Predicting is ***Unavoidable***

Discussion in 'Strategy Building' started by aeliodon, Mar 5, 2007.

  1. nitro

    nitro

    I don't think you understand what prediction means from a mathematical point of view. All prediction means is that cause preceeds effect. It is the quintessential definition of doing science through mathematical models. The fact that prediction comes out of the model in probabilistic terms doesn't change a thing.

    nitro

    PS Note that Quantum Mechanics throws a sort of monkey wranch into the traditional definition of science, since cause and effect are fuzzy in QM.

     
    #21     Mar 5, 2007
  2. nitro

    nitro

    No no no. I agree that there are many ways to make money. But they all require prediction of something, even if the prediction is "30% of the time this trade will make x dollars, and 70% of the time, I need to keep my losses to y dollars, so that the x dollars I make 30% of the time overwhelms the 70% of my trading losses + commissions + b/a spread". The reason I pointed that out is that it is clear that in options, predicting direction is not the only way to make $$$, and in fact, it is rarely the way that $$ is made in them.

    nitro
     
    #22     Mar 5, 2007
  3. Prediction is also related to the linearity of time. All science is based on this. All science models are judged based on their predictive powers.
     
    #23     Mar 5, 2007
  4. nitro

    nitro

    Well almost all sciences, but you are right for 99% of them. That is the big beef that people have with String (M) Theory. It makes no predictions (that are within the realm of experimental science even in the forseeable future), so it can't be proven right or wrong.

    We may have to change our definition of science. Either that, or classify String Theory as mathematics. Either way, you come out confused.

    As to linearity (nothing to do with time - any of the variables can be non-linear), it dominates science, but not all sciences. That is because we are not smart enough to deal with most non-linear models today. But all super successful models are linear, e.g., QCD, or the Standard Model.

    nitro
     
    #24     Mar 5, 2007
  5. Which begs the question, "Is trading art or science"?

    Trading models are judged based on their ability to make money. Models can make money without being predictive. A model can be based on reality. And what is reality? Price. What price is actually doing.

    If you believe in being in the moment, there is no need for the linearity of time. You let go of the past, you don't focus on what is unknown and not knowable, and you exist in the here and now. Is this art? It is good trading.
     
    #25     Mar 5, 2007
  6. Trading better be a science for all traders who are new or who are in a drawdown. After you put in thousands of hours in front of the screen then it can become an art for you as you develop an intuitive sense of what the odds are.
    Regardless, its important to know the logical fallacies of whatever you're trading model is based on an get rid of them.
     
    #26     Mar 5, 2007
  7. The art of formulating appropriate scientific models.
     
    #27     Mar 5, 2007
  8. Consider a person who does not enter or exit the market but is in the market all of the time.

    What is this person doing?

    He is monitoring in NOW (the only time available).

    He has three basic feelings. Comfort, support and confidence. They come from what he is doing.

    He is in the market; on the right side of the market; and collects segments of profits for each trend of the day.

    In NOW he collects a data set and passes the data set to analysis. Here is where the comfort, support and confidence feelings occur. All feelings occur with sensory activity only.

    In analysis, he pairs the data set to a conclusion that matches the data set.

    He takes the conclusion to a decision making pairing. The MODE of the market is determined here. Two possible results. A binary choice. He decides.

    Lastly he goes to behavior and acts. The action most all of the time is to hold (continue). If the mode is "change", he behaves to hit T. Hit T means he reverses.

    Ad nauseum, he repeats the four steps as a new NOW appears.

    Three steps are done with the eyes closed and the hearing aid (in my case) shut off.

    Monitoring is done with the eyes open to take a data set. To take a set of data that says the person knows he knows what is going on. No more. No less.

    For me and others that is how life is. It is different than entering on a bet and exiting when a reason appears or you are stopped out.

    The pairs trading and the options trading and about 80 ways to do edges or other market strategies are what you say they are. They are different than doing the four steps I do.

    Let's focus on the data set. It is taken from a current and annotated data display. It is the facts of NOW. It is a sufficient set of data that fits a conclusion. The set of conclusions is finite. A match is made.

    The prediction is done mostly in your examples from "outside the market". I am working from a vantagepoint of "inside the market". My vantage point gives feelings of support, comfort and confidence.

    A test of a person trading the paradigm I trade is to check and see if fear, anxiety, and anger are in the space. If so, then the person checks out a number of observations about himself and what he is doing.

    The self examination involves several things:

    1. Am I using the begining of the profit segment as a reference? This is the most common practice of people who do bet type trading.

    2. Am I looking at what is going on with respect to the market? The answer is no. What is being observed instead is the value of profits at this point in time.

    3. Did I take a single data element to engender these emotions as a sensory result? Usually the answer is yes and further the person was doing a "recheck" type subloop "just to be sure".

    4. Am I sublooping and only doing data and analysis followed by data and analysis? the answer is yes I did not make a decision and I did not get to closure by acting to hold (most oftern what happens) or do change (take timely reversal action).

    5. And many more.

    You are doing betting and probabilites and protection and drawdowns and trying to do discipline.

    Notice there is nothing related to betting above.

    Notice there is nothing related to probabiliies above.

    Notice there is nothing related to protection above.

    Notice there is nothing related to drawdown above.

    Notice there is a practice of discipline above.

    Why are there no stops?

    Why is there no target?

    Why is there no contract level stated? (At least at the January. February level of forest trading)

    Why is there no drawdown to contend with?

    When the process is done, I am always right: when I take data, when I pair a conclusion to the data, when I match a decision to the conclusion and when I take timely action. I am always right.

    I am striving for effectiveness, efficiency and optimizing my trading.

    The novice level deals with few "changes".

    The intermediate level deals with more "changes"

    The expert level deals with the remaining "changes" that can be considered.

    The whole procedure is a process of extraction from the vantage point of being in the market.

    Being in the market all of the time is a pregnancy test situation. The science of pregnancy is binary. You have to be pregnant to make money. I stay pregnant during RTH's.

    Binary methods for trading are de rigure for me.

    What is it like to be far far away from protection that you do all of the time.

    Sidelines are where the CW traders hang out most of the time.

    Why?

    For protecting themselves from the unknown. This is super super prudent.

    When a CW trader goes into the market, what is the immediate and remorseless feeling (See posts of CW traders for the list). It is a collection of negative feelings.


    What is the first time a CW trader feels a positive feeling? When he sees a print on an exit that is scaling, partial, early and when he sidelines one way or the other. Fight or flee is the choice. Both are survival and negative feeling generators.

    Prediction ...... feelings.... as it comes closer to going from beliefs to behavior there is a shift of mentality and you are telling it how it is for you.

    Prediction giving comfort..... support and confidence... I do not think so from the words here.

    What are the feelings of people who week after week say fraud and "I demand proof"? The usual: fear, anxiety and anger.

    Shoot the messenger a few times. Really look in the barrel and shoot that fish in the barrel you have built with your reasoning, beliefs and trading behavior... What is the feeling? It is exactly the same feeling of exiting one way or another. It is over for the time being until another barrel is built to take a few more shots into.

    SCT and PVT are both NOW type trading that use a standard four part template. NOW is where trading takes place and that is the only time available for making money. You have to be in the market to do it and you have to stay on the right side of the market by doing the routine in NOW.

    I do not do the future, nor the past. I use vector measurement at a time called NOW. Magnitude and direction. That is what is required from the variables of the market. I take laps in NOW only.

    If it is there to take out of the market, I am taking it out by being in the market.

    This is not possible to understand. That is how it is.

    You are"measuring" what you measure from your CW paradigm. The pool extraction paradigm is difficult to measure by anyone who ia unable to empty their minds for a moment and just use their minds in an intellectual open minded way. This is very tough to do muchless come up with a comprehensive six level understanding of the potential of the markets to give you what they are continually offering to anyone who is there to extract.

    The markets are so huge and so global and growing in capital pools, it is impossible for anyone to affect them.


    We will deal with opening and closing the valves in a few months. For now anyone who makes more and more profits, simply has the right to apply the profits for extracting more money per day.

    What does it feel like to apply more and more contracts in a context of feeling support, comfort and confidence?

    The common test of screwing up SCT or PVT is to have the feelings come into the space that the CW trader is continally plagued with.

    Lay off the risk with a profit limiting maneuver ASAP. Feel it?
     
    #28     Mar 5, 2007
  9. This is a worthless semantic argument.
    Anyone who trades with the goal of making money is predicting in one way or another, there is no way around it.

    They will try to deny it by using different synonyms for it, but its still predicting.

    You dont have to predict direction to be predicting either. Arb traders, pair traders, trend traders, all predict in one way or another or they wouldnt be placing their bets (Assuming they are not complete idiots)
     
    #29     Mar 5, 2007
  10. "PS Note that Quantum Mechanics throws a sort of monkey wranch into the traditional definition of science, since cause and effect are fuzzy in QM."

    Humor, humor humor...lol

    rolling etc.
     
    #30     Mar 5, 2007