Trading Catechism

It is possible that high energy trading is a manifestation of Probability on a higher normed "QM".

Probability(Reals) => Classical Mechanics
Probability(Complex) => Quantim Mechanics
Probability(HyperComplex) => Trading Systems

Read this for a gentle introduction: (Key idea "that nature is described not by probabilities (which are always nonnegative), but by numbers called amplitudes that can be positive, negative, or even complex.") or split-complex number - nitro

http://www.scottaaronson.com/democritus/lec9.html

Professionals only:

http://www.scottaaronson.com/papers/island.pdf
 
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nonlinear5 said:
Negative probabilities, interesting concept.
More...
Not negative probabilities, negative amplitudes or even complex amplitudes (and I claim even further split-complex amplitudes). Probabilities are "always" positive and always add to 1. What we see in the real world is Unitarity. Why the world "behind the scenes" works this way is a fantastic mystery. Although, I think GOD didn't have any choice once he decided on one feature: physical dimensions of the Universe (one can argue that is other parameters that are more fundamental, but modern physics says D is the most fundamental.) Christopher Fuchs argues that a non-linear world (which QM is not but but GR is - another mystery) would have a non-finite speed of light. Anyway, that stuff is physics and not trading, which is what I am trying to get at here.

Quantum Mechanics is actually easier than people think, once you realize it is not talking about probabilities, instead it is talking about things that feed into probability. If you think it through, the same is true with trading.

QBism takes this one step further, and says that Frequentist probability is of little use in singular event prognostication. So it moves to Bayesian probability, which imo is also the correct paradigm for much of trading.

WFC.gif
 
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1. The simple stuff. Dictionary of trading strategies for different regimes (trend/mean reversion) Optimized lengths for asset class:
  • MA Crossover for trends
  • Bollinger Bands for mean-reversion
============Retail Traders Stop Here======================

2. The critical stuff. This is where having a Phd in a related field helps. Big data driven:

[Classical] Probability of being in regime, and what level to to enter and exit. P is adjustable. 60 and 70 seem reasonable. Higher/Lower numbers tilt expectancy (risk):
  • 70% in trend (persistence) regime: enable MA Crossover. Disable BB.
  • Probability dips to 60%: Exit
  • 40-60% no position
  • 70% in mean reversion (anti-persistence): enable Bollinger Band. Diable MACO
  • Probability dips to 60%: Exit
  • 40-60 no position

3. Stopping times overrule probability measures. This is where being a statistician helps.
  • Give the trade enough time to play out. Brownian motions have characteristics. Bid data driven: Asset class, sector, etc.

============Retail Traders Dip Toes Here=====================

4. Computer science to run the whole show.

============Institutions Rule Here==========================

5. Execute over thousands of symbols. Get a great tax structure. Rinse Wash Repeat. Get rich.

By far the hardest part is understanding how to do 2. But there are simple memes for this in the sciences.
 
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