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----- Original Message -----
From: <<A
href=""><FONT
size=2>uenal.mutlu@xxxxxxxxxxx<FONT
size=2>>
To: <<A
href=""><FONT
size=2>amibroker@xxxxxxxxxxxxxxx<FONT
size=2>>
Sent: Monday, November 17, 2003 10:46
AM
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.)?
I don't think anyone is saying that
a price series is completely random, but rather that a random series can look
like a price series. Any price series is produced by contributions
from three sources: trending, cyclical, and random.
<FONT
size=2>> > 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" <<A
href=""><FONT
size=2>amibroker@xxxxxx>> To:
<<FONT
size=2>amibroker@xxxxxxxxxxxxxxx<FONT
size=2>>> 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" <<A
href=""><FONT
size=2>quanttrader714@xxxxxxxxx<FONT
size=2>>> > To: <<A
href=""><FONT
size=2>amibroker@xxxxxxxxxxxxxxx<FONT
size=2>>> > 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 <A
href=""><FONT
size=2>amibroker@xxxxxxxxxxxxxxx,
<FONT
size=2>uenal.mutlu@x... 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"
<<FONT
size=2>palsanand@x...>> >
> To: <<A
href=""><FONT
size=2>amibroker@xxxxxxxxxxxxxxx<FONT
size=2>>> > > 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 <A
href=""><FONT
size=2>amibroker@xxxxxxxxxxxxxxx,
"quanttrader714"> > > <<A
href=""><FONT
size=2>quanttrader714@x...>
wrote:> > > > You guys are confusing randomness, independence
and stationarity> > > big time.> > > >> >
> > --- In <A
href=""><FONT
size=2>amibroker@xxxxxxxxxxxxxxx, "Dave
Merrill" <<FONT
size=2>dmerrill@x...>> >
> 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 gamblerˇÇs 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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