Surf, Glad to see you could make a reasonable, logical post. We have a difference in philosophical style on the nature of the universe: You) It appears you rely on what others tell you to formulate your perspective. Some would call this indirect information since you have now way of knowing it they are telling you a fact they have tested, an assumption or belief they have form asking other, or a lie for any number of reasons. Me) I prefer my own direct experience based on my own research, experiments and discoveries and the actual results they produce. I inherently mistrust experts for several reasons. 1) They have a built in bias in the form of their need to maintain their social and academic ranking. Anything that doesn't not agree with their perspective is a direct threat to their ego and their position and hence livelihood. A hedge fund manager that is getting a 20% return will tell you thatâs the best there is. 2) They tend to be far from the edge of discovery, only adopting something new when forced by mass movement in the field. Edison invented the light bulb primarily through dogged and creative effort. If he had queried collections of experts he likely would have given up and would have become as unknown to future generations as they are today. A single example, as there are thousands. In the 1830's the Scientific American published an article from a group of experts on a radical invention called the rail road. Their conclusion was that stage coach lines need not worry about the competition as the biology of a human being would cause fatal nose bleeds if the body was subjected to sustained speed in excess of 20 MPH. There is an old saw.."those who can do, those who can't teach or at least talk a lot about it". You said: "ps. maestro speaks the truth here,as far as i can tell. " I can tell that heâs wrong based on my direct experience. That's why I keep challenging him to state trading results which represents the threshold between random and non-random behavior and why he is terrified to do so. What if someone can provide independently verifiable evidence that there is life on the other side of his defined boundary .... a real bummer for an expert and a risk to terrible to take. Jerry030
? besides arbitrage trading and the like, I don't see how you can have an edge in directional trading if the markets are always acting randomly ? Can you elaborate ?
I'm confused Firstly, I went back and looked over your paper on zero crossings. 1) I found some things that seemed like errors (I could be wrong). For instance: "Inside of the dead-zones, zero crossings do not occur." huh? Isn't that exactly where they occur. Should it not be outside of the dead-zone "channel" zero crossings do not occur. Secondly, I didn't understand about the loss (per step change in opposite direction) equating to -2s on the game. If my prior bet was +s and the next step is +s, i win +s, if i then bet again +s, and the next step is suddenly -s, i lost -s or 1 s unit, i then change my bet to -s, and if the following move is -s, i am back on track. How did i lose the 2s units? Neverthelss, the paper simply concludes exactly what i said earlier, that any mean offset in a random distribution increases the expectancy of the long run of that game to be biased in the direction of that mean (i.e. larger mean offset implies larger final magnitude of gain and less zero crossings). Where as in a random distribution with a zero mean, the final output would on average tend to zero (or no edge).That is what upward drift in the markets is all about. Was there something outside of that, that I missed? There is nothing here that compensates for fat tail events. Don't see how this relates to parrando's paradox. Did you post a different paper? ------------------------------------------- P.S. Nice mataphor for parrando http://www.cut-the-knot.org/Curriculum/Probability/Ratchet.shtml
The Anglican Church had/has theologians as well. And if Disraeli is the earliest you could find, you didn't look very hard.
http://gi.cebitec.uni-bielefeld.de/people/rahmann/parrondo/rahmann-report.pdf "The key is to know the rules of the games exactly, so one can know which game to play in which situation. This is clearly the reason why one cannot gain money by applying parrondo's paradox to the stock market."
The trouble with that approach is that it doesn't work too well in actual play. For an extensive critique, see Aaron Brown's book. "Poker Face of Wall St."
No, the reason is that there is no reason to apply Parrondo to the stock market. A Parrando game always contains a sub-game with a positive edge -- i.e. a winning game. Just play the sub-game directly.
Thanks for corroborating the original statement. Obviously, one of the things I was getting to was that the sub-game itself had as a component, a huge edge already built in (Game B = 75% prob). Now if only you could get a system that does just that one component's performance, you'd have a pretty good edge. No argument there. Not that you've added anything to the original question (i.e. parrondo). I'd rather think of the question, of having two sawtooth functions perfectly inverted (they both have mean of zero), simply bet long on one when it is rising, and switch to the other when the first begins to fall... keep repeating the algorithm. Notice no edge is required on either individual system (they both have long term expectations of zero), the key is knowing when to switch, as the authors pointed out. Which in stock market parlance is ... good luck.
Very cool and the humor is there too. NYT and Nature trump the Lo to be thanked crew of the late 80's. What a list to trump. It is very good to make successive discoveries of what is at hand; what is really at hand. Jumping the threshold is a great thrust because it puts to rest so many games that just waller under this line in the performance sand. Wavelets, at least, are more sensible that the brownians on which they ride. Parrondo, though, is only an exercise that is way away from the markets. The reasons are imbedded in the Rahmann (2002). For these reasons, well given, come the seeds to realy climb out and above the performance so far cited. The players are not A and B or two other pairs that play under other defined rules. Changing the rules insitu is only an interseting thing to play with. Part 3 scopes and bounds what Rahmann wants to consider. By Part 5 we find there is no tooling to deal with getting someplace. So dtrader thanks for getting us back on the jerry030 track of dealing with significant performance above the Maestro and surfer buddies levels. What is the pertinent substitute fro A and B? What is the set of seeds that can be seen in Rahmann (2002) by inference? The players in the making money game are two in number and each has a strategy that can be revealed by the rules they play by. What is the change in the consideration of rules that Rahmann infers? When 666 quotes that I do not believe backtesting is valid, he makes the point Rahmann infers. Silvermotion can only concieve and percieve that he knows what is going on after the event (SCT's tooling doesn't work until afterwards). What these people believe is out of order and who cares. The two players in the game are the trader (like jerry or cutten etc and not like Maestro or Surfer boys) and the MARKET. The scope and bounds of each's rules has to be considered as Rahmann looked at the rules of Parrondo individual losing gamers A and B in order to see if he (Rahmann) could do a work around to get above prior mathematical levels of success (the Part 3, 4, 5 thing). I changed the players to the trader and the MARKET. I injected the consideration that the rules used are those of the two players and not a common set of rules. All these rules, it turns out, do not have to be applied all of the time. The poker calculator uses the same deck and one set of rules and just what is showing (using 1 million combinations) to only do a probability. It does not work for trading, as suggested, because the deck is not constant nor are the rules of the game that are in play at any time. Similarly, as jerry notes, to win at ruolette you do not play the odds unless you are the house; instead you play the machine by dealing with the fact that two velocities are involved and when the ball leaves the rim to bounce around, it does this at a specific location (different each cycle) and all the places where the ball gets captured are fixed in stone around a physical never changing arrangement. Do you know the order? Maybe not but college students do. We are not flipping coins. Put the coin away. The use and application of rule subsets from two different sets of rules is the other part of the opportunity. The comment: Where is the trading fractal?" does not refer to just a chart of a certain duration of bar. What the comment means is: what part of the MARKET model is in use at a given time? It also means; what part of the trader's strategy is being applied at a given time? Both players A and B can change what they are doing at any time. Backtesting if it were of any utility would have to do this according to the action-reaction of player A to B and B to A. The MARKET pace-volatility matrix is dear to me because it embodies most of the considerations. constructing it monthly in equi-deci-divisions of pace crossed with 5 minute bar market volatility informs me of how the player called MARKET is playing. the rows and cloumns are normal distributions that are ONLY truncated (columns only) by the market's CAPACITY, a transparent truth always available. So any trader can make his trading rules and pair subsets of these rules to the MARKET trading fractal at any time. As was ponted out people who measure the markets often have vested interests. My vested interest is pool extraction from the viewpoint of a trader. I feel most people who trade want to make as much money as they can. I recommend looking at what is offered and taking it. That is what the pace-volatility matrix tells me. At any pace (immediately measured) the market offers a given volatility distribution and I know what the distribution mean median and mode are in that five minutes. And I also know (imdeiately measured) what the market IS doing volatilitywise. I also know all day long everyday what cell the market is operating in on this chart. So I frontrun the other participants in the market to take what is offered segment by segment. Trends operating on the market fractal (this is not the 5 minute bar) is what researchers need to get around to. Randomly genrerated data is not good enough to work with since it is not reality. Neither as dtrader pointed out is the zero crossing game. Jerry points this out as well and in terms of his personal performance which is way beyond the threshold of the literature. All of the people who are classified as great trader you have never met" also pass being well above the threshold test. Surfer's buddies do not know any of these people and neither does surfer he tells us. He says he does not know ANYONE who is a player who is "out of the box". Research, NYT or Nature articals do not hack it so far. The inherent academic and financiing sources biases do not support understanding what is going on or what is possible. Crayola 101 is humor to be sure, but it does allow a person to use a string to add up the day's offering. Four inefficiencies contribute to not reaping the offering. Today, in modern times, what jerry is talking about measuring and understanding is where the intellectual action could be focussed. The trader only has to take care of being in the market and always being on the right side of the market. What I mean is just not possible to understand (as a passive onlooker) until you are practicing doing this. A recent poster mentioned that he looks at a naked bar. Suppose he knew, always, the instantaneous market pace and volatility; his boat would be floated. He can't get out of this framing; he is IN the market fractal. All he has to do is collect the remaining infomation that explains the MARKET's playing and then USE his rules to extract the offer. The market is transparent as it unfolds. Two losing players can win to some extent. Beyond this extent is what is important. Make the MARKET a winner (obey the market because it is always right) AND extract all that is offered by staying in the market AND on the right side of the market. It looks like someone has to start funding these biased people and get them biased to what jerry suggests. Academics are cheap that's for sure.
Ah, the master of "take comments out of context" rears his ugly head again. He who is incapable of doing his own research is first to cast doubt on the hard work of others. I am a student of Einstein like anyone that follows the theories of any respected and brilliant theorist. I, unlike you, respect the research of others by trying to advance the search for knowledge not stonewall it like yourself. Why is it you must start arguments everytime you enter a thread? I also said I spoke in one of Einstein's classrooms in Zurich. I presented a paper on my research there a few years ago. I never said I taught there. Of course anyone could see how that could be misinterpreted . . . . NOT.