Do you need to understand where the edge comes from?

I use "leading indicator" as does the rest of the world -- outside of retail trading.
Just a stickler for truth. Not truthiness.

(Much like the math you wish to ignore.)

 

If you don't mind my question:

Why is it wrong to model the market as a signal + noise?

Thanks.

 

Make sure you do out-of-sample testing.

 

That is some heavy BS. Do you need to understand how a car engine works to be a good driver?

I rest my case.

What is important though to understand when one is just lucky to have the right strategy for the right times (like being long in a bull market) and that can change. But you don't need to understand why it is a bull market, just ride it....

 

A race car driver would have a understanding of every component in his vehicle, some of it in fair depth. A soccer mom driving her minivan knows nothing about her car but then again, she is not competing with anyone.

A trader (i.e. a human that is extracting alpha) is more similar to a race car driver, since he's competing with others market players. An passive investor is similar to a soccer mom.

 

Not all of them and it is not necessary. Why has Tesla been such a high flying stock until recently? You don't need to understand that it is a cult stock, just ride it, or if you wish believe in Elon.

I don't need to know the math behind Bollinger bands or what the Williams %R actually indicates to be able to use them profitably...

A trader can be the soccer mom in your analogy. Trading is more of a marathon and not a dash....

 

Really beneath you, Peks. Wowie.

 

You need to know how your tools work as the market does change personality (volatility, range and so on) and you will have to make adjustments so it's kinda (understatement) important to know what to adjust and how to do it.

 

It's wrong, because DSP was developed to work on physical phenomena, such as waves from an earthquake, thermal fluctuations of electrons in a resistor, etc. Market data is generated by a completely different mechanism that only resembles waves. Markets are made of people and are sentient, earthquakes are not. However, all market models are wrong, and DSP may be no more wrong than any other model.

To address tommmcginnis:
Negative group delay is purely a mathematical construct and has no predictive power and surely is not the result of economic decisions of traders. Although one could argue the base indicator is a net result of fundamental trading decisions. What math am I supposedly ignoring?

 

...was there an argument there? I somehow missed it...