[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

Re: [amibroker] "Random prices" (was Re: Backtest using equity curve)



PureBytes Links

Trading Reference Links

Why should there be a random component in price movement?
Supply and demand (plus News) drives the price.


----- Original Message -----
From: "Tomasz Janeczko" <amibroker@xxxxxx>
To: <amibroker@xxxxxxxxxxxxxxx>
Sent: Monday, November 17, 2003 5:18 PM
Subject: Re: [amibroker] "Random prices" (was Re: Backtest using equity curve)


> 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 gambler&Aogon;Ēs 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




------------------------ Yahoo! Groups Sponsor ---------------------~-->
Buy Ink Cartridges or Refill Kits for your HP, Epson, Canon or Lexmark
Printer at MyInks.com. Free s/h on orders $50 or more to the US & Canada.
http://www.c1tracking.com/l.asp?cid=5511
http://us.click.yahoo.com/mOAaAA/3exGAA/qnsNAA/GHeqlB/TM
---------------------------------------------------------------------~->

Send BUG REPORTS to bugs@xxxxxxxxxxxxx
Send SUGGESTIONS to suggest@xxxxxxxxxxxxx
-----------------------------------------
Post AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx 
(Web page: http://groups.yahoo.com/group/amiquote/messages/)
--------------------------------------------
Check group FAQ at: http://groups.yahoo.com/group/amibroker/files/groupfaq.html 

Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/