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UM,
Perhaps there's a miscommunication going on here
regarding the definition of randomness.
I think folks are arguing that it's random in a
sense that there's no way to "predict" the price
movement with 100% certainty. That has nothing to
do with "why" the price moves. Of course there's a
reason for price movement -- someone's buying and
someone's selling. I don't think anyone is arguing
that part, since it's common knowledge.
Jitu
--- In amibroker@xxxxxxxxxxxxxxx, "quanttrader714"
<quanttrader714@xxxx> wrote:
> Come on, UM. Please re-read my earlier post (52237). Carefully.
It
> addressed every issue you've raised if only you'd open your mind.
>
> --- In amibroker@xxxxxxxxxxxxxxx, uenal.mutlu@xxxx wrote:
> > 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?
> >
> > ----- Original Message -----
> > From: wavemechanic
> > To: amibroker@xxxxxxxxxxxxxxx
> > Sent: Monday, November 17, 2003 5:40 PM
> > Subject: Re: [amibroker] "Random prices" (was Re: Backtest using
> equity curve)
> >
> >
> >
> > ----- Original Message -----
> > From: <uenal.mutlu@xxxx>
> > To: <amibroker@xxxxxxxxxxxxxxx>
> > 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.
> >
> > >
> > > 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@xxxx>
> > > 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@xxxx>
> > > > 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”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
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