Why predict?

Could you know in advance that the crash is coming?
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Based on the pattern of previous bubbles, yes one could make such a call and many did and were vindicated. Some even got close to the actual jour de la bubble-bust. Then there's that business cycle thingy and a lot of people try to make a living by figuring out where we are in that cycle.

I'm not talking about a single person but about the whole population.
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Then we are talking about different things and I'm not entirely clear what you are talking about, which of course says nothing about you, or me, except that we don't look at behaviours in quite the same way.

I must admit that I would tend to agree more with LC's sentiments, with the caveat, as you also have noted, that it's the timing that's the rub.

There's a finite number of ways that people can react to things and in the market, fear and greed rule supreme. The professionals know that and that's how they make their money. They knowingly mark the price up or down, when the time is ripe to do so.

lj
 
Quote from ljyoung:



snip.....



So when JH comes along and says scrap the probabilistic notions and offers something tangible and testable in lieu of B-S, it is indeed refreshing. Where JH errs, IMO, is with his assumption that his binary, non-probabilistic method is the singularly unique solution to the market dynamic (perhaps I overstate his case here - I don't know, but I'm sure, if he wishes, he will let me know). I do not believe that it is but I also would be the first to say that his method is a good one.

snip....

lj
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Hi lj,

Market solutions are not singularities. There are many and many presumed solutions are not solutions. The non-solutions are simply ATS "hope" machines as you have pointed out.

A corrollary to this is anyone's ability to exercise the right to invent market instruments. These can be used in coordination with exisiting instruments or they can be used to go it alone. Most of thse simply deal with the salesmanship required to get the instrument "in situ" and get the capital pool activated to make money with it. The financial industry is really a plethora of instruments, salesmen and back rooms that invent trading schemes for the instruments.

I may address this soon if the current unanswered questions in this thread are not answered. Is anyone up for some significant intellectual exercise?
 
Something can be random AND have trends. If you flip a coin 1000 times and plot it (heads add 1, tails subtract 1), you will see some nice trends, including many of the formations you see on stock charts like head and shoulders.

lux
 
Anyone can take a look at the trading world. It is a complex of pools, instruments, markets and players.

All are surrounded by the businesses of the financial industry which is driven by sales people who garner money for deals.

The delightful thing is that there is no competition for moving money from one place in the system to another when the system's better opportunities are examined. But there is a cost for all the other opportunites that are not the better ones. It is true that the better opportunites are generally unknown and there is a uncomplicated test that determines that there is no competition.

This statement I'm making is like a paper that could be written at a "house" that, likely, would be making an effort to excell other "houses". It would probably fall on deaf ears in any case.

"Where there is competition, there is a premium." JTH 1957.

"People who pay premiums to compete, lose right at the point of paying the premium." JTH 1957.

Nitro is building a "HOPE ATS" and the guys he works for since January are hoping to peddle it by November.

his machine is the one that uses coin tosses and makes money on the afiliated instruments people will buy during coin toss proceedings. It is called "reversion to the mean. this is just watching and recording coin tosses and betting on the fact that the theory of large numbers takes the fair coin flips back to neutral at any point where they get out of whack for the moment.

This out of whack is called the "premium".

Why stop there?

Well who would stop there if they are doing the coin flipping and have a good education (I have one of the best educations, you will find out someday)?

Nobody would.

Right off we look at the skewed nature of the premium. What causes the skewing is almost a trite problem to knock off. It is simply a market analysis problem yet once again.

LOL.

Three levels of wagers so far folks:

coin betters.

premium betters

and peremium premium betters.

This low level of betting is why printing money is the euphinism for the wagering trading of instruments).

Making money is a pipeline deal not a printing money deal.
Now we get to look at how using a random orientation to coins, to premiums on coin's random orientation and the random orientation towards premiums on premiums is stuck at the printing money level of making money instead of doing bigtime maiking money with a pipeline that operates on the total flow of capital circulating in giant pools of capital. Coin flipping in capital pools doesn't even make waves.

What is the rep rate of turning capital over (100% flip of capital) in a HOPE oriented ATS? LOL.

Where is there no premium? "At equilibrium" is not the correct answer.

When looks at who is playing the answer comes to the surface.

Houses only get to play to the extent that they can "sell" participation in their HOPE based ATS and, furthermore, only to the extent that they can get players to face them.

So usually a game going on is observed, then an ATS is set up to play the exhisting game. Who pays the highest premiums? The last guy in the game. When is the game lost? When the premium is paid.

To make money at trading, what is the prime requirement? It is this: You have to take your marbles out of the game.

Most houses do only one thing. They "sell" participation to outsiders in order to raise the stakes of the games they play. No one takes marbles out; they all keep playing with bigger stakes.

How can anyone win? To win a player has to stay in the game until the premium gets lower and lower and below the entry premium.

As has been shown Fisher didn't get it done with Myron. Robert came up with the fix. When that( BSM) was spread all over the place, new ATS's were needed to trade the premiums on the coin tossing. FBT fixed it at GS first then the musical chairs got into full swing.

From these points on it has become super clear that the coinflipping is small potatoes in the infinite scheme of things. Every game freezeup comes and a collection is taken up to retire the field on all sides of the contemorary game.

Freezeups are simply an exhibition of the limitations on the size of the games for playing at the printing money level.

The equilibrium counterparty game which attends this is another freezeup game that ends with the inevitable "skrink wrap " being applied until it goes away.

It is a blast to be parisitic to all these marble rings out there. Understand that parasitic in the financial world means living off the games of others.

When the houses kick in to salvage a coin flipping episode; the houses printed money proffered is zilch compared to the house street value shrinkage in the pipeline game where I play.

Merrill kicks in 300 million to restore coin flipping liquidity along with 10 opther houses. That's nothing. In five months merrill's stock value lost 50%. LOL

Playing marbles is like fixing small leaks in a pipeline. Plumbers (quants) fix leaks with models, new intruments and trading HOPE ATS's. Developers do codes to make machines do things for traders as they beat each other up playing marbles to print money to add to the marble bag.

So now the picture is there to see. some people think the markets are random. they build on this to find out when the coin flips are out of whack. they bet a premium that the flips will come back into whack. If it doesn't they nightengale it for a few turns of the whell. LOL. sale people beat the bushes to get more marbles to play with at ever increasing "costs" to the marble provides watching the game as money is getting ready to be printed someday soon. Finally at some pont when the freezeup comes (too many marbles in the circle and no one can shoot and get one out the other side. some one has to fork up a lot of money (marbles) from outside the game to give back the markble to the people watching the game who invested in it.

All the while this is going on, we have to note that the marbles are like balloons filled with helium. That is the instruments continally shrink as a function of time.

So what was the lemon that no one took the time to plow into the HOPE ATS's?

It was there sitting in front of them since about 1986 demonstrably. All the marble games take place over time. All big money has a problem with time but computers do not. They can Cray away like nobodies business.

As these guys choose and invent instruments to play marbles based on random based assumption; they tend to rely on the timelessness of random movement. And they rely on time based changes in instrument value and premiums. What got left out? what is the lemmon that needed to be made into lemmonade.

BS and antecedents eliminated convergence. Nitro will not get it straight either. His goose is in the same boat as Pekelo's.

And it is true that all constructs have to obey their respective null hypothesis.

The null hypothesis that underlies my systems (PVT and SCT) is based upon a non random market theory. Lemmonade comes from squeezing the random movement lemmon until is seen to not have any theoretical value in market operation.

BS and FDT stood there and saw how to handle time to attain convergence and then they didn't do it; if they had done it they would have had to abandon their insistence on randomness. QED.

So prediction prevails and randomness is in with the people who persist in creating periodic freeze ups. The black swan is the possibility that follows freeze up of the marble rings. The marbles just sit there in the sun and evaporate.

Don't leave any marbles in the ring when a game can't be played.
 
Quote from luxor:

Something can be random AND have trends. If you flip a coin 1000 times and plot it (heads add 1, tails subtract 1), you will see some nice trends, including many of the formations you see on stock charts like head and shoulders.

lux
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Right.

So Nitro is designing a graphing machine.

He takes that and uses it to do trades.

Oh. did you notice that you can never tell when the graph is going to go back to neutral.... ??? LOL...

Can you imagine how slow it is relatively speaking? Sure that is a simple calc too.

Along side all of this is a giant gushing pipeline. LOL.
 
To make money at trading, what is the prime requirement? It is this: You have to take your marbles out of the game.
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This was Jesse Livermore's lament - he didn't do it like he should have done it.

lj
 
Quote from EmRock:

Predicting the future of non-linear events such as the financial markets is not only unrealistic, it's unnecessary. Let's assume for a moment, hypothetically, that the markets are completely random. There would still be random sequences of long down and up movements within such a large data set. So, in theory, if one where to devise a system that cuts losses and lets winners run, one could profitably trade a totally random market.

So if your goal in trading is to make money, then why predict?

Consider that it may be those predictors among us who, through the exploitation of their cognitive biases, allow for trading with a positive expectation.

In order to make money as a trader over an extended period you need, at least, a positive expectation or you must be extraordinarily lucky, or some combination. If you think you can predict future prices, please explain why? If not, then where does your edge come from?
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I have not read all the posts so excuse me if this has been discussed but it is Human to predict. We are predicting animals. It is why we have a brain, that is, to figure out as best as possible what the future will bring.

If our genes were set up to consider the world perfectly random (which it is not) then we would have never made it.

Early man had to learn discretionary thinking or it could not have survived. Early man evolved in a linear black or white world where you learned to try predict the ramifictions of certain behaviors.

This is why trading is so hard because it goes against several million years of genetically ingrained behavior.

John
 
sigh

so much talking from the random believers and not a single answer

to all those who believe that the markets are random:

how can you possibly trade them and make money? it makes absolutely no sense!
what methodology or theory allows you to overcome odds where your returns are not even going to be 50% because of commissions?
 
Quote from nitro:

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I will ask again. How can you make money from the result of flipping a fair coin? It is not a trick question - you can't predict it any better than 50%. If you can't make money from predicting the actual event, then how can you make money from playing?

nitro
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I am stating that there is a way to make money playing this game against someone. Give me an example of how it can be done. It's trivial and yet no answer.

nitro
 
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