Random Charts

[ctrader]

Take a look at this:

http://www.ms.uky.edu/~mai/java/stat/brmo.html

Run this applet, to get a random chart, based on Brownian motion. Looks just like a stock chart.

I look at that, and immediately see trends that I could trade.

For some reason this is bothering me...how can I see trends in a chart create by random events?

 

[PuffyGums]

The flip side of the coin is that there are very complex math functions which look just like the random chart yet people, after enough exposures, are able to predict them.

from Learning to Trade: The Psychology of Expertise
Brett N. Steenbarger, Ph.D.

http://www.greatspeculations.com/Brett/learning_to_trade.htm

"Such implicit learning has been demonstrated in the laboratory across a variety of tasks. Cleeremans and McClelland, for example, flashed lights on a computer screen for subjects, with the lights appearing at six different places on the screen. The subjects had to press a keyboard button corresponding to the location of the light on the screen. There were complex rules determining where the light would flash, but these rules were not known by the subjects. After thousands of trials, the subjects became very good at anticipating the location of the light, as demonstrated by reduced response times. Significantly, when the lights were flashed on the screen in a random pattern, no such reduction in response time was observed. This was a meaningful finding, since the patterns picked up by the subjects were not only outside their conscious awareness—they were also mathematically complex and beyond the subjects’ computational abilities! (Like the markets, the patterns were actually “noisy”—a mixture of patterns and random events.)"

 

[PuffyGums]

Look at this function. It looks like a stock chart. Looks like a random chart, also. Its not random. Its a very complex, but deterministic math function.
(see http://www.xplore-stat.de/tutorials/timesnode2.html)

<img src="http://www.xplore-stat.de/tutorials/timesimg6.gif">

 

[Gordon Gekko]

Quote from ctrader:

Take a look at this:

http://www.ms.uky.edu/~mai/java/stat/brmo.html

Run this applet, to get a random chart, based on Brownian motion. Looks just like a stock chart.

I look at that, and immediately see trends that I could trade.

For some reason this is bothering me...how can I see trends in a chart create by random events?

there were some very good posts in this thread:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=8780

i think runningbear and some others explained it well.

 

[BKuerbs]

Quote from PuffyGums:


from Learning to Trade: The Psychology of Expertise
Brett N. Steenbarger, Ph.D.

http://www.greatspeculations.com/Brett/learning_to_trade.htm

...

Great article, thanks for the Link.

Regards

Bernd Kuerbs

 

[profitseer]

Quote from BKuerbs:



Great article, thanks for the Link.

Regards

Bernd Kuerbs

yeah, me too, thanks everybody. Maybe that's why some people have it and some people don't. If you need to have everything organized, maybe that's why you don't have a feel for the market, because it is not organized the way we think of organization.

 

[aphexcoil]

Randomness is one of the only words I know of that shouldn't exist, since nothing in this universe has an event without a cause -- save for quantum physics.

 

[aphexcoil]

 

[Katrina Johns]

Quote from ctrader:

Take a look at this:

http://www.ms.uky.edu/~mai/java/stat/brmo.html

Run this applet, to get a random chart, based on Brownian motion. Looks just like a stock chart.

I look at that, and immediately see trends that I could trade.

For some reason this is bothering me...how can I see trends in a chart create by random events?

but .. but .. but i swear i see Support & Resistance levels in that chart! i know i could make $$ trading that chart


(or could i??)

 

[bungrider]

trading is like gambling with worse odds.

the only thing you can be sure of is that other people will make tons of mistakes, and that is where your targets lie...

i'm convinced (after all of 5 runs) that the midline (looks like yesterday's close ) on the horizontal brownian chart acts as S/R...