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How important is a knowledge of maths?

  • #21
  • Feb 7, 2007 8:57pm Feb 7, 2007 8:57pm
If you've got a calculator, you're probably ok. However, I was quite surprised how useful "Brain Age" on the Nintendo DS was. Due to the timed math/recognition games, I found myself able to analyze charts and do quick math much faster. It also includes Sudoko, which helped a bit too with visual patterns.

Certainly not a necessity, but I found the games to be a useful tune-up given I haven't taken a math class in about 20 years...
  • #22
  • Feb 7, 2007 10:14pm Feb 7, 2007 10:14pm
Quoting Bemac
In retrospect, about 12.5%
MM = 40 %
Psych = 30%
FA = 12.5%
TA = 12.5%
Var = 5 %

IMHO only I'm sure others will have their own opinions.
I agree that MM and Psychology are more important than math skills but I don't think the various components can be broken down to exact quantites for all traders. We are all different. Also some value FA more than TA and vice versa.
  • #23
  • Feb 7, 2007 10:43pm Feb 7, 2007 10:43pm
Agreed.

Just thought some numbers would be prtrinent to the thread.
If definatively asked, I doubt i coud put a percntage on any of them. I did, however, think that this would be a good place to start.
  • #24
  • Feb 7, 2007 10:45pm Feb 7, 2007 10:45pm
Perhaps I'm the ignorant one, but how are you all doing MM without "math skillz"?

It makes no sense to me; charts, graphs etc.. are MATH. How is it possible that knowing that wouldn't help ????

I actually find this question almost like a fighter pilot asking "Do I need to know complex math?" and others replying "No, you don't. Reaction time is much more important than math when flying.. besides, my 9 year old son flies the simulators just fine, and he doesn't even know multiplication.."


I can only say, FX is a DIFFICULT Item, and I for one, try to give myself as much advantage as I can.. I can't imagine someone "trying to be successful" at FX and not learning math because others on a forum told them it's not really necessary..

Just ask yourself:

Do I want an advantage in FX? If so, learn math, if not, don't.
google:
  • #25
  • Feb 7, 2007 11:20pm Feb 7, 2007 11:20pm
Quoting twoblink
Perhaps ...
Please understand that I am not trying to incite anyone...
All Traders that Trade from your Base Criteria will agree 100%.
However, not ALL Traders Trade from your Base Criteria. I know this to be true because I am one of them.
And. {assumption} Before you ask.
No. You cannot see my statement or proof thereof but I believe if we were to discuss Math, you would leave me in your dust. If we were {are} discussing Forex {admittedly I haven't sold a TS/EA or written any books related to the markets which probably puts me in the Boys gate.} what I do, works for me.
  • #26
  • Feb 7, 2007 11:29pm Feb 7, 2007 11:29pm
wow, so much knowledge in this thread. esp the dirivatives..

i propose we develop an indicator based on that knowledge.
  • #27
  • Feb 8, 2007 12:26am Feb 8, 2007 12:26am
I fully realize that my opinion doesn't matter regarding this particular subject, but I'm bored so I'll weigh in.

Math has its place in trading. A working knowledge of algebra and statistics/probability are required for proper application of money management and system performance analysis techniques. If you don't understand the mechanics of those calculations, you’re probably going to have a hard time trying to build a profitable system.

However, when you try to break down the market’s gyrations into a mathematical equation your taking it too far. The market is not a probability distribution. If it were it would be impossible to make any money at it because every tick would in effect be random. Since none of us believe the market is random (if we did we wouldn't be here), we must also conclude that pure mathematical laws do not govern it. The natural evolution of that belief system is (or should be anyway) that something other than math governs price movement. So if math doesn't govern price movement, why are we trying to solve price movement mathematically?

If the philosophical subject doesn't speak to you, we can examine it in a different way. Solving the market with math is like trying to solve the color green. You can construct all kinds of mathematical equations to make green (as they have done in the computer world), or you can do what preschool children do with red and blue. Neither method has provided a new insight into what green actually is. So neither method has any sort of "edge" over the other.

Unfortunately that’s what high level mathematicians run into when they’re competing against high school dropouts in the market. They’re both looking at the exact same things (price, and potentially volume or order flow) and using different mechanisms to evaluate what the market is going to do. They can both be right or wrong, but that doesn't mean their method is better or faulty. The truth is that neither of them will ever know what really made price move in the exact way that it did.

The moral of this story is that if the market could be solved mathematically, it would have already been done. Since it hasn't we can only assume that we have to find a way to evaluate the next choice presented to us. We can either build complex algorithms to make that choice or we can draw a simple trend line, but in the end we need to have the conviction that the choice we made was the best one. How we come to that conviction may or may not require the use of math.
  • #28
  • Feb 8, 2007 12:39am Feb 8, 2007 12:39am
Quoting Darkstar
I fully realize that my opinion doesn't matter regarding this particular subject, but I'm bored so I'll weigh in.

Math has its place in trading. A working knowledge of algebra and statistics/probability are required for proper application of money management and system performance analysis techniques. If you don't understand the mechanics of those calculations, you’re probably going to have a hard time trying to build a profitable system.

However, when you try to break down the market’s gyrations into a mathematical equation your taking it too far. The market is not a probability distribution. If it were it would be impossible to make any money at it because every tick would in effect be random. Since none of us believe the market is random (if we did we wouldn't be here), we must also conclude that pure mathematical laws do not govern it. The natural evolution of that belief system is (or should be anyway) that something other than math governs price movement. So if math doesn't govern price movement, why are we trying to solve price movement mathematically?

If the philosophical subject doesn't speak to you, we can examine it in a different way. Solving the market with math is like trying to solve the color green. You can construct all kinds of mathematical equations to make green (as they have done in the computer world), or you can do what preschool children do with red and blue. Neither method has provided a new insight into what green actually is. So neither method has any sort of "edge" over the other.

Unfortunately that’s what high level mathematicians run into when they’re competing against high school dropouts in the market. They’re both looking at the exact same things (price, and potentially volume or order flow) and using different mechanisms to evaluate what the market is going to do. They can both be right or wrong, but that doesn't mean their method is better or faulty. The truth is that neither of them will ever know what really made price move in the exact way that it did.

The moral of this story is that if the market could be solved mathematically, it would have already been done. Since it hasn't we can only assume that we have to find a way to evaluate the next choice presented to us. We can either build complex algorithms to make that choice or we can draw a simple trend line, but in the end we need to have the conviction that the choice we made was the best one. How we come to that conviction may or may not require the use of math.

geez dark i wish i was only 1/4 as intelligent as you

ur posts out of boredom are amazing!

thanks
mike
  • #29
  • Feb 8, 2007 12:45am Feb 8, 2007 12:45am
Psychological knowledge is more important than mathematical or financial

It is just desirable to understand what the indicators mean, how they express price movements.
kiss the trend
  • #30
  • Feb 8, 2007 3:09am Feb 8, 2007 3:09am
Quoting Darkstar

The truth is that neither of them will ever know what really made price move in the exact way that it did.

but in the end we need to have the conviction that the choice we made was the best one.
Brilliantly said. Two of the essential elements that people need to know. Well done.
  • #31
  • Feb 8, 2007 6:33am Feb 8, 2007 6:33am
Renaissance Technologies is a private investment management company with over $4,000,000,000 under management founded in 1982 by Jim Simons, who (correctly) believed in the potential of technical trading models.
Renaissance Technologies


"The advantage scientists bring into the game is less their mathematical or computational skills than their ability to think scientifically. They are less likely to accept an apparent winning strategy that might be a mere statistical fluke."
Jim Simons, worlds largerst fund manager

rest of article: http://www.turtletrader.com/trader-simons.html
  • #32
  • Feb 10, 2007 3:30pm Feb 10, 2007 3:30pm
math is very important. if you dont know what chance you have of winning you are just playing the lottery.

there are really 2 paths to take:
1) get trading in the zone and you will make money when your aura is green and the weather is great. You can only win this way if you are a natural or you are lucky. Note the guy who wrote the book is barely profitable and thats on the good days
2) get a statitics book and scientifically figure out your odds and duration to make a profit. You can only win this way if you can make a plan that the odds are in your favor. To do this you need to know how to determine odds.
  • #33
  • Feb 13, 2007 10:48am Feb 13, 2007 10:48am
Why learn math, when you can buy someone's system, which will make 3000+ pips a month, but they are willing to sell it to you for the low low price of $49.95 (but only if you act fast!!)

google:
  • #34
  • Feb 13, 2007 11:38am Feb 13, 2007 11:38am
Of course you need basic math to manage your account, but you don’t need it to see an MA cross, MACD cross, RSI cross or to see whether the price is going up or down.

If you want an edge, learn it. It's helpful to understand how indicators are worked out, how they relate to price movement and how you can interpret them to your advantage.
Follow the money. Follow the money. Follow the money.
  • #35
  • Feb 14, 2007 6:26am Feb 14, 2007 6:26am
I actually recommend people not use indicators of which they don't understand the math behind it..
google:
  • #36
  • Feb 14, 2007 8:07am Feb 14, 2007 8:07am
Yes because then they will realize that RSI, Stochastics, CCI and many others are just moving average calculations themselves.

So no matter how many they plot on their chart all are based on the same principle.
  • #37
  • Feb 14, 2007 8:15am Feb 14, 2007 8:15am
Quoting SunTrader
Yes because then they will realize that RSI, Stochastics, CCI and many others are just moving average calculations themselves.

So no matter how many they plot on their chart all are based on the same principle.
Yes, same source... why CCI, RSI, Stoch etc.. all match up..
google:
  • #38
  • Mar 25, 2007 9:57am Mar 25, 2007 9:57am
Quoting tom.hunter
Hey

As title: How important is a knowledge of maths in forex trading?

(not very basic maths i mean more advanced mathematics)

Thanks
If you can count your money, you'll be fine. Only simple math is involved unless you create your own indicators and do other fancy stuff that doesn't improve your trading but impresses your friends.
  • #39
  • Mar 25, 2007 5:57pm Mar 25, 2007 5:57pm
I think that at least some minimal math (calculus, probabilities, signal detection) is needed to properly (a) calculate your money management rules and (b) optimize your trading method using historical data.

Whether any knowledge is needed beyond that depends on trader's personality. As far as I can see, there are two types of traders: the ones that are good in pattern recognition and the ones that are good in analysis. It is evident even in the responses to this thread. People mostly think that their way of perceiving the world is the right one.

It seems to me that it's better to understand, what is your optimal
information processing style and develop it. The best, of course, is to be able to combine both styles...
sans peur et sans reproche
  • #40
  • Mar 25, 2007 6:47pm Mar 25, 2007 6:47pm
What a discussion!

My 22 years as an engineer has, I feel, worked against me in trading. In engineering, you do the math, the world obeys. The numbers, the physics, don't lie, the things you're working with obey the rules!!!! If the bridge collapses, you made an error.

Imagine the transition from that world to trading! The market never has to obey any rule, but the bright side is, nobody dies because it does something unexpected.

I've read the usual stack of books, not one ever said that higher math skills were a necessity, and most or all were written by psychologists, not mathmaticians.

It gets back to the "indicator or eyeball" argument. You can use calculus, take derivatives, and that will tell you how fast something is changing relative to time or another variable, OR you can learn to look at a chart and say, "it's going up faster now than what it was earlier."

Take your pick. Unlike rocket science, you can calculate to any extreme and come up with the wrong answer just because someone decides to buy a few billion dollars.

Learn statistics, that will help you think the right way about trading, and can help lead to consistency and the correct viewpoint about probablities and results over time.

You probably know enough math to follow money management rules on leverage, percentage, number of pips, etc.

Those two things are my goals: consistency and money management.

If you use indicators, you should understand how they are calculated, but most of that is arithmetic/algebra. Fairly simple.
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