of it catches us as individuals off guard at times. Every single day there are way more tradable predictable human behaviors than anyone could ever have the time or capital to act on.
I've had success so far with using that premise as a base for my trading, although I'm not saying I don't incorporate other methodologies into my trading style. However, I would have a very hard time putting money into the market with the assumption that the next X ticks could go up or down and as long as I manage my money properly I'll be ok.
I'd appreciate your thoughts.
murdog
both you and nik are making the case that human behavior is predictable, and obviously sometimes it is. The markets though are not a typical arena for human behavior to act itself out in. I can predict that people will shop a lot on friday, but can anybody tell me exactly how that will affect INDU consistently?
I take your examples as proof you are a good trader, but I just have to ask then why wall street analysts are so poor at this stuff and then why so many traders lose. Don't doubt you make money but your anecdotes don't constitute a study. In order to really address the question we need a long track record of predictions (not trades).
I agree with your last paragraph somewhat. I think most all trades are predictions of some sort, but some people like taleb simply want big moves, they don't care in what direction.
Ok, I have a basic question. If human behavior and its effects on the markets is so transparent, why are market forecasts mostly bad and why are there market forecasts that are directly opposed to each other? It would seem that there should be many more successful people around like murdog and they should all be saying about the same thing.
My own answer is that we all are the market and making forecasts and acting on them is part of the system we are trying to predict. Highly nonlinear feedback loop in place.
back to weather, the one day forecast is usually very uniform among forecasters and fairly accurate. Why can't I get also then get an accurate one day forecast for MSFT everyday in the paper?
When I said fast I am referring to simply my own perception, which of course could be wrong, that whenever a situation arises where we have a predictable response to a given event (Freeze in Iowa in July), then most players seem to act very fast- just my own thought and your experience could be different.
sorry so choppy- i'm tired.
btw, I wonder what would happen if I complained about my own post.
You say you have to be "damn fast" to take advantage of it. Why?
I don't see it that way. I've been successful in life with what some people might see as "going with the flow", and specifically some people here might call my trading style sloppy. I disagree.
I'm a forest type of person, not to say I don't look at a few trees here and there, but I start with the big picture and work down.
How this fits into the discussion is I look for opportunities based on how I think other people are going to act.
Here are some specific examples:
I love someone like Jim Cramer because he gets people to act. I just don't go willy nilly into a stock he mentions, but I often will play a stock he recommends. I don't have to be quick to the trigger. If he pumps what I feel is a non-quality stock with little institutional support I'll let it peak and try to ride it back down until it settles again. But I'll play him other ways too.
Take a look at Microsoft. I've made an absolute killing on it this month with both leaps and regular old day trading 5 - 20 cent gains on the stock. I played the stock because I feel it has little downside and with XBox coming out people have historically driven the price up before a product release and toward the end of the year.
How about something as stupid as a Nike corporate jet that's having landing gear trouble? That was on tv for a couple hours before the landing, giving someone plently of time to prepare a short term trading strategy.
How about a long term example? More people are getting old. Old people need more medical care. Old people or the government on their behalf are going to pay for medical care rather than die. United Health Group as had a very nice run based on that premise.
Perhaps you are talking about something completely different, but my contention is the market is 100% affected by long term and short term human behavior. Some human behavior is very predictable, and some of it catches us as individuals off guard at times. Every single day there are way more tradable predictable human behaviors than anyone could ever have the time or capital to act on.
I've had success so far with using that premise as a base for my trading, although I'm not saying I don't incorporate other methodologies into my trading style. However, I would have a very hard time putting money into the market with the assumption that the next X ticks could go up or down and as long as I manage my money properly I'll be ok.
I'd appreciate your thoughts.
murdog
both you and nik are making the case that human behavior is predictable, and obviously sometimes it is. The markets though are not a typical arena for human behavior to act itself out in. I can predict that people will shop a lot on friday, but can anybody tell me exactly how that will affect INDU consistently?
I take your examples as proof you are a good trader, but I just have to ask then why wall street analysts are so poor at this stuff and then why so many traders lose. Don't doubt you make money but your anecdotes don't constitute a study. In order to really address the question we need a long track record of predictions (not trades).
I agree with your last paragraph somewhat. I think most all trades are predictions of some sort, but some people like taleb simply want big moves, they don't care in what direction.
Ok, I have a basic question. If human behavior and its effects on the markets is so transparent, why are market forecasts mostly bad and why are there market forecasts that are directly opposed to each other? It would seem that there should be many more successful people around like murdog and they should all be saying about the same thing.
My own answer is that we all are the market and making forecasts and acting on them is part of the system we are trying to predict. Highly nonlinear feedback loop in place.
back to weather, the one day forecast is usually very uniform among forecasters and fairly accurate. Why can't I get also then get an accurate one day forecast for MSFT everyday in the paper?
When I said fast I am referring to simply my own perception, which of course could be wrong, that whenever a situation arises where we have a predictable response to a given event (Freeze in Iowa in July), then most players seem to act very fast- just my own thought and your experience could be different.
sorry so choppy- i'm tired.
btw, I wonder what would happen if I complained about my own post.
Might I suggest a positive approach that could thread some numerical light on this very erudite and informative discussion. ? Gold has crept up to $ 493. Is it more or less likely to break thru 500 than random? Same for bund at 119.63. Is 120.oo in the cards. What about DJI at 10820. Going to 11000? Are there any levels, any sequences of past prices from after which prics tend to show predicitve distributions that yield useful information. ? The key aspect of success in this field might be said to be to ask the right questiions. I believe the above is a good set of same to supplement . The posts on long term prediction based on qualitative analysis of global trends some very reasonable. Are there ways of quantifying such things as the performance of Cramer touted stocks after runups of various degree following his "spontaneous" remarks? Finally, one notes that from what I know about some of the star and failed speculators mentioned, most of them would not like to be compared to each other, Gann, or the boy wonder who went bankrupt several times before killing himself. His advice sounds so reasonable. But is it helpful and has it stood the test of time. A very good reason to take out the pencil and paper for all such reasonable sounding "guidances". proturf
Billionaire or not?
Kind of solves itself if you cannot become one.
If I may so, it adds up to a lot of horsesh*t to announce that you don't want what you are not, cannot do or are unlikely ever to do.
Billionaire is simply a measurement of great success. Therefore it can represent a valid goal for representing success.
Kind of solves itself if you cannot become one.
If I may so, it adds up to a lot of horsesh*t to announce that you don't want what you are not, cannot do or are unlikely ever to do.
Billionaire is simply a measurement of great success. Therefore it can represent a valid goal for representing success.
First, all that I posted in that note was an unattributed (uncredited) quote from Niederhoffer's first book. I've waited a long time for the answer to my question concerning the odds in that quote.
Second, the context suggests VN is looking at serial correlations of 1,2,5,etc. days.
Third, although my work was with 1 minute bars and describing the market from the coin flip analogy, if you accept the idea that the market is self-similar at all levels of granularity from tick to daily data and beyond then there is no contradiction. Although, I haven't done the work at the tick level. For a picture to what VN refers please see my journal http://www.elitetrader.com/vb/showthread.php?s=&threadid=9437&perpage=6&pagenumber=24 look at the newstate.gif on that page for 5-minute data...and at the indictor called "Newstate" . It is a picture of price changes polarized into the coin flip analogy...