is trading just aggregate black swan events?

Discussion in 'Trading' started by jjk2, Feb 14, 2008.

  1. jjk2


    trading is result of trial and error.

    we suck at forecasting. if we are correct, then its pure luck not skill.

    we only profit from luck because good traders know how to stay solvent long enough to wait for these unpredictable but violent events.

    what does taleb mean? that we are all just dumb lucks. can warren buffett be lucky over and over for all these years? is microsoft an accident? like google?

    i just feel a wave of nihlism while im reading nassim taleb's book.:confused:
  2. Well, I can only really speak from the daytrading angle but forecasting doesnt come in to play for me. I think suckers (and noobs; usually one and the same) think that daytrading is about prediction. I think we all try this when we start off, the good ones eventually realize that no one can predict with consistency what will happen next.....unless.....we learn to read price (markets code). The intricate movement of price within context takes away the need to "predict" what will happen and leaves the trader with a much smaller set of variables to work with. Refine this even more and, over time, you learn to see the trades where price can only do one thing (save for any crazy news release thats unexpected).

    Its simple really, let the market tell you where it wants to go. Its language takes a freaking boatload of time and energy to learn. But then again, its a good gig if you do it right.

    Forget forecasting, let the suckers and noobs get lucky from time to time to keep them in the game financially and, at the same time, reinforce the wrong approach mentally :)

  3. jjk2


    still you are essentially using past time-series data to forecast the future price.

  4. Cutten


    No - the market definitely has pockets of predictability. The markets are random most of the time, but not all the time.
  5. The market is a neurotic man sliding around on an ice rink wearing street shoes.
  6. Well, there is no way to read price action that hasnt happened yet, so in a sense yes. BUT there is a difference, a major one, btw this and what the great majority do, and thats make a prediction based on ones own opinion, ones own interpretation of whats happening. Dont get me wrong, I have done this too but not anymore. I realized that there is no consistency to it.

  7. it's not a matter of what the market is going to do. Is a matter of what the market is doing.

    Ohh... and that "staying solvent" is call money management... one skill that takes time and work to learn... and it saves your neck quiet often.
  8. jjk2


    absolutely. :D i've got burned way too many times trying to time and predict the future.

    i can see where you are coming from, its totally okay, as i too believe PA is essential to trading.

    but i always wonder, can i be lucky for one whole year? taleb says of course but its not sustainable unless we expect the unexpected and take appropriate prevention steps.

    interesting book however.
  9. Correct.

    Daytrading is about "reaction" and for those of us who are educated, for every action there is a reaction. (Newton's 3rd Law).

    Day traders react, thus causing a action, which then cause another reaction. Much like the Q ball, when it strikes the solid ball, which then strikes another ball until an equal or greater than equal force cause an opposite reaction. Then the game starts all over.

    The market is a living and breathing "Motion", it is fluid and runs like water, only to follow the path of less resistance. Day traders, swim in the current and some try to create an opposite force to flush the current in a different direction.

    There are two laws that govern the markets. Law of "Reason" and law of "Emotions". PERIOD.

    These two laws spring into action causing Newton's 3rd law. Thus, IMHO, Psychology first, then Physics are what you see taking place in the Markets.

    BLACK SWANS come in "quant" cycles. Some say every 10 years, some say 20, etc. Black Swan is a theory, much like SHOLES. SCHOLES has been torn apart by Prof. Lucas at the UofC. So, fo all of US that were taught the SCHOLES THEORY, well.C

    But, yes the markets are not a "Random" rolling of the dice. Your decisions to enter and exit may be "random" but the market is very orderly.

    The only problem is that the Human Emotions come into play to create "Randomness". All because of the "MONEY". If you could numb your soul, if you could forget your trading "Money" and instead, were trading water or X that means nothing, you would probably come to an interesting conclusion.

    PREDICTIONS are not always a fairy tail. It depends on how you arrive at the "Predictions". What method you use and where your data comes from.

    I can predict that the sun will rise in the east and set in the west tomorrow.

    So, not all predictions are "Snake Oil".
  10. Good info. Very succinct. That goes for swing/position trading too.
    #10     Feb 14, 2008