well, i claim that they are mostly random, and the trick is to take advantage of the small non-random component that's there due to the inefficiencies dottom covered in his post. this has been widely accepted among the academics, too. heh, don't get me started on this -- i'm a theoretical physicist who has trouble shutting up every time when involved in a discussion about quantum physics. so i'll say just this: there are a lot of weird phenomenons in modern physics that you'd better believe, lest you end up looking as silly as people a few hundred years ago who insisted that the earth is flat - jaan
Hitman: Imagine you're in my situation: You have done paper trading tests which were very positive. You want to trade US stocks. You don't have enough money. You're trying to get funds to day trade. You're trying to know everything about the markets, trading, psychology, etc. You're trying to understand the nature of the markets. You think that you can be good at day trading. And somebody tells you: SHUT UP AND PLAY! YOUR PAPER TRADING RESULT IS A TOTAL GARBAGE! Your analysis is a total garbage. You have no capital, oh man, that's a #1 newbie killer!!! What would you say to that guy??? dottom: "everybody has a better weapons to a newbie trader" - are you sure?? are you really sure? Not every newbie is stupid, not every newbie knows nothing at all about trading. A lot of people who trade for months even years, are LOSERS. ChrisM: on one of the polish discussion forum for traders, you wrote, that you bought a lot of systems, and nothing works. You're in this bussiness for 8 years, and you didn't find anything that works? I'm reading your posts and I see that all you're saying is "there're no good systems, stock and futures markets are a total chaos". Magna: This whole luck vs. skill herky-jerky dialogue is oh so theoretical and deep and profound. And pointless. Either you believe in your heart that you can make it, and go out and do everything it takes, or you stand on the sidelines having these kinds of conversations. I have time to discuss. Yes, I stay on the sidelines, until I get funds to trade. Will you play a game, if you know, that every strategy that you use in this game has a expected P/L =0? Or even below zero, when you add commissions costs? Of course NO! Is this pointless? This is a fundamental thing! That's why I wanted a statistical proof, that trading is not that kind of game. That there're systems, traders ( like Hitman ) who have positive results from big number of trades. "Believe in my heart"... you say... there's nothing to BELIEVE in, trading is not a religion, show me numbers, show me stats. Now I can say, that markets probably aren't random, there're profitable systems. Luck is a factor, that will ALWAYS have some impact on the final results. If you make more trades, the impact of luck will be lower, with very big number of trades it will decrease to almost zero. Hitman, Magna: if you don't want to discuss about theoretical things, just don't do that. DT-waw
Whether or not one can gleam positive results from a bunch of numbers is not the premise of trading. Trading is simply anticipating human psychology, as the flickering numbers we look at all day are derived from human action which ultimately is a function of human emotion. So if you believe a human being can anticipate or form a thesis about future human action then trading is not all luck and can be thoroughly thought of as the study and profit of human psychology. Peace.
It seems that some of you are making much to big a deal about trading. Trading is a profession, and yes, even a passion, but it is not something that should cause chaos in one's life nor should it impact others to speak negatively about your ideas. Trading loses something when it ceases to be fun. Trading is fun, trading is exciting, and trading can be very rewarding. Trading cannot replace replace religion, morals, or the human spirit. So trade, do well if you can, but above all, enjoy the profession as I have for so many years (yes, even the rough times). Not trying to get philosophical, but let's have some fun with trading....and (after all) it's only money!
jaan- I think you turned my point around. I was arguing it was the professors who stated the world was flat and the markets were efficient. In the early eighties, if you had said to your econmics professor that there were inefficiencies in the market that can be exploited, 99.9 precent of them would have failied you out of their class and asked you in their classroom if you also thought the world was flat. Professors are just involved in the thesis- antithesis-synthesis cycle and what is taught as fact (or unquestionable) is really slowly but constantly changing. I find it ironic that the backbone of academia- the scientific method- is so challeged by science. How can the results of an experiment be changed by the very observation of the experiments. Until professors can answer that question, I will develop my own working theories.
>Whether or not one can gleam positive results from >a bunch of numbers is not the premise of trading. Since you don't speak for me, you might change that to "is not *my* premise for trading". Gleaning positive results from a bunch of numbers is the *only* premise for me. I like the game, I find I have an aptitude for the game and enjoy the positive results of the game. It's not a religion or calling to me. JB
Whether or not one can gleam positive results from a bunch of numbers is not the premise of trading Don't tell that to the large investment houses that have computer programs arb'ing billions of dollars between stock, futures, & options every day. They wait for very specific numerical relationships between the underlying and its derivatives. Some arbs are very simple, some involve very complex relationships between multiple instruments. It is nothing but a numbers game.
i see, LOL. nono, the QM most definitely does not challenge the scientific method! i believe you are misinterpreting the "act of observation" in quantum physics. to put it simply, quantum systems are so delicate that it is not possible to observe them without profoundly disturbing them. you see, "an observation" in physics is always an actual physical act that will have some impact on the system being observed. for example, connecting an oscillograph to an electrical circuit will inevitably change the configuration of the circuit. in classical physics, however, such impact is easy to factor/cancel out. in QM, connecting a system to an observer will have a huge impact, basically causing the system configuration to collapse irreversibly. that's why the act of observation is such a big event in the life of a QM system -- but there's nothing in it that would invalidate the scientific method. quite the opposite: the collapsed system will contain clues about the system state before the collapse, and those clues lend themselves perfectly to consistent analysis (ie scientific method). so it's that simple... NOT! in QM there are at least two curious aspects to the system-observer relationship that make QM so controversial and far out: one is that the observer causing the collapse can and will affect system behaviour in the past as well as in the future, and instantly over great distance. to a classical physicist this sounds as sufficient grounds to dismiss the theory as invalid (in fact, einstein did just that!). the "probem" is that such strange behaviour is confirmed by real life experiments! the second curious aspect is even more surprising: nobody really knows what exactly constitutes an "observer"! you see, in practice, the "observer" means "the external environment", but QM does not limit itself to tiny systems in theory, so the whole universe can be viewed as a huge QM system where everything is internal! this problem has spawned really intriguing hypotheses -- actually, i cannot think of one that is not intriguing! for example, some believe that the presence of a sentient being is required on the receiving end to invoke the collapse. others assert that the collapse is just an illusion caused by the fact that each QM interaction will split our universe into parallel sub-universes, thus, if we happen to observe such an interaction, we witness an inrreversible event whose outcome depends on which one of the parallel universes we (or our "instances", to be precise) happen to fall in. and so on and on, i hope baron will not bust me for this... actually, in an attempt to make sure that he won't, let me draw a comparison to market theory and economy in general. if my memory serves me right, george soros described the effect called "reflection": whenever somebody has a theory about market behaviour, and makes it public so others could scrutinize it, s/he will change the market behaviour, because the theory, once public, starts to influence the expectations and behaviour of market participants. just as in QM, such influence by the observer(s) is irreversible and impossible to factor out. unfortunately for economics, such system-observer entanglement will destroy the applicability of scientific method, because it eliminates the possiblity of reproducing experiments. in economy - as opposed to QM! - it is not possible to clone the system for repeated experiments. that's why i, like many others, are hesitant when calling economics "science". - jaan
jaan fascinating stuff. I dont have a problem with most of it as I think the universe is a sentient being but I sure would like some clarification on this statement: "can and will affect system behaviour in the past ..." How is this possible? I know this is off topic and should be discussed elsewhere but its hard to separate life into compartments.
Posted by Jaan "for example, some believe that the presence of a sentient being is required on the receiving end to invoke the collapse." . This is something like saying that our very awareness precludes us from understanding. If that were true, the only way to understand would be to become unaware. My "intuition" tells me that there may be some truth to this. Fascinating. If this were applied to trading it would mean that the best way to understand the market would be to become unaware of it.