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why have you accepted the price-predictability assumption?

  • #321
  • Dec 23, 2013 9:11am Dec 23, 2013 9:11am
Quoting jmn5611
{quote} Good post, and it boils down the essence of the argument. You cannot catch the train if you do not know when it is coming. Worse, this train has no schedule. It might run three times in one day, and then not come back for a month. The only thing we can do is be at the station when it arrives.
that is one of the best explainations I have ever seen, in 13 years of trading.. you can narrow the arrival time down though (sometimes)
SEE LINE,TRADE LINE..PRICE HAS TO GO SOMEWHERE,,, PRICE WILL GO SOMEWHERE.
  • #322
  • Dec 23, 2013 9:12am Dec 23, 2013 9:12am
Quoting billytt
{quote} touche' we on same wave length lol, I was so low in my class they taught me in the cellar boom boom

LOL

You know when someone starts using big words they will soon come out with something STUPID, my fav's being " It's too cold to snow!" while it's raining LOL and " Ghosts are real" LOL


Closing my GU long for +8 was bored and off out in gales and driving rain, awesome.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #323
  • Dec 23, 2013 9:17am Dec 23, 2013 9:17am
Quoting Vachus
{quote} The magic line theory ... So, you think someone will trust his money and take an educated guess based on a candle formation ! These so called large orders don't sit down waiting to be picked up, otherwise - who's moving the price ?!
Magic line theory? never heard that one before. I trust my own money and make my own guess (based on past price action and certain candles) on where price will turn around and go the other way. Who's moving the price? I don't know and I don't care... it is what it is.
  • #324
  • Dec 23, 2013 9:21am Dec 23, 2013 9:21am
Quoting GDR3k
{quote} Magic line theory? never heard that one before. I trust my own money and make my own guess (based on past price action and certain candles) on where price will turn around and go the other way. Who's moving the price? I don't know and I don't care... it is what it is.

I can vouch ( real world vouch ) that what he does, no matter how improbable it seems really works and very well, which does confuse and annoy me.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #325
  • Dec 23, 2013 9:24am Dec 23, 2013 9:24am
I was supposed to be shutting down but,,,,Price Predictabilty, what would be a good strike rate of achieving this correctly and what sort of pip range are we speaking of 10-20=50-100 etc
SEE LINE,TRADE LINE..PRICE HAS TO GO SOMEWHERE,,, PRICE WILL GO SOMEWHERE.
  • #326
  • Dec 23, 2013 9:28am Dec 23, 2013 9:28am
Quoting billytt
I was supposed to be shutting down but,,,,Price Predictabilty, what would be a good strike rate of achieving this correctly and what sort of pip range are we speaking of 10-20=50-100 etc

I fear they want 100% on the Nail 0pips out, to prove it's not random.

In and imperfect world, there are only imperfect solutions.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #327
  • Edited 9:46am Dec 23, 2013 9:32am | Edited 9:46am
Quoting the redlion
I see a problem here where you guys have disregarded evidence that my self, pipme up and prixmus (sorry i might not have the name correct) have previously shown. you have all asserted that the market indeed is predictable and there are trends, have accepted the assumption and now are talking about how you exploit this. If trends indeed do exists the returns would show autocorrelation which they do not, the returns show randomness you cannot ignore this, and go by your visual interpretation when clearly mathematically randomness is present not trends....

Hi red, I'll go out on a limb and suggest that the mathematical, empirical proof you are looking for will never be presented here. Does anyone really know that the E/$ is going to hit 1.3710 in the next 10 minutes or 1 hour? No. Can anyone know with 100% certainty that the next 30M candle is going up or down? No. If the conclusion that is drawn from this lack of proof, is that it is not possible to maintain long-term profits from trading, then that is incorrect. I have documented in my trading journal some of the things I do to assess the market and make trades. Long-term success, for me, is based on my faith in my abilities to assess market structure, read charts, and manage trades. Given the way I trade, the market today, largely behaves in the same manner it did 10 years ago. As long as this is true, or until it isn't, I am justified in maintaining faith in my trading. I am not aware of any mathematical approach to modeling faith, so I think you are headed for a dead end in your search. But, just in case, I'll continue to follow this thread in hopes that I am wrong. Merry Christmas red, and to everyone else on your thread!
BTW, the E/$ hit and exceeded 1.3710 as I was writing this, as I thought it would.

Edit: Let me briefly explain the comment on the E/$. I've been helping a friend today on how to pace the market and find good entry points, and that was the example we have been using this morning. He just made 20 pips, while risking 13.
  • #328
  • Dec 23, 2013 9:38am Dec 23, 2013 9:38am
Quoting Turveyd
{quote} I fear they want 100% on the Nail 0pips out, to prove it's not random. In and imperfect world, there are only imperfect solutions.
yes indeed, even though I no longer trade I develop trading methods then sell them to my colleague who then adds the TALK and resells . but the weird thing is I actually look at the market a different way now. I can remember the days of getting over 1000 pips per week (compounding figures) but I dropped down to approx 100 IF I traded every day otherwise about 20 per day. and as for predictability /odds/ statistics that's why i looked into this thread
SEE LINE,TRADE LINE..PRICE HAS TO GO SOMEWHERE,,, PRICE WILL GO SOMEWHERE.
  • #329
  • Dec 23, 2013 9:48am Dec 23, 2013 9:48am
Quoting jmn5611
{quote} Good post, and it boils down the essence of the argument. You cannot catch the train if you do not know when it is coming. Worse, this train has no schedule. It might run three times in one day, and then not come back for a month. The only thing we can do is be at the station when it arrives.
Being at the station is definitely one of the sides of the trade.

The other is to trade in direction of that station.

If we have a general idea of where price will tend, ie, where the station is, then, trading the smaller ranges in this general direction will allow prosperity and can also help to eliminate the buying tops and selling bottoms.
Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #330
  • Dec 23, 2013 9:57am Dec 23, 2013 9:57am
Quoting Turveyd
Couldn't follow if it was random.
Why? A spurious trend is a trend nonetheless.

Quoting Turveyd
If it was random, then the only way to trade it would be ' Begginer Joe's ' Take 2 positions short and long and exit both in profit and hold until then, thankfully this is not the case. * * Well I really hope this isn't the case, if you prove otherwise then he'll become a hero to us all!
A random walk isn't stationary. Mr Begginer Joe would lose his shirt doing this.

Quoting the redlion
{quote} I apologize I had the traders confused, can you generate several random charts with positive drift and provide open,high,low, close data so i can run some tests on the returns and see if indeed they are a correct representation of the market?
As I'm using the market data itself I cannot choose the skewness. I used S&P500 and Gold as they clearly show an uptrend.
For S&P to go from 711 to ~1825 it went 1604513.2 ticks up and 1603397.8 ticks down. It moved up 1115.4 ticks but the ratio UP/DOWN is 1.000696.
For a random walk the theoretical limit value is 1. This isn't very far.

I decided to use gold and cherry picked the up trend from 28/09/2009 to 01/08/2011. Here the ratio is 1.001448. This is still close to 1.
These trends seem not totally incompatible with a random walk. Yet I could NOT generate a random DOWN trend (nor a range) with the data from gold.

S&P500 from 02/03/2009
up 1604513.2
down 1603397.8
ratio 1.000696

XAU/USD from 28/09/2009 to 01/08/2011
up 431527.76
down 430903.70
ratio 1.001448
Attached File(s)
File Type: csv randomGold.csv   42 KB | 185 downloads
No greed. No fear. Just maths.
  • #331
  • Dec 23, 2013 10:06am Dec 23, 2013 10:06am
Quoting Turveyd
If it was random, then the only way to trade it would be ' Begginer Joe's ' Take 2 positions short and long and exit both in profit and hold until then, thankfully this is not the case. * * Well I really hope this isn't the case, if you prove otherwise then he'll become a hero to us all!
Ignored

A random walk isn't stationary. Mr Begginer Joe would lose his shirt doing this.
I am sorry for being secretive but what was posted about Begginer Joe ? it can be done, the big boys do it. It is how they do it, thinking hat timeys bo
SEE LINE,TRADE LINE..PRICE HAS TO GO SOMEWHERE,,, PRICE WILL GO SOMEWHERE.
  • #332
  • Dec 23, 2013 10:18am Dec 23, 2013 10:18am
Quoting PipMeUp
{quote} Why? A spurious trend is a trend nonetheless. {quote} A random walk isn't stationary. Mr Begginer Joe would lose his shirt doing this. {quote} As I'm using the market data itself I cannot choose the skewness. I used S&P500 and Gold as they clearly show an uptrend. For S&P to go from 711 to ~1825 it went 1604513.2 ticks up and 1603397.8 ticks down. It moved up 1115.4 ticks but the ratio UP/DOWN is 1.000696. For a random walk the theoretical limit value is 1. This isn't very far. I decided to use gold and cherry picked the up trend from 28/09/2009...
Thanks for the data PipMeUp. This is exactly what I was trying to say without the numbers.

We can only follow. If we do we will have positions along the trend as the trend emerges. How that process occurs, we cannot know that.

Of course, what is key is that we let those positions that are winning run. The losers will be closed.
If you are good at something, never do it for free--Joker
  • #333
  • Dec 23, 2013 10:50am Dec 23, 2013 10:50am
Thanks, PipMeUp, i'm amazed by your simple but effective numbers again!

your example seeminly fits/explains my 'elusive' edge: picking top and bottom of the market is the way to go. in other words, after some down, enter for some longs; or after some up, enter for some shorts. trend is observed, but not always respected by me, lol. fundamentally, i traded that way ---- the most promising way to me.

Quoting PipMeUp
{quote}For S&P to go from 711 to ~1825 it went 1604513.2 ticks up and 1603397.8 ticks down. It moved up 1115.4 ticks but the ratio UP/DOWN is 1.000696. For a random walk the theoretical limit value is 1. This isn't very far. I decided to use gold and cherry picked the up trend from 28/09/2009 to 01/08/2011. Here the ratio is 1.001448. This is still close to 1.
  • #334
  • Dec 23, 2013 1:56pm Dec 23, 2013 1:56pm
when we say the market is predictable, we do not say it is certain….that is where our edge and ability lays….beside we can be right into the direction but we can still have a losing trade….being able to read the market and act on it for a profit are two distinct components.

The individual psychology makeup is complex and unpredictable, but the mass psycology is stupid, it is predictable, that it is why pattern works, because they represent the mass psychology, do the work all the time? No, because it depend on how many got trapped on the other side……

An H & S with enough long participant trapped will deliver, when that pattern fails it will have even better probability and the failure of the fail one even better, why? because the are many trapped and they need to cover given fuel to the other side…..

My favourite systems is " buy in a bull market when bears get to excited"
Wherever you go, there you are.
  • #335
  • Dec 23, 2013 2:12pm Dec 23, 2013 2:12pm
Quoting milam
when we say the market is predictable, we do not say it is certain….that is where our edge and ability lays….beside we can be right into the direction but we can still have a losing trade….being able to read the market and act on it for a profit are two distinct components. The individual psychology makeup is complex and unpredictable, but the mass psycology is stupid, it is predictable, that it is why pattern works, because they represent the mass psychology, do the work all the time? No, because it depend on how many got trapped on the...
Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #336
  • Dec 23, 2013 2:22pm Dec 23, 2013 2:22pm
Quoting Magix
{quote}
Merry Christmas little Tiger.
Wherever you go, there you are.
  • #337
  • Dec 23, 2013 2:23pm Dec 23, 2013 2:23pm
Quoting milam
{quote} Merry Christmas little Tiger.
Back Atcha, brother!
Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #338
  • Dec 23, 2013 5:38pm Dec 23, 2013 5:38pm
Quoting the redlion
you guys have all patted yourselves in the back while not provided any empirical evidence so far, perhaps you can prove me wrong
Quoting the redlion
to predict is to forecast, to foretell, to extrapolate an outcome in various degrees of certainty. To do this you need to have some basic assumptions and so far the number one assumption that needs to be present is that the data is not random. We havent gotten past this yet, some of us have provided evidence that
points to randomness while other have asserted predictability ....assertion is not evidence.

I thought Mandelbrot essentially destroyed the idea that markets are random. Pretty much every failed modern financial theory, from Black-Scholes to MPT assumes a random market and normal distribution, and they're all laughably wrong; they all vastly underestimate the odds of large movements (both positive and negative).


Besides analysis of markets themselves, if markets are random, the number of consistently successful traders in the world is a massive, massive statistical fluke beyond human comprehension. Beating the market for X number of months in a row should be nearly statistically impossible, and yet it's done at a rate far higher than would be predicted if markets were random. Orders and orders of magnitude higher. Think of someone, just one single trader, who beat the market every month for three straight years. If markets are random, what are the implications of someone who accomplished that (besides being a conservative estimate since we know certain traders have done better for longer)?


(Liquid) Markets aren't random. They're chaotic systems.


Markets are fractal; they're scalable. Larger patterns are made up of smaller patterns which are made up of even smaller patterns. Patterns repeat, but never repeat exactly; this is probably the single biggest reason that mechanical systems based on backtested indicator settings are usually doomed to failure from the start. If all we had to do was take a few indicators and backtest them with various settings until we found something that worked, we'd all be rich.


So far we've seen in this thread that it is possible to distinguish between a randomly generated price chart and an actual price chart. We didn't need this thread for that, though-- that's already been studied, done and dusted, and conclusively proven (it's the volatility and extreme price movements).


The far more informative and enlightening question I think, for many chart analysts, is can they distinguish between charts on different timeframes? There seems to be a lot of back and forth about whether M1, M15, H4, ____ chart is the best for trading, or is the best for analyzing trends, but could you even tell the difference? And what implications does that have for your trading?


I like to think of trading like predicting the weather, which is also a chaotic system. While we can't exactly predict the weather, given certain circumstances and based on previous weather patterns, we can make a pretty good educated guess as to what will happen in the short term. Sometimes it will be wrong in direction (predicting rain and it turns out sunny), sometimes it will be wrong in magnitude (predicting 65 and sunny and it turns out 85 and sunny), but sometimes it will be exactly how we think it will be. Treat trading like you treat predicting the weather; just because I think it's going to be sunny (e.g. bullish conditions) doesn't mean I can ignore the chance that it will rain (e.g. bearish conditions), especially if I start to feel raindrops.
  • #339
  • Dec 23, 2013 5:54pm Dec 23, 2013 5:54pm
Quoting smittens4212
There seems to be a lot of back and forth about whether M1, M15, H4, ____ chart is the best for trading, or is the best for analyzing trends, but could you even tell the difference? And what implications does that have for your trading?



Very well thought out and written complete.

As for the TF for trading, as stated in your reply, I am with you on the fractal nature of the market, thusly speaking that the only real thing that changes between these different time frames are the actual ranges of trades.

The implications lend to the ability to create and work with a multiple time frame analysis, allowing both sides of the major trend inside of the smaller ranges. In itself, this lends itself to people, like myself, who have the inability and lack of complete market or broker trust to have the opportunity to trip the fast charts for an immediate payoff and still allow the entire range of play...

This wisdom was leant to me as an example of eating an elephant.
Take small meals and you can complete this.
Try to swallow the elephant whole and you are subject to the worst indigestion of your life.

To each is their own. However we find our way through the static of randomness created by a 24 hour trading day broken into several smaller trading sessions and the market steering this ship with its own speed of time..all good with me.

Being at the train station, when the train gets there, still the end run.

Thanks for the post...really enjoyed the read!

Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #340
  • Dec 23, 2013 5:58pm Dec 23, 2013 5:58pm
Quoting smittens4212
{quote} {quote} I thought Mandelbrot essentially destroyed the idea that markets are random. Pretty much every failed modern financial theory, from Black-Scholes to MPT assumes a random market and normal distribution, and they're all laughably wrong; they all vastly underestimate the odds of large movements (both positive and negative). Besides analysis of markets themselves, if markets are random, the number of consistently successful traders in the world is a massive, massive statistical fluke beyond human comprehension. Beating the market for...
Excellent points, Smittens

Merry Christmas everyone
"To hold, you must first open your hand. Let go." - Lao Tzu
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