Why do I see "Trends" in Randomly Generated Data?
- Thread starter Rahula
- Start date
"Clouds are not spheres, mountains are not cones, coastlines are not circles, and bark is not smooth, nor does lightning travel in a straight line."
â B.Mandelbrot, introduction to The Fractal Geometry of Nature
I add another line to this statement . . . "nor does price move in straight lines."
â B.Mandelbrot, introduction to The Fractal Geometry of Nature
I add another line to this statement . . . "nor does price move in straight lines."
How is it different? It's just a matter of your perception. You could say: - "Every time I see a dog head in the cloud formation it most likely will rain". That is exactly the point. What ever you call a "darker cloud" someone else might call a "dog head" and start dancing around the fire trying to increase the chances of rain. Rituals are the attributes of religion; religion is a form of exhibiting your faith; you do not have to follow the rituals to have faith.
Quote from ProfLogic:
Jerry,
I guess our collective successes are gauged on the length of time we post on a particular website.
Life must not begin until we find, "ET".
I'm enjoying your posts.
Thanks, glad I'm not just talking to myself on here.
I think the powers behind ET must have a secret deal that after you have posted here for X months or made Y posts your are given a special mantra that turns you into a very profitable trader as well as a world famous expert in multiple fields of human endeavor...kind of like one of the Internet universities where you get to become a certified neurosurgeon by studying online in your spare time.
Any thought or comments on my question: What level of market returns would call into question MAESTROâs theory that the market is random and therefore untradeable beyond random returns?
Jerry030
once again...rate of return is not related to random behavior. if you have an edge you will profit as long as the edge lasts this has nothing to do with randomness.
a better question is how many moves volume or whatever in whatever time frame does it take for the next price move or series of same to be predictable in a statistically relevant manner?
OR if one flips a coin 10 times and gets heads 10 times is this a heads trend? does the next flip have a better chance of being heads?
In science it's called experimental verification. You may or may not know about it.
A simple example:
1) Count the number of dog heads visible when it rains and doesn't rain.
2) Count the number of dark clouds visible when it rains and doesn't rain.
3) Count the number of times it rains with neither.
4) Count the number of times it rains with both
and so on till you exhaust all logical combinations of conditional observations.
5) Input the observational data into SAS or SPSS
6) Press the run button
7) Review the confidence levels in relation to each postulate on rain causation.
It's not that difficult.
Jerry030
It depends.
Is your edge and hence a rate of return several standard deviations from the mean due to luck in a random market or berceuse the market is not random and you have found something that turns what appears to many observers to be random into something where periods of causative dynamics lead to predictable outcomes?
The gaming industry lives by this. They have a random phenomenon like a roulette wheel which combined with the rules for betting and payoffs gives them a long tern profitable edge and massive income. It's unknown who will win on a single bet as the outcome is random but the law of large numbers insures that they will profit over many bets.
I don't know if you are aware of the physics students who got run out of Los Vegas by using a computer in a van in the parking lot, I/O devices in their shoes and eye glasses and chaos theory to consistently beat the house in roulette. Since the casinos know that long term distribution of winnings should be in their favor, anyone who consistently makes very large winnings has taken the randomness out of the game by some form of manipulation.
These guys from UC Santa Clara used advanced math as opposed to an alteration of the ball or wheel itself. So they got banned and went into the markets where they made a few hundred million dollars.
Jerry030
I look at the trading environment, I think, like you do, with one exception.
I think the markets are entirely random but that their randomness is definable using in fractal based charts. I understand how MAESTRO utilizes market information to profit and I understand what you mean by the non-randomness and profiting from it.
I'm not closed minded, like some in these forums, that think that there is only one way to "skin-a-cat". I've seem that individuals profit from seemingly opposite views of price action. I've also been shown that though opposites sometime both produce profits that one side is usually more consistent that the other . . . but not always. This is why I have a hard time understanding the, "my way or the highway" attitude some traders have in regards to old standard techniques.
I'm from Ohio and fully understand the "flying" analogy. I'm a student of Einstein and even had the opportunity to speak in one of his classrooms in Zurich so I understand that analogy. Technology progresses but individuals refuse to admit that techniques COULD possibly progress to improve the percentages and abilities of trading or investing profitability.