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It is even then not true. Do you really believe that for
example the price in the range 24 to 26 of the below
said stock is random? That is: will the price be jumping
randomly in that area? No, Sir. The price will be "build" and
it will "move" but not randomly jump. As said: prices are
driven only by supply and demand, and not by any random
event. Since you seem to believe in randomness in stock
prices: to what degree (%) do you think are price moves random?
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
wavemechanic
To: <A title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Monday, November 17, 2003 5:40
PM
Subject: Re: [amibroker] "Random prices"
(was Re: Backtest using equity curve)
----- 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"
<<FONT
size=2>amibroker@xxxxxx>>
To: <<A
href=""><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" <<A
href=""><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 gambler¡Çs 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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