Niederhoffer tweaks me with his fanatical devotion to testing and his utter refusal to accept or even pay attention to simple philosophical principles. He can't test the validity of common sense and so he doesn't see the point in having any. It's not that his observations are incorrect; it's that they are devoid of larger considerations that, if taken into account, would potentially take the conclusion in an entirely new direction (or add color and insight at the very least). In his magnum opus Niederhoffer mentioned that he never got good at chess. I think I know why. Chess masters apply deeply ingrained strategic principles in deciding their moves: time, space, pawn structure, etc. They can't always consciously quantify in the midst of the game; it all blends together most of the time. This kind of stuff is too "fuzzy" for Vic because he can't break down a spreadsheet on the spot. I have a word for the scientific type who consistently overlooks real world observations: hailei. High analytical intelligence, low emotional intelligence. A hailei is kind of like a walking computer / encyclopedia britannica. He / she can recite a million facts, but can't offer much of value unless you come up with the questions yourself.
And in fact, I recall that Taleb claims in "Fooled By Randomness" that Neiderhoffer said, no actually blurted out : "Any testable statement should be tested!" I can't tell you how many traders I've come across, some leaning over my trading screens and telling me how they see support and resistance here and there, and ooh, there's a moving average crossover, and blah...blah...and almost none of them have bothered to so much as cut and paste data to excel and do some basic statistical analysis. I agree that Neiderhoffer seems a bit detached from the real world, but he is right on the above statement in quotations.
How about simply testing your "ideas" the old fashion way -- with money? I have been consistently profitable for quite some time now and have never needed to "test" a thing. When I'm discord I know soon enough, for if there are two things in this game that always tell the truth its time and the bottom line...
Well thats not exactly true. Trends set in motion tend to stay that way, until of course they don't anymore.
Sort of like skydiving without going through the drill on the ground first. An option sure, but I wouldn't recommend it. Congratulations on your trading success (not being sarcastic, seriously)
Right- as with most things, you'll find excess on both sides of the aisle. I'm definitely not an advocate of lax habits or mumbo jumbo. Let me also add that I think Niederhoffer is a bit hypocritical about testing when it comes to evidence that contradicts his beliefs. For example, take Niederhoffer's insistence that we can't be certain trends exist. Then take the track records of JWH, Campbell & Co, Dunn Capital and Chesapeake, trend following firms with 20+ year track records that have literally generated tens of billions of dollars in profits for their clients. You would think that Niederhoffer would address these literal elephants in the room when pontificating on the existence of trends, or that he would try and apply statistical analysis to their profiles and style similarities and highly correlated returns in investigating the validity of a trend following philosophy, or that he would at least tone down his anti-trend rhetoric. But as far as I know, I've heard none of this from him. In that sense, he is breaking his own rule by not "testing" evidence that would refute a key hypothesis- in fact ignoring that evidence, similar to random walk professors ignoring the statistical absurdity of trying to apply survivorship bias to guys like Buffett or Bacon or Jones. N might claim in his defense that he never asserted with certainty that trends don't exist, but riffing on the same inquiry with the same bias a hundred times over is tantamount to making an assertion.
I can appreciate where you are coming from, but at the same time there are elements to a trading "strategy" that a speculator simply can't quantify; namely the human element...
Fair point Dark Horse, I've noticed that he dismisses the importance of share volume for example (I am speaking about stocks, not anything else here). Yet there is a huge weight of academic evidence supporting the price/volume/news effect on stocks. I've verified this myself and have stacks of academic stuff on it. So the guy is a bit of a curmugeon and down right dismissive of contrary opinion. True. But - Testable Statements Should Be Tested!