Why Is The Obvious Not So Obvious?

I am almost (>99.99%) certain you can rule out the middle one

 

For your paper you need to focus on avoiding induction. NYSE guy is using induction so he is going to come up against a bad result in time. See his John Boyd based inductive feedback loop comment. This also includes his making using a non null hypothesis error. He mentions ACTION as important. Boyd used OODA where A is action. Unfortunately, however, Boyd was a user of induction which is, in fact, a riddle. See Riddle of Induction. Too bad for the thread.

The alternative is using a deductive process that grows from reasoning, an intellectual pursuit not done in this thread.

A hypothesis set is required as the starting point. There are many requirements to begin to reason from a hypothesis set. Keynes introduced having like kind for each element of the set.

If you begin your reasoning with three thoeries or principles such as:

Logical Theory (Carnap)

Principle of Indifference, and

Invariance Theory

At this point the work of Rev. Thomas Bayes will come into view. Here you see part of the debate on probability between frequentists and Bayesians.

Kuhn will present you with the concept of the adequacy of a theory. It necessarily involves: accuracy, consistency, scope, simplicity, and fruitfulness.

You will come up with a paradigm (algorithm) whose component parts include the Hypothesis Set and the parametric system of measure. To do this you will have to consider the Underlying Measure variance Theory and an aspect of Logic Theory that requires completeness.

Here you come to understand that there are no "rules of trading", rationally speaking.

Carnap provided that there is a language (L) and keeping its size small while complete leads to the understanding that it is extremely important to have many levels of vocabulary instead of one large single level vocabulary based upon a few prime words. An optimal dictionary has about 15 levels. For trading 7 levels will suffice.

The hypothesis set needs to deal with a few matters. Arbitrariness can be minimized by moving as high as possible in hypothesis since, by intuition smaller symmetric types (kinds) are rare and less arbitrary. I slipped symmetry in and its value is primo. Here is where in hypothesis “names do not matter and only “form” is important. Finally, it is important to move as close as possible to the beginning or origin of thinking. Having no or few priors sitting “before, in a primal sense’, the hypothesis set is important.

Trading has a common name for the hypothesis set although the name does not point to hypotheses in a typical trader’s mental status and comprehension. The Holy Grail.

These three boxes make up the graphic of the theory of paradigm or algorithm: Ther box filled with the Hypothesis set; the box filled with the parametric measures; and the box that is “prior” to the hypothesis set.

From this point on all that is needed is the practical and pragmatic set of training wheels that lead to a system that is wholly functional.

There are two hypotheses; one parametric measure and three priors. All are one liners.

The two hypothesis are symmetric and of like kind. Further they are mutually exclusive. Call them h sub 1 and h sub 2. So, h sub one is NOT h sub 2 and h sub 2 is NOT h sub 1.

Wonderfully the parametric measure is simply change measured with respect to time an, secondly, only two variables are involved.

The three priors are just a result of the manner in which markets operate as quasi living things and the pragmatic aspect of making money.

The priors are:

You have to be in the market to make money.

Money is made through the principle of price change.

To extract the market’s offer fully, you have to be in the market all of the time on the right side of the market all of the time.

Velocity is what you measure for the compnents of the two hypotheses.

The two hypotheses are:

If volume is increasing, then price trend will continue.

If volume is decreasing, then price trend will change.

As it turns out a person learns by developing short term memory into long term memory. An example of this is reading. As shown above the language you learn to trade is reading the velocity of volume and then knowing you know what price Action will result.

This involves a process of building the mind level by level through seven levels of glossary or terms that form the language of the market. It is quite an experience to have gone through and applied this process for quite a while to many markets. The Kuhn test with its five components shows up in trading expertise of having a language that is read on all fractals whereby there is no change in the languaging.

In the thread no one, without exception, gets this.

There are some classic ET members who are undifferentiated and have no language to use. These B people are priceless in the humor they post.

Some very common mistakes that are made:

Using induction.

Using an entry/exit based strategy.

Being disrupted in use of analysis.

Being disrupted in application of intuition.

Using mathematics other than Boolean algebra.

Not recognizing that there are two equally important variables in markets.

Not knowing the relationship of the two variables in null hypothesis terms.

Beyond this there is the incoherent belief system of what has become known as Conventional Wisdom.

Trading is a partnership of two elements: the trader and the market. Most, say 95%, cannot recognize the simple requirement of a partnership and just where the requirement comes from and how it gets into the space. A routine results: Monitor, analyze, decide, and act in a timely manner.

The partnership begins with “tells”.

The requirement is to “accept” the “tells”.

By allowing “acceptance”, the trader will find “TRUST” appearing in the space of the partnership.

“Trust” builds from a small seed. It grows and more and more “tells” are seen and “accepted”. Most traders have never seen the market. NYSE guy hasn’t. Sushi hasn’t. traderzones hasn’t. so they only post humor.

Finally, what “trust” means comes into view. A measure becomes available. The measure’s name is “value”.

I have described a circle. “tells”>>>acceptance>>>trust in the circle>>>> value>>>>tells>>>etc…..

Trading’s Holy Grail is the order of events and their timing. The algorithm is pool extraction, that is, continually taking the market’s offer through a hold/reversal strategy that keeps you in the market, on the right side of the market, and extracting segments of profits each time the right side of the market changes.

Obviously, all of this can be coded into an assortment of ATS’s. There you get to deal with the added variable of the market’s capacity. Presently it is a good estimate to understand that trading ES contracts is limited to about 10,000 contracts as the capacity for taking the offer continually in a given account.

The two disruptions lead to irrational observation, decisions and actions. The simple proof of this was found in a Rutgers study by a team. Their results appear briefly in the economist on page 78 of the 11APR09 issue. There you see how those in the thread are defeated by themselves. They simply bet on the wrong outcome of losing and the wrong outcome of winning. The numbers speak for them selves and you can assign these disruptions to each of the posters to see where their posts are incoherent rather than coherent. This can be measured while trading using a hookup to your computer. Buy a emwave pc and make the four measures of your incoherence.

QED.

 

jack,


I thought you retired already

No matter go piss up a rope – although your writing does help me sleep

And - I believe you still have an outstanding trading challenge waiting you - No??


Regards

 

Ahh, the open mind strikes again.

Occasionally, I find a post worth commenting on. MC 87 is at a small liberal arts school and doing a paper on a business plan and trading plan. I got the idea that he could believe some of the stuff here.

I do have an outstanding trading challenge. What makes it outstanding is the magnitude of the opportunity.

The challenge is the capacity of the markets in these extremely fruitful times.

Who would have thought the mere slope of lines on two panels (P and V) would be all it takes to continually pull capital out of the market at the capacity of the market. As the little acorm said when he grew up: "Gee I'm a tree". Geometry is quite simple.

Am I on your wavelength yet????

LOL

 

Please, let's not permit this thread to turn into a pissing contest. There's precious little else on this site of any worth whatsoever. This is the one thread where people are actually doing some serious thinking. There is a lot of logic and value in JH's opinion.

Inductive reasoning can indeed lead you into a whole big world of hurt if you are not careful. However, I am sure that NYSE is aware that if indeed he is using options to trade pairs, then that always carries the risk of a black swan swimming onto the scene at some point. If he is smart, which I believe he is, them he will have his eyes open to the fact that market movements follow power law distributions rather than normal or Gaussian distributions. This is the reason why so much of the statistical maths used in a lot of the older quant strategies out there is utterly, utterly useless in the long run.

I reckon he will also be aware of the fact that, whilst trading pairs protects you from one breed of black swan, there are other breeds which can still bite you in the arse just as badly.

This is valid up until a point. Volume can be very misleading if you don't use your noggin to think through what generates it. IMHO, the key is understanding why volume is increasing/decreasing. Are people trading because they wish or because they must...and more importantly, do they stop trading because they wish or they must?

As always, all the best...

 

Hershey is good for one thing at least - making chocolate

This is "exactly" the opposite of what you "must" do.

The next thing we will hear is that one is better to;

"Think outside the box"

but, I say it is much better for a trader if he/she is

"Inside the box"

BTW, I read about 5-6 lines, then it was very "obvious" to me that JH knows "everything about anything"

Looks like RN had him sussed out a long time ago - not that I will waste any time looking back

 

Oh well - like I said, everyone to their own.

RN, this is a good clue for the last puzzle

And, for those of you who lose money, volume and VSA, and all the rest of the crap that is "studied" - is just that, crap, that stops you seeing what you "must" see in order to take money from others, but as usual, I know that I know "absolutely" nothing, where it is very "obvious" that others do not

 

W87 - this is a good chance to see how observant you have been - I said something, a "few" times that is very relevant to what has been recently posted!

Do you, or anyone else for that matter, have any idea what it might be?

It is very obvious that 2 people do not

 

Conventional VSA is indeed just that. Complete and utter shite. Anyone who has spent any time glancing over a chart with their brain in any gear other than neutral can deduce that.

You only need to consider these two scenarios:

1. Sellers go bonkers for whatever reason and decide to smash seven shades of shit out the bid. Price falls quicker than a whore's kecks on massive volume.

2. Buyers go bonkers for whatever reason and decide to strip all their resting buy orders from the book. Price falls quicker than a pisshead off a barstool on no volume.

Two completely different volume signatures but the same price action.

All the traditional VSA stuff about tracking the professional money moving into and out of the market is hopelessly myopic. Professional money doesn't post a billboard advert to tell everyone what it is doing. However, discounting changes in volume from your thinking completely is also hopelessly myopic.

Indeed, you are right that the only true "absolute" is that price can drop to zero. And indeed you are right that options provide excellent vehicles for controlling risk whilst using leverage. However, watch out for those black swans. They have a funny habit of finding a bit of bare arse to peck.

 

And how does one learn anything of value

And yes, I do look at volume when daytrading, but not like anyone else looks at it

As mentioned, the one who "excels" is the one who will gain the upper hand - or edge, if you prefer to keep it "trading talk"

At this stage, readers should know that I am completely mad, or that I know absolutely nothing about anything