yes, you can generate positive alpha WITHOUT a PhD AND 201 replies and 9460 views of this thread in 12 hours and 36 minutes classifies this thread as a "butterfly effect" example.
the corollary is - a PhD will not guarantee positive alpha based on my estimations, it may not even help as a trader-trainer, i'd prefer somebody like a competitive athlete, type A, down to earth, common sense type .
it seems like everyone is just arguing from extreme, opposite viewpoints. i think the statement by the OP that you cannot generate alpha without a PhD is quite naive, but the arguments made by some of you to the contrary are no better than OPs argument. My question to Virgin and whitster is: In your perspectives, how much of a role does randomness play in trading results? and is the degree of randomness enough to fool your average person?
look, randomness implies UNPREDICTABILITY that is simply not the case in trading. i have just over 20 different setups. some only present opportunities once every 6 months or so (and i am an intraday scalper), others are usually at least a couple of times a day or so so, i have one particular setup i have used over 600 times. it has over 85% winning trades, and the average win is just over 85% of the average loss. when people don't understand price action, they say it's RANDOM. that's simply absurd. intelligent trading means i can enter trades with reasonable (and profitable) expectancy... thus the price action cannot be random but you have to have a statistical edge i would have no edge if i were to guess that the first randomly chosen person would be taller than the second. i would have an edge if the selection was such that the first person would be a male, and the second would be a female. while i cannot predict with any certainty that the former will be taller than the latter, i know that given sufficient n, it's going to be true far more often than not, and thus given 1:1 odds would be a great "trade" that's how i look at my trades. i don't enter when i don't understand the price action. cause even though it isn't RANDOM even then, it just means I have no statistical edge in predicting its movement the idea that price action is random is an outrageous claim. outrageous claims require extraordinary evidence. i haven't seen ANY evidence that price action is random, let alone "extraordinanry", and i have immense evidence, as well as the backing of statistical and scientific theories to back up that it is not
so judging from the fact that you come from a statistics background, I'm sure you have analyzed your trading RESULTS for randomness? if so, what is the probability that the results you attained are due to randomness?
In case you haven't figured it out, anyone like the Whitless Wonder who claims to use Chaos and Game Theory in their scalping is highly unlikely to have any kind of quantitative background, much less be able to perform the relatively trivial statistical task of testing for non-randomness in their track record.
So you took Stats 101? I have 3 degrees; one is Stats, one in Operations Research and one in Management Science. That's a rather intense quantitative background. Have any understanding what OR and MS degrees focus on? I'm not someone who has a few courses in introductory probability & statistics and did some Monte Carlo simulations. That's at best a sophomore undergrad class. And oh yeah ... after 15 years in industry I threw it all away ... to trade. Been 11 years now as a trader.
i was not aware of these facts. i guess i shouldn't put too much emphasis on self proclaimed market practitioners or PhD candidates.
The corollary to that is : Just because something is unpredictable doesn't mean that it is random. One of the implications of a Stable Pareto Levy Distribution is that the short term is "predictable" while the long term is not. I put "predictable" in quotes because the "prediction" has to be rough enough for it to be accurate. A good example of a nonlinear dynamical system and "prediction" is a weather system and its forecast. A forecast can be accurate if you keep it rough enough. It cannot be something like this: "It'll be 84.7 F at 2:54 pm in Central Park around 86th St. with barometric pressure at 29.92 inches." However, a forecast such as "A high pressure system is moving in, kicking out the low pressure system that gave us rain over the last several days. Expect temperatures in the 80's with clear,bright blue sky over the next 3 days..." is accurate because it is rough enough to survive reality. Keep in mind that no one can predict / forecast the weather 3 weeks from now, or 3 months or 3 years. Remember all those forecast of Dow 36,000, CMGI heading to the moon, New Economy, etc.? What ever happen to those long term forecasts? Short term is "predictable", long term is not. Hey, if it's 20 F outside right now and the temperature has been dropping, I betcha that it'll be in the high teens within the next few hours. What are the odds of that happening? Same thing with the markets.