Why do I see "Trends" in Randomly Generated Data?

Discussion in 'Data Sets and Feeds' started by Rahula, Feb 21, 2008.

  1. Even if there are no trends, and all that seems to be a trend is just an ilusion.
    You cannot forget that all traders will be subject to seeing that same ilusion. Some will see that ilusion, while some will see the opositte... So they begin pushing in the oppositte direction... and then people start noticing that they can make other people push with them by making it look as if things were going one way or the other... and so manipulation begins...

    But this doesn't happen in a far away place isolated from the world, quiet the contrary... there are also external factors influencing the market, in any given day there are thousands of news affecting the market, sudden and unexpected changes in the rules for one small company that no one really cares for, or sudden changes that alter the rules of the game and most players' expectations...
    even Nick Lesson couldn't stop the Nikkei from falling like a rock when the Kobe earthquake hit...

    Black Swan events are just an accident waiting to happen... perfect storms, they're specially bad if no one was expecting it to happen and bets were going the wrong way... that creates a panic reaction, an stampede not different from the ones you see in the Serengeti.
     
    #21     Feb 21, 2008
  2. yes, i concur.

    however, this is not quantifiable in any manner, it can be witnessed after it has occured, but there is no way one can tell when one of the trends you mention will begin or stop---- not even mentioning using such a thing to make buy and sell decisions in the market when everyone is trying to GAME everyone else.

    your broad strokes are correct, however drilling down, there is nothing there that will aid in predicting.

    surf
     
    #22     Feb 21, 2008
  3. The following is from es today on a 1 minute chart. This fib was totally predictable, and after hitting the target the next fib after this one was predictable.

    Now fib days don't happen everyday, but when they do they are very predictable and you will normally get two or three very reliable trades. All you do is just leave your target at the 100% mark and it will get hit 99% OF THE TIME.
     
    #23     Feb 22, 2008
  4. slacker

    slacker

    Wow, 99% of the time?!? Seems to be easy to define. Have you tried to backtest it?
     
    #24     Feb 22, 2008
  5. I wouldn't know how to back test it if I wanted to but I can tell you from experience it works.

    The guaranteed part is when it surpasses the previous low so in this case we are talking about the range from 1359 to the target.

    I normally trade this pattern twice. I first trade it to two ticks less than the 61.8 mark, and then reenter the trade if it exceeds the lower pivot point by at least two ticks.

    There are occasions where it will only make it to two ticks from target(people doing the same thing and exiting for a sure thing). People get restless waiting for the final two ticks, but typically the market will move up a little and go right back down to the 100% mark.
     
    #25     Feb 22, 2008
  6. pneuma

    pneuma

    I have mathematically defined what a trend is for me, and based on the algorithm I have statistically proved that the trend as I have defined will continue. Thus I developed a trading system.

    Why can't you get it through your thick head that there is no prediction there – it’s just a numbers game. For actual trading I don’t even look at charts, I just run algorithms and generate statistically relevant trading signals.

    Let me put it in terms you might understand. If you ask enough chicks one is bound to sleep with you. As you practice you can "pick" those chicks that are more likely to sleep with you. If you can objectively define the variables that frame your "pick" you can statistically understand possible future performance.

    And before you suggest that “you know statisticians that don’t believe in TA”, I’ll let you in on a secret – I am a statistician. I don't think your friends understand TA, you obviously don’t.

    pneuma
     
    #26     Feb 22, 2008

  7. ....what year are you living in?
     
    #27     Feb 22, 2008
  8. achilles28

    achilles28

    Support and resistance points are a fundamental, self-fulfilling truth of the market.

    At these points, 'smart money' lines up to move price from random to non.

    In my experience, there are plenty of traditional ways to ascertain when a trend is failing and when a new one has commenced. These principles are available to all in the public record.

    Good trading.
     
    #28     Feb 22, 2008
  9. One of the most scary thing in life is the abuse of logic. This is what you have done.

    The conditional :

    (random data) => trends

    is true because one can demonstrate so like you did.

    NOW, this is the tricky part, if you see trends in data and based on your demonstration above that corroborated the conditional you then claim that the data is random this is called:

    AFFIRMING THE CONSEQUENT

    which is a FORMAL logical fallacy and maybe the worse of its kind.
    Example:

    When it rains I wear a raincoat. Affirming the consequent is to say: I wear a raincoat therefore it rains.

    All of the above is a simple way to say that random data include trends but the fact that markets also include trends CANNOT and DOES NOT imply the data are random.

    Actually, the underline process of stock market data generation is for extended periiods of time very predictable and driven by macroeconomic conditions. In layman's or politician's terms, the stock markets reflect the state of the economy.

    Bill
     
    #29     Feb 22, 2008
  10. squeeze

    squeeze

    I generate and use random data quite a lot to provide a base-line when testing new analytics.

    Superficially, i.e. by casually observing charts it is difficult to tell the difference between real and artificial random data, especially on a daily time frame.

    Analysed in more detail they are not the same. If you can find the differences then you are well on your way to having a tradeable edge.

    Markets are much closer to random than most traders would like to admit and much more deterministic than most economists believe.
     
    #30     Feb 22, 2008