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Hello,
No, neither I nor quanttrader are saying that prices
are pure random (white noise).
We are just saying that there is random component
in price movement.
Did you hear about deterministic chaos ?
Suggested reading:
Stocks & Commodities V. 9:2 (49-52): Of Trends And Random Walks by E. Michael Poulos
Stocks & Commodities V. 7:11 (391-395): Chaos theory and market behavior by Bernd Anders
Stocks & Commodities V. 8:8 (319-322): Making Money With Chaos by Hans Hannula, PhD, RSA, CTA
Stocks & Commodities V. 9:9 (361-365): Nonlinearity, Chaos Theory and the DJIA by Victor E. Krynicki, Ph.D.
Stocks & Commodities V14:6(258-261): Statistics Of Chaotic Markets by Hans Hannula, Ph.D., C.T.A.
Best regards,
Tomasz Janeczko
amibroker.com
----- Original Message -----
From: <uenal.mutlu@xxxxxxxxxxx>
To: <amibroker@xxxxxxxxxxxxxxx>
Sent: Monday, November 17, 2003 4:46 PM
Subject: Re: [amibroker] "Random prices" (was Re: Backtest using equity curve)
> 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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