If prices are random, does that mean that prices have no relationship to the balance of supply and demand?
Hi Toe, If you haven done so I would recomend Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets (Paperback) Nassim Nicholas Taleb Regards,
I[m following a system, that seems to be predicting the markets within certain limitations. I do believe that supply demand still rule. Check this chart. This is a prediction of the Russell2000 from today. The prediction was executed at 11:45, where the black and red line splits. The black line was the prediction, the red line, what finally happened. The system made almost u$s 800 per contract only in the Russell.
Some people here should learn what "random" means... It looks like a very bad prediction... I'm sorry
Bull dinkies.... From a purely systematic point of view, NO knowledge of 'trading' is at all required to be an extremely efficient (most profitable), trader. It's all in the data and how knowledgeable one is to extrapolate reasoning purely from that data source.
Hi Science Trader. Why do you state is a bad prediction ? The system was able to make u$s 800 with that prediction. I tend to quantify how good or bad is a prediction by measuring the Root Mean Square Error of the prediction path and the market. Do you use any other measurement that you would like to share with us that will give hard numbers to support your statement? Thanks.
Trading is a game of position and risk management. This means your root mean square error of prediction is not of real interest. Precision of your indicator should be measured with respect to timing, not following a path with minimal deviation. No one gets rewarded for following a path in the markets. Then, concerning risk mgmt, you should have a prediction with some kind of "confidence interval" to judge if opening/closing/reversing a position is worth it.
As an experienced quant... And as someone who has made 300K-400K trades... I completely 100% disagree with you. Once you develop a workable strategy that takes advantage of some market inefficiency... What makes it successful is NOT sticking to it with iron discipline... But having the long trading experience to DEVIATE from it the right 50% of the time... And avoid the kind of disastrous pitfalls that befall newbies and academics. As a specific example... I follow several hundred NYSE stocks... And am presented every day with perhaps 500 trading opportunities by my computers... Of which I reject about 300... Leaving me with 200 trades that ** choose ** to execute. If I did all 500 trades... And did not use my vast experience to avoid pitfalls... I would be only marginally profitable and out of business long ago... As opposed to very profitable. Anybody rigidly sticking to mechanical strategies is doomed to mediocrity at best. I idea that the input of an experience pro trader is of little value... Is completely illogical... And could only be held by someone with very limited trading experience.
500 potential trades a day ? This sounds like your system is not really restrictive ! If one beats his own system, it just means he did not integrate all the variables he considers in his strategy.