Probability and Trading

[FreeGoldRush]

Let us now look at it from another dimension.
Mathematics has an interesting topic called 'Chaos Theory' which evolved in the last 3 decades and is still evolving.

Most engineering kind of math is linear. Chaos is non-linear math it talks about random events/variables and is applied to events in nature/society/stock markets etc.

Most of us look at charts in a linear fashion. Like, say for example, we are looking at them from a time frame perspective. But those charts are not dependent on time and so a linear math formula cannot be derived. That drives us to the concept of probability. That's why we draw trend lines and trend channel lines etc. as we assume the distribution of data to be in that range.

With further development in artificial intelligence, the applications of chaos theory can advance further to throw new perspective on stock markets. Then we can see a paradigm shift in our charting methods.

Nonlinear regression analysis solves the problem you are describing. What sort of tools that fall under the category of "chaos theory" have you used with market data?

 

[SunTrader]

Markets are algorithmically driven, and they have a method to their madness. Chaos theory is for those that aren't aware of what they do and how they do it [imho].

Do you know what chaos theory is, especially as to how it relates to the markets?

 

[Dollardogs]

This is one of the weirder threads I've ever seen on here and that obviously is saying something.

 

[sridhga]

Nonlinear regression analysis solves the problem you are describing. What sort of tools that fall under the category of "chaos theory" have you used with market data?

I have not used it. I may not need it. My current trading systems are profitable.
I made a reference to chaos theory to explain why we depend on probability distributions and draw a trend line as well as trend channel line.

 

[FreeGoldRush]

I have not used it. I may not need it. My current trading systems are profitable.
I made a reference to chaos theory to explain why we depend on probability distributions and draw a trend line as well as trend channel line.

Is your current strategy quantitative or do you use something like TOS or TWS and trade while looking at charts?

 

[sridhga]

Do you know what chaos theory is, especially as to how it relates to the markets?

I studied it during my master's course in Mathematics. That was 25 years ago. I do keep a track of the progress in the field. Although scientists did develop models for stock markets and there have been research papers on the same, I do not think any tradeable models/tools have evolved out of them so far. That is why, in my earlier post, I was referring to progress in Artificial Intelligence. Chaos computing with AI may provide answers in the future.

 

[sridhga]

Is your current strategy quantitative or do you use something like TOS or TWS and trade while looking at charts?

I use price action.

 

[sridhga]

This is one of the weirder threads I've ever seen on here and that obviously is saying something.

Nice try at passing comments.

 

[deaddog]

%%

IT'S much more like a forest or logging business .
Good day for day trades, even though most logging jobs are more than any one day/LOL

That's an interesting analogy
How do you relate logging to trading?
It's what I did before I traded and I'm having trouble seeing any similarities.

 

[Gazillionaire]

Referring to
https://en.m.wikipedia.org/wiki/Feller's_coin-tossing_constants

In the example given, If we toss a fair coin ten times then the exact probability that no pair of heads come up in succession (i.e. n = 10 and k = 2) is p(10,2) = 0.1406263...

Does this mean in 10 tosses, the probability of a pair of heads or tails coming out in succession= 1-0.14 ?

What is this probability formula for X tosses in general?