Actually - the probability of someone pulling the alarm is a part of the model in all shopping centers in the first world. It just wasn't a consideration in your own calculations. But I'll give you that it was a trick question. The whole point is that the markets contain things beyond our perception and our ability to model them. Just like a tweet from Donald Trump, Iran attacking Saudi Oil Tankers, a good unemployment report... These are all 'fire alarms' in the market and one of the reasons this concept of markets being purely mathematical doesn't play out in the real world.
You just don't get it. Restating what I said in my first reply to you, there is nothing magical about being a human trader. If humans can react to events so can algos. It's all about processing the available information, which is ultimately a mathematical process.
Jigsaw, taking a step back here, I believe we might just be arguing semantics here. What you believe counts as mathematical or not is different than how I see it. I don't believe that "event driven" is opposite of "purely mathematical". I just see it all in terms of information processing and to me that is mathematical.
Maybe - but your own algo would have missed the fire alarm, right? Which is why mathematical/technical traders are always adding in more complexity/decision points to make up for all the fire alarms they appear to have missed in hindsight. A bit like MSNBC always call the reason for moves in retrospect. Hindsight analysis - looking for effect in cause. The fact is - it's NOT just about processing the available info - a good report can move a market up one day and down the next. The markets are fickle & emotional as much as they are mathematical.
Your example is nonsense. In a mall people can be anywhere, so the theoretical position of all people together is almost infinite. In trading however there are only three possibilities: long, short, no position. In a shopping mall all people have different reasons for their behavior. In trading there are only three reasons: making money going long, making money going short, not losing money by staying out of the market. So you compare apples with oranges. The math problem with only 3 possible answers is much easier and more realistic, then the math with your examples which can have a million different outcomes. Number of people multiplied by the number of potential places in the mall multiplied with the different time possible. That runs in the millions of combinations. On top of that you have no clue about the motivation of the people in the mall, whereas the traders all have only 1 motivation: making money.
No because fire alarms are pretty obvious and I do my due diligence before deploying algos. Not sure what your point is anyways. It's clear to everyone in this business that trading involves tons of uncertainty and unexpected events. Reacting to being wrong is always part of the game and humans have the exact same thing to deal with. That is a newbie tier mistake for auto traders. Curve fitting. Are you suggesting that emotions are not a material phenomenon with physically observable causes and effects? It's still just information input, trades output.
It can be modeled: You posted a hypothetical question, so let me give you several hypothetical answers: 1. You input into your model, all the informations on each individuals, who, what and where in a set of initial conditions, you also input into your model, the store informations, then run a time series calculation, you can also run a Monte Carlo, ending up with a set of most likely outcome over time series. 2. You do something easier, assume a Brownian motion but input the boundary conditions that include the layout, size and store information. You can calculate the probability density function of where the people are. You can even follow an individual "particle" (people) and calculate its individual path as a Weiner Process.... 3. And by the way, you model it not by predicting the fire alarm but by including in your model an input perturbation function, like the fire alarm or other non random events. So, you model what happen AFTER the fire alarm. In trading the Quants are trying to do #1, we amateurs are trying to do #2, @destriero @TheBigShort et al tried to do #3 in this thread: https://www.elitetrader.com/et/threads/earnings-journal.328822/ The fire alarm is Earning. I am just babbling, not really making any sense, so you can ignore this post.
Jigsaw is promoting some real winners here: https://www.elitetrader.com/et/threads/axia-futures-balance-sheet-summary.331212/
%% I have one of his books; but it took me longer than 2 years to find his book, LOL. Another way to profitable trading; risk a % of investment profits+never, never , never risk a big % of investment profits. I do more ETFs than single stocks; but Investors Business Daily helped a lot. And he changed the name of his newspaper to ''Investors Business Weekly.'' I like his old name better[Investor's Business Daily]; but it's his company + his brand name.,[NO telling how many years+ years he lost money on his excellent newspaper-but that's life]
Update: I have lost another $1200 and I only have $504 left in my account. After it's gone, I'm going to end it... Nobody is making money. NOBODY. And figuring it out costed my life. So long traders!