Definition of a trend

That so-called illusion is what is known as a cognitive bias or in the case of chart trading a cognitive distortion. The most relevant example being:

<b>Hindsight bias</b> is the inclination to see events that have occurred as more predictable than they in fact were before they took place. Hindsight bias has been demonstrated experimentally in a variety of settings, including politics, games and medicine. In psychological experiments of hindsight bias, subjects also tend to remember their predictions of future events as having been stronger than they actually were, in those cases where those predictions turn out correct.

 

absolutely. these proflogic types who claim to view the market inside of a fixed environment therefore are not subject to the hindsight bias, I never understood. makes no sense, regardless of the rhetoric to the contrary.

surf

http://www.elitetrader.com/vb/showthread.php?s=&threadid=160857&perpage=6&pagenumber=27

 

See attached.

 

IMHO . . .
You are absolutely correct.
But the lack of precision comes from the construction of the chart not the market itself. Randomness is built in if the chart is created using the variable aspect of time, transaction or range because there is nothing consistent in the value of the bars. Markets can not be deterministic if the charts they are being read on are random (time, transaction or range bar charting magnifies the randomness), and yes, "analytical geometry" CAN NOT be applied with ANY consistency because of the inconsistency of the chart construction.

 

It isn't that we aren't effected by a hindsight bias, we are. I admit it . . . OMG!!!

The difference is that in a typical charting environments of time, transactions or range bars do not give an advantage to that hindsight bias. This is because the bar construction is inconsistent and erratic rendering them useless. In a Constant Volume/Share Bar chart the bars are equally weighted and the hindsight bias is accurate based on that particular chart ONLY! Buy hey, we should only be taking our trading decisions from a single chart anyway since each individual chart shows a unique picture of price action.

Easy to understand why you don't understand this and it makes no sense to you. Everything is cyclic and making the bars perfectly consistent makes seeing the cycles perfectly clear.

 

What if there were two football teams.

A. The Bengal Buyers, and
B. The Seattle Sellers

1. Now to determine what the trend was, you would first have to determine who was in possession of the ball.

2. Once that has been determined you have to figure-out whether the the team that possessedd the ball was deep in their opponents territory or whether they were headed towards a touch down with the 50 yard line behind them.

3. And of course you would always have to be careful of intereceptions, fumbles and loss of yardage on badly run plays.

***

When I look at the market using these analogies, it makes much more sense to me than thinking of a linearly based concept such as trend, and reminds me of the fact that, based on my assessment of who is in control of the ball, there only (at most) two things I can do at one time:

1. Go Long if the Bengal Buyers are running the field (like they were this morning); or No Entry if I missed the play and have to wait on the Bench for the next one.

or

2. Go Short if the Seattle Sellers are in control of the ball; or No Entry if I miss a play and have to wait o nthe Bench for the next Call.

Hope that helps

 

The problem with this analogy is that the Bengals RARELY make touchdowns or even keep the ball with any consistency so trying to apply a definition of Trend to them is futile . . .

 

The problem with your analogy is how to identify the touchdown.

 

LOL ...

If you want to be so literal, a touchdown for the Bengal Buyers may be defined as "a close which is higher than the previous day's high" (if you are trading on an intra-day timeframe) or "a close which is higher than the previous week's high" if you are trading on a daily time frame, etc.

Simply reverse the process for the Seattle Sellers.

 

no, one can apply a random data series into one of your "chart environments" and it still remains random. the environment only appeases the visual illusion, not the reality of the data.

surf