Intuition Amplifiers 2

traitor786 · Mar 19, 2013

Quote from MAESTRO:

All it says that if you flip a fair coin and create a random walk out of the multiple flips you will have a chart that is based on a normally (Gaussian) distributed data. It has been proven beyond any doubts that no matter what tactic you would use to trade this chart you guarantee not to win (and not to lose either with the exception of commissions and Bid/Ask spreads). The only way to make money on the markets (aside being a broker or a bank) is by relaying on the market inefficiencies. Those inefficiencies exhibit themselves as stable differences between the normally distributed data and the data that has ânon-randomnessâ built in to it. Once those inefficiencies are recognized and extracted they have a tendency to be âarbed outâ of the market. It is incredibly hard to find any âstableâ inefficiency. So, majority of people do not bother to check whether their TA tools really can find those market inefficiencies (differences between the normally distributed data and the distribution skews) or not. That is why when I was dealing with Bank of America back in 2007 the first test they asked me to perform is to show what would happen to my methods if they are exposed to totally artificially created, random data. Any TA indicator, any chart tool anything at all must be tested against those conditions. If they work the same way on normally distributed, random data as they do on real charts that simply mean that those tools are no good at all. Only when it has been thoroughly proven that there is noticeable difference between their reactions to different data origins you can accept those tools as being genuinely efficient. Unfortunately 99.9% of all known to me TA methods and tools fail this test.
Cheers,

MAESTRO
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DO you know of any practical way to play around with this. Would there be a place some where on this web with a chart based on randomness vs a market chart, built in would be the ability to add a moving average and such TA's

I know its a long shot, the important stuff is always missing.

traitor786 · Mar 20, 2013

Quote from MAESTRO:

Markets are usually compared to a poker game. However, there are many other games that can shed some light on the marketâs underlying forces and, therefore, on market participantsâ psychology.

Letâs take a look at the blackjack game played in casinos. What I have discovered is the âhiddenâ casino advantage that has lots of similarities with the market.

In the casino the dealer is your opponent and her strategy is set by the casino and cannot be changed: the dealer would continue to take cards until the sum was 17 or more, in which case she would stick. In other words, the dealer plays by the algorithm written for her by the developers of the game. What would happen if I played exactly the same game? It would occur on the surface that the probability of me winning each hand is 50% and on the long run I would neither win nor lose. However, I could have a nice evening; drink all of the free vodkas served by the lovely cocktail waitresses, have some fun and it would not cost me a dime. Also, I would catch the time that I am up and quit with a few dollars left in my pocket. Wouldnât that be nice! Not so fast though; everybody knows that the house always has the advantage, but how? Is it because the dealers got to see your cards, but you did not get to see theirs? Is it because I have to decide whether to take a card before the dealer or not? But the strategy of sticking at 17 does not require looking at any cards other than your own, so who sees whose cards or who sees them first is irrelevant.

Well, as everybody who played this game knows if I asked for a third, fourth etc. card and it added up to more than 21 the dealer immediately would grab your money declaring that I have lost the hand. Only when no one else at the table wants another card, the dealer reveals her cards and their sum, at which point she could also bust, but if my hand is already lost it wouldnât matter to me. Technically, if I busted and the dealer also had more than 21 we are tied. But it is not the case in the casino.

The casinoâs advantage is simply that I would always lose when my hand adds up to more than 21; yet the dealer only can lose when I did not. So, according to Bayesian conditional probabilities formula there are more chances for me to lose then for the dealer.

But why is it so hard to see? Well, it is because the probabilities skew is hidden in time! The timing of the decision makes all the difference. The markets have the same hidden rule, but unlike casinos they are not immune from me exploiting it.
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This is a very good observation.

Xspurt · Mar 20, 2013

Quote from MAESTRO:

Markets are usually compared to a poker game. However, there are many other games that can shed some light on the marketâs underlying forces and, therefore, on market participantsâ psychology.

Letâs take a look at the blackjack game played in casinos. What I have discovered is the âhiddenâ casino advantage that has lots of similarities with the market.

In the casino the dealer is your opponent and her strategy is set by the casino and cannot be changed: the dealer would continue to take cards until the sum was 17 or more, in which case she would stick. In other words, the dealer plays by the algorithm written for her by the developers of the game. What would happen if I played exactly the same game? It would occur on the surface that the probability of me winning each hand is 50% and on the long run I would neither win nor lose. However, I could have a nice evening; drink all of the free vodkas served by the lovely cocktail waitresses, have some fun and it would not cost me a dime. Also, I would catch the time that I am up and quit with a few dollars left in my pocket. Wouldnât that be nice! Not so fast though; everybody knows that the house always has the advantage, but how? Is it because the dealers got to see your cards, but you did not get to see theirs? Is it because I have to decide whether to take a card before the dealer or not? But the strategy of sticking at 17 does not require looking at any cards other than your own, so who sees whose cards or who sees them first is irrelevant.

Well, as everybody who played this game knows if I asked for a third, fourth etc. card and it added up to more than 21 the dealer immediately would grab your money declaring that I have lost the hand. Only when no one else at the table wants another card, the dealer reveals her cards and their sum, at which point she could also bust, but if my hand is already lost it wouldnât matter to me. Technically, if I busted and the dealer also had more than 21 we are tied. But it is not the case in the casino.

The casinoâs advantage is simply that I would always lose when my hand adds up to more than 21; yet the dealer only can lose when I did not. So, according to Bayesian conditional probabilities formula there are more chances for me to lose then for the dealer.

But why is it so hard to see? Well, it is because the probabilities skew is hidden in time! The timing of the decision makes all the difference. The markets have the same hidden rule, but unlike casinos they are not immune from me exploiting it.
More...

Time is the weight that hangs over the market tipping the balance points. Just don't try to always go linear for when confidence is highest it will implode.

It's weird that people gamble who pay scant regard to the algo that guarantees their failure. An then there are traders...

MAESTRO · Mar 20, 2013

Quote from traitor786:

DO you know of any practical way to play around with this. Would there be a place some where on this web with a chart based on randomness vs a market chart, built in would be the ability to add a moving average and such TA's

I know its a long shot, the important stuff is always missing.
More...

I usually create my own random charts using either MATLAB or .NET programs. However, I know that Tom Gastaldi ( http://www.datatime.eu/public/gbot/MetricsForAlgorithmicTrading.htm ) does a lot of work on creating the simulation models of the markets and he does generate pretty good random charts. I have seen his work and I was impressed. He uses multiple random parameters to generate very realistic random charts. So if you are interested you should take a look at his research. Also, his G-Bot is pretty good and he uses the forward random testing to tune its parameters.

Cheers,

MAESTRO

jack hershey · Mar 20, 2013

Quote from traitor786:

DO you know of any practical way to play around with this. Would there be a place some where on this web with a chart based on randomness vs a market chart, built in would be the ability to add a moving average and such TA's

I know its a long shot, the important stuff is always missing.
More...

It taks five peices of paper, a big eraser, and a pencil.

Also you have the wrong list in your mind.

jack hershey · Mar 20, 2013

Quote from Xspurt:

Time is the weight that hangs over the market tipping the balance points. Just don't try to always go linear for when confidence is highest it will implode.

It's weird that people gamble who pay scant regard to the algo that guarantees their failure. An then there are traders...
More...

Correct, the market variables are NOT scalors.

Linear applies to continuous functions. The market variables are NOT continuous.

jack hershey · Mar 20, 2013

Quote from MAESTRO:

I usually create my own random charts using either MATLAB or .NET programs. However, I know that Tom Gastaldi ( http://www.datatime.eu/public/gbot/MetricsForAlgorithmicTrading.htm ) does a lot of work on creating the simulation models of the markets and he does generate pretty good random charts. I have seen his work and I was impressed. He uses multiple random parameters to generate very realistic random charts. So if you are interested you should take a look at his research. Also, his G-Bot is pretty good and he uses the forward random testing to tune its parameters.

Cheers,

MAESTRO
More...

All of market analysis comes down to one thing: parcelling the information.

So why spend time doing "random".

By parcelling from the simplest, you get the finite map of possiblities.

By doing this, you get to find the parametric measure of the market's variables.

Your referenced person has not gotten this far as yet.

How did Braithwaite achieve this?

He looked at information transfer.

how did John Kelly do this?

He looked at error in transmission.

how did Holarith do the deed?

He made his code perfect for transmission.

Is there a common concern.

You have read my stuff for a decade cand it is still meaningless.

Start very slowly with one piece of paper and two variables that are using the MARKET DICTATED units being transimiited to you from a source you are using TO MAKE MONEY.

source ............ receiver.

source ........... parcels ............ reciever.

receiver ...sensing space ....... shape ........ movement in shape.

This is all RELATIVE.

Random makes no difference ever......

It is all samllerr than you are thinking

It is all simpler than you are thinking.

Sense (10%) is ADDED to inference (90%) = preception (100%)

All inference is just simple RELATIVE relationships.

H.1 ???? H

L.1 ???? L

and there are more for C.

Volume. 1 ????? Volume

How many operators can fill in the question marks?

Cases for price. WHAT FOR VOLUME? (the independent variable).

A person keeps falling down.

She gets a helmet and a postage stamp wired to the helmet and she has the postage stamp placed on her tongue.

In four months she does not need the helmet nor the thing on her tongue and she does not fall down. (See chapter 1 Doidge)

The PC prevents people from seeing charts. they have no inference to see them. It does not arrive in 10 years for example.

RELATIVE. DataBase Mamagement System. (RDBMS)

Joe Doaks · Mar 21, 2013

Randumb charts? For practice I draw manipulated charts.

smallStops · Mar 21, 2013

Quote from MAESTRO:

It is good to âdelegateâ and free up our minds of routine mental chores such as number crunching, data storage, search and sorting of information etc. It is also good to have auto-pilots, self-parking cars and buy/sell algorithms to trade markets providing that we are still in a position to take over when needed and to be as efficient as our ârobotsâ in performing those tasks. Unfortunately, most of us have resigned to the fact that our brains are incapable of competing with the machines we have created. In this thread I will try to prove the opposite.
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Just starting to read the full thread. And I like to see what you are attempting to do.

Joe Doaks · Mar 21, 2013

I am sorry. How much brain power (or computational power) does it take to recognize that price is moving up or down on your preferred trading time frame? Given that, answer the same question about the persistence of the price move. All else is bullshit designed to get you to spend your money on fancy indicators that aren't nearly as smart as you are.