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Theory of Everything, and Trading

  • #1
  • First Post: Sep 7, 2009 12:49am Sep 7, 2009 12:49am
Hello, I was just reading something on Wikipedia, about quantitative analyst in trading, and some expert on it Emanuel Derman, who worked for Goldman Sachs for more than 10 years, gave this quote:

"In physics there may one day be a Theory of Everything; in finance and the social sciences, you’re lucky if there is a useable theory of anything"

I think that the sentence does not have any sense, if he believes that maybe one day, we will find the Theory of Everything (Albert Einstein Died trying do discover that theory, and the more recent work about it, is the String Theory)

Well, what do you think is more complex, to find a theory that explains you everything with 100% precision about the universe, or to find a theory that explains you everything with 100% precision about how the markets moves?

We invented the markets, LOL, why can’t we know with 100% precision to where it is going to move?

I think like in everything in the universe, there must be some kind of law, that can give us exact precision of what’s going to happen in the market.

I definitely don’t believe it can be done, by using a stochastic indicator, or any indicator of that kind, I’m more a believer of the supply and demand theory, which if you think, is directly connected to Peoples Psychology, they are the ones that move the market with their brains.


Think of a Serial Killer, LOL, when he kills, he almost always leaves evidences and the body of the murdered guy, the way he was killed can lead the cops, and the forensic guys, to trace some kind of profile of him, know what influences him to kill, and the way he kills

The market should not be any different, its people that are driving it, we should also be able to trace its profile.


Am I, 100% out of my mind, or what I have written has some logic (not that it is something of new)
  • #2
  • Sep 7, 2009 8:06am Sep 7, 2009 8:06am
You're not out of your mind. Let's look at a chart and find the beginning of every big move and see what they may have in common.

Where does the move occur? (previous sup/res?)
What happens prior to the big move?

Attached is a daily chart of USD/JPY with arrows at some of the big moves.
Attached Image (click to enlarge)
Click to Enlarge Name: usdjpy.gif Size: 9 KB
  • #3
  • Sep 7, 2009 8:29am Sep 7, 2009 8:29am
Quoting Quantum
Hello, I was just reading something on Wikipedia, about quantitative analyst in trading, and some expert on it Emanuel Derman, who worked for Goldman Sachs for more than 10 years, gave this quote:

"In physics there may one day be a Theory of Everything; in finance and the social sciences, you’re lucky if there is a useable theory of anything"

[font=Verdana][color=black]I...
The sentence you have quoted makes sense insofar as he [Derman] makes a division between natural sciences (Mathematics, Physics, Chemistry for example) and social sciences (Sociology, Psychology, etc.).

Social scientist are concerned with change, uncertainty and risks as a result - not necessarily limited to trading of course, but also in everyday life.

Because of 'social change' uncertainties appear/disappear and so does risk in all its forms. For the same reason, social scientis' theories and hypothesis' are prone to change and revision, based on the lates research and results of analysis of human behaviour in the social context.

In contrast, natural scientists endeavour to establish equations, rules and laws that stand firm across the universe and time - mathematical laws are certain in the sense in which they have been created. One and one makes two and will make two for any human being in the future.

Human behaviour (part of social science) can and is likely to change many times over, hence Dermans quote makes very much sense.

Einstein is the link between the two, natural and social to a degree because of his relativity theory. 'Everything is relative' [Einstein], can be universally applied.

regards
daytrading
Enter Signature
  • #4
  • Sep 7, 2009 8:55am Sep 7, 2009 8:55am
the only constant is change...
suits both ?
To Live is the rarest thing in the world , Most people exist , that is all
  • #5
  • Sep 7, 2009 9:48am Sep 7, 2009 9:48am
Quoting Quantum
The market should not be any different, its people that are driving it, we should also be able to trace its profile.

In a zero sum game the profile is to take the other guys money.

Quote
"In physics there may one day be a Theory of Everything; in finance and the social sciences, you’re lucky if there is a useable theory of anything"

Think LTCM.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #6
  • Sep 7, 2009 11:24am Sep 7, 2009 11:24am
While this is my first post too, I've been standing on the corner watching for a long time...sorry to disagree.

1st, I don't hold Wikipedia articles as much of an authority, interesting though they may be. It has to do with the way the articles are compiled. I also think that Derman was a more astute observer of humanity than the credit you give him. And, on the cutting edge of science, string theory is almost as dated as Newton's apple, more recently it's about membranes and multiple universes, but that was last month.

2nd, while I like the idea of 100% precision, obtaining it worries me. If you believe you have found it in science the tendency would be to stop looking (not a good thing IMHO). If you find it in the Markets, a few others would soon figure out what you are doing and EVERYTHING would grind to a halt in short order (They would own everything and We would lose everything or quit trying). Thank the gods for greedy, frightened people and market inefficiencies, oh wait, the Markets are Random, LOL

3rd, it could be that only enough serial killers are caught to insure the continued existence of forensics and profilers. I'm sure there is an interesting market analogy in there somewhere. I look forward to a 'serial killer strategy".

4th, seems to me that in Market theories it is pretty much a dog chasing its tail, Fundamentals, Technical Analysis, and something else, Fundamentals, Technical Analysis and something else...recently the something else seems to be Order Flow, but there have been a few championing Astrology and divining entrails.

Finally, 100% out of you mind, I doubt it, but I suspect there is more than one FF member that eagerly awaits your first funded account. Please dont let this deter you, while there may be a Forrest Gump FX trader or two, the rest of us have blown up at least one account.

Phil

ps: a suggestion, find a simple strategy, figure out how it works for you and manage your money. I know, easier said than done ( the tricky part seems to be 'how it works for YOU').
  • #7
  • Sep 7, 2009 1:10pm Sep 7, 2009 1:10pm
Quoting Phil4x
While this is my first post too, I've been standing on the corner watching for a long time...sorry to disagree.

[size=2]1st, I don't hold Wikipedia articles as much of an authority, interesting though they may be. It has to do with the way the articles are compiled. I also think that Derman was a more astute observer of humanity than the credit you give him. And, on the cutting edge of science, string theory is almost as dated as Newton's apple, more recently it's about membranes and multiple universes, but that was last month....
Hello, Well I'm not new to trading, I have traded Forex, and now trade Futures for more than 4 years, with technical analysis.

I also love Science, (I also think String Theory is crap), I like the logic of things (Agnostic), and I think the market should also have its logic, and Laws like everything has on earth.

Why not question it?
  • #8
  • Sep 7, 2009 4:32pm Sep 7, 2009 4:32pm
it's just that I know enough economists to know what happens when two or more of them 'collide' ... it's profitable.

Phil
  • #9
  • Sep 7, 2009 6:44pm Sep 7, 2009 6:44pm
Quoting Quantum
I also love Science, (I also think String Theory is crap), I like... blah blah blah
You 'think' string theory is 'crap'? What makes you think you're knowledgable enough on the subject to make such a judgement? Do you understand the absurdly complex mathematics of the theory? If you did, you wouldn't be posting on an internet trading forum, you'd be a world renound scientist. I'm not even sure that judgements can be made about the theory yet, isn't that what Cern is all about?
Reminds me of a quote from Richard Feynman:

"It is safe to say that nobody understands quantum mechanics."

It is safe to say I can't understand Quantum's posts either.
  • #10
  • Sep 7, 2009 7:28pm Sep 7, 2009 7:28pm
Quoting birdt
You 'think' string theory is 'crap'?...
I shouldn't say this, because this is a trading forum, not about Sciences, but the thing about String Theory, is that it cannot be proved (because of the multiple universes), if it cannot be proved, it is crap for me.
  • #11
  • Sep 7, 2009 7:55pm Sep 7, 2009 7:55pm
Quoting Quantum
I shouldn't say this, because this is a trading forum, not about Sciences, but the thing about String Theory, is that it cannot be proved (because of the multiple universes), if it cannot be proved, it is crap for me.
That is why it's all called theory. Big Bang is a theory, when it comes down to it, much of the "Big Questions" are theories that cannot be proved, but you go with the best theory of the time. As new discoveries are made these theories will change or be proved.

Most people are just going to have to pick their poison as far as origin goes, which really is the ultimate question that these theories are trying to answer.

Oh, and how to win big in Forex, that's the other big one.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #12
  • Sep 7, 2009 8:11pm Sep 7, 2009 8:11pm
Quoting Quantum
I shouldn't say this, because this is a trading forum, not about Sciences, but the thing about String Theory, is that it cannot be proved (because of the multiple universes), if it cannot be proved, it is crap for me.
So your problem isnt actually with String theory, but more so with theories in general. Lol.
Living the adventure in my head.
  • #13
  • Sep 7, 2009 8:33pm Sep 7, 2009 8:33pm
Quoting Leonlorenzo
So your problem isnt actually with String theory, but more so with theories in general. Lol.
My, problem, Is that I think that it must exist any law, wich helps me to predict the market, without using any indicators, or price action, just by traders psychology, witch are the ones that drive the market.

if it exists, and anyone discovers such thing, if not discovered yet, dont expect it to be shared on a Forum, LOL, who is stupid to do that? he would just lose it, because things would change if everyone would be aware of it.
  • #14
  • Sep 7, 2009 8:41pm Sep 7, 2009 8:41pm
Just rememberd that someone have predicted this crash on the economy many years ago, only using demographics.

Thats the kind of things That I'm searching for
  • #15
  • Sep 7, 2009 8:43pm Sep 7, 2009 8:43pm
Quoting Quantum
Just rememberd that someone have predicted this crash on the economy many years ago, only using demographics.

Thats the kind of things That I'm searching for
Austrian school of economics is what you want to search for. They can tell you what will happen, just not when it will happen.
Check out this link here @ FF. http://www.forexfactory.com/showthread.php?t=153569
It's the Video Store.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #16
  • Sep 7, 2009 8:51pm Sep 7, 2009 8:51pm
Quoting Quantum
Just rememberd that someone have predicted this crash on the economy many years ago, only using demographics.

Thats the kind of things That I'm searching for
And that was one thing, totally out of the Box, no indicators used, no candles used, and no news used, just a study of the people who move the market
  • #17
  • Sep 7, 2009 9:20pm Sep 7, 2009 9:20pm
There were also people predicting a return to the stoneage and that the Dow would be at 30,000. Everything in between too. Someone was bound to be right and now you want to praise that guy. Good luck with your search.


The sum total of knowledge is growing exponentially, so is computing power, maybe someday we will have a 'unified theory of money markets' but I doubt it. Seems more likely that we will be blessed with a One World Currency first, man will that screw up the golden goose or what???


Phil
  • #18
  • Sep 7, 2009 10:07pm Sep 7, 2009 10:07pm
Quoting Phil4x
There were also people predicting a return to the stoneage and that the Dow would be at 30,000. Everything in between too. Someone was bound to be right and now you want to praise that guy. Good luck with your search.


The sum total of knowledge is growing exponentially, so is computing power, maybe someday we will have a 'unified theory of money markets' but I doubt it. Seems more likely that we will be blessed with a One World Currency first, man will that screw up the golden goose or what???


Phil...
I trade Futures, LOL
  • #19
  • Sep 7, 2009 10:09pm Sep 7, 2009 10:09pm
Quoting LasVahGoose
Austrian school of economics is what you want to search for. They can tell you what will happen, just not when it will happen.
Check out this link here @ FF. http://www.forexfactory.com/showthread.php?t=153569
It's the Video Store.

Thank you very much for the link, I enjoyed those videos,
  • #20
  • Sep 7, 2009 10:09pm Sep 7, 2009 10:09pm
Quoting Phil4x
maybe someday we will have a 'unified theory of money markets' but I doubt it. Seems more likely that we will be blessed with a One World Currency first, man will that screw up the golden goose or what???
We already have "unified theory of money markets". It's called central banking and systems of credit. Money based on nothing will always end up being worth what it is based on.
Don't wish it were easier, wish you were better. ~ Jim Rohn
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