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I naturally disagree :-)
So, you and quanttrader are really saying that
the stock prices are indeed really random?!
So, then why use T/A or AB at all?
Why on hell would anybody invest in random things (except in lotto etc.)?
Ok, here is a practical example: imagine a stock
closed at 25 yesterday. Do you really believe that
the intraday price of this stock today will make
random moves between 0 and say 50 ?
Intraday it will move around 25, but will definitely not make
fe. something like the following: 25, 1, 50, 25, 10, 40, 0, 1, 50
If this practically is not possible with this stock then
it definitely is not random. IMHO a basic fact.
----- Original Message -----
From: "Tomasz Janeczko" <amibroker@xxxxxx>
To: <amibroker@xxxxxxxxxxxxxxx>
Sent: Monday, November 17, 2003 3:49 PM
Subject: Re: [amibroker] "Random prices" (was Re: Backtest using equity curve)
> Uenal,
>
> I fully agree with quanttrader.
>
> Even code you supplied can be modified to produce chart that is random too
> but looks much closer to 'real' prices.
>
> Graph = 100+ Cum( -1 + Random() * 2.0 );
>
> Plot(Graph, "Random graph", colorBlue);
>
> Best regards,
> Tomasz Janeczko
> amibroker.com
>
> Best regards,
> Tomasz Janeczko
> amibroker.com
> ----- Original Message -----
> From: "quanttrader714" <quanttrader714@xxxxxxxxx>
> To: <amibroker@xxxxxxxxxxxxxxx>
> Sent: Monday, November 17, 2003 3:39 PM
> Subject: [amibroker] "Random prices" (was Re: Backtest using equity curve)
>
>
> This proves nothing. Your model is flawed. Generate a chart with one
> dimensional Brownian motion and there's not a person on this board who
> would be able to tell it from a "real" price chart. An omniscient
> being could create perfect deterministic models of the markets but for
> mere mortals, there's significant randomness caused by an incredibly
> complex mix of competing forces that "nudge" prices in different
> directions, from institutional purchases to Johnny Jones cashing in to
> pay for his daughter's wedding to daytraders, etc., etc., etc.
> Certain forces will prevail and/or be in synch to varying degrees over
> time. But even in a totally random process, anything that can happen,
> will happen if you wait long enough.
>
>
> --- In amibroker@xxxxxxxxxxxxxxx, uenal.mutlu@xxxx wrote:
> > // generate random series in the range 0 to 100 and plot it
> > Graph = Random() * 100;
> > Plot(Graph, "Random graph", colorBlue);
> >
> > Does any real chart look like such a random chart: NO.
> > This proves the basic fact that nothing in the markets
> > is or was ever random.
> > UM
> >
> >
> >
> > ----- Original Message -----
> > From: "palsanand" <palsanand@xxxx>
> > To: <amibroker@xxxxxxxxxxxxxxx>
> > Sent: Monday, November 17, 2003 1:19 AM
> > Subject: [amibroker] Re: Backtest using equity curve
> >
> >
> > In his book "The Profit Magic of Stock Transaction Timing", J.M.
> > Hurst proves that market movement is not random, and by analyzing a
> > large "stable" of underlying instruments one could find excellent
> > opportunities for profit each and every day. The movement is not
> > random but non-stationary because markets do not move without a
> > purpose or a goal, they move because of an imbalance between supply
> > (sellers) and demand (buyers) with the price tending to equalize it.
> > However the outcomes are random, i.e, unknown and the probability of
> > winning is undetermined, i.e., not a constant.
> >
> > Identifying persistent price patterns helps one to determine the
> > dependance of the outcomes. The existence of a pullback or a rally
> > situation is dependant on the existance of a previous uptrend or a
> > downtrend and so is the existance of a trend reversal. What's real
> > price movement in response to a clear signal and what's just random
> > noise? Figuring out the difference is vital and according to John F.
> > Ehlers in a recent article in S & C Magazine such a distinction can
> > be important to trading. If one could avoid periods when the market
> > has no clear trend (just enjoy being flat), one could avoid whipsaws
> > and get cleaner trades. If one could identify periods that were
> > filled with noise and no clear signals in either direction, one
> could
> > also switch trading tactics to suit the situation, for e.g., day-
> > trading instead of position-trading. At the very least, one would
> > know what situation one faces.
> >
> > rgds, Pal
> > --- In amibroker@xxxxxxxxxxxxxxx, "quanttrader714"
> > <quanttrader714@xxxx> wrote:
> > > You guys are confusing randomness, independence and stationarity
> > big time.
> > >
> > > --- In amibroker@xxxxxxxxxxxxxxx, "Dave Merrill" <dmerrill@xxxx>
> > wrote:
> > > > agreed. if the fact that a trading system did well in the past
> > has no
> > > > bearing whatsoever on whether it does well in the future, how
> can
> > we
> > > know
> > > > anything at all about the future performance of a proposed
> trading
> > > system?
> > > >
> > > > dave
> > > >
> > > > The gamblerĄĒs fallacy is a fallacy because the gambler
> ignores
> > the
> > > > independence of the outcomes and looks for patterns that do not
> > > exist. If
> > > > we have designed trading systems based on recognition of
> patterns
> > that
> > > > precede profitable trading opportunities, and if those patterns
> > are
> > > > persistent, then we no longer have random, independent outcomes.
> > Our
> > > > trading systems do have serial dependencies and upward sloping
> > equity
> > > > curves. So analysis of the equity curve provides an indication
> > of the
> > > > health of the trading system.
> > > >
> > > >
> > > >
> > > > Howard
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