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Hello Quanttrader,
That puts the icing on the cake.
I'm a maths neophyte so thankyou for teaching.
I now understand why maths is decribed as being elegant.
It provides a clarity we can't achieve easily in other ways.
For the record; the database used by Merrill in this case was the
DowJonesIndex.
The results were duplicated by Colby over a more recent period (up
to 2000).
I have also encountered the same effect by chance when backtesting
all American equities >$10, 2000-2005, Metastock data.
I am cautious about drawing conclusions from very old data.
I suspect that IT and the Quants may have changed the nature of the
markets in the last decade or two.
Possibly the *calender* biases won't survive the levels of analysis
that are now applied to the markets.
Can you recommend anyone who stands out as a giant in the field of
Quant trading?
*******************************************************************
Psychological commentary:
My post was also offering some observations on the debate that is
going on in the Woodies topic re system versus discretionary.
I am very right brained and my subjective faculties are honed beyond
anything imagined by most if not all forum members.
I was alluding to the fact that *we* are at our best when we can
balance both sides of our psyche.
The subjective mind is something in the west that we are not all
that familiar with, as we have focused so much on developing our
objective natures.
The east has 1000's of years of traditional understanding of
subjective realities.
The subjective mind is more than just a basement for our junk
emotions.
It is also the seat of the super-conscious which I also call super-
rationality.
In trading, and life,we are at our best when operating with our
subjective super-consciousness active and our junk emotions inactive.
The analogy is that our subjective functions are like fuzzy logic
and we can use them to compliment the objective.
In the Chi squared example, my intuition, which provides 95%,
*surround the target* certainty,lead me to the door of statistics
and I have to go in whether I want to or not.
Over the years I have learned to trust my intuition.
It always leads me beside the still waters and into verdant pastures.
Once my intuition leads me there I have to knock on the door and
enter with my eyes wide open i.e. apply classical objective
techniques, hence my attraction to maths and system trading.
When I am subjectively and objectively correct I *know* I am G for
go.
It's all green lights; *in the zone* as the young bucks say.
My psychic discipline is such that I could actually trade
systematically in the morning, and with discretion in the afternoon,
and know the difference between the two.
They can both be very successful methods.
I agree with Sebastions observation that traders are mixing
subjectivity with their objectivity and vice versa.
That's O.K as long as it is the right kind of subjectivity.
Obviously the successful discretionists pull that stunt off.
Personally I like the emotion free atmosphere of system trading.
It removes all stress from the equation and that is not an easy
thing to do in other ways.
Remember,it is just as hard for me to cross the bridge into your
world as it is for you to cross the bridge into mine.
My mentor taught me:
*It is not that we live in this world less, but in both worlds more*.
Tomasz is a very fine example of a person who operates, to some
extent, with a balanced psyche.
Whether he is conscious of that or not I don't know.
They are always very prodigious and multi-talented i.e. easily
achieve competence in almost any field of endeavour they chose.
They also seem to command superhuman energy.
*****************************************************************
Clarifying a point from my post in the Woodies topic:
The norm of this forum is levels above that of the world we are
living in.
The world is awash with ignorance.
The forum is a very special place but we can't expect to keep the
world out entirely.
Even those of us who find a natural home here are human and make
mistakes; sometimes making incorrect or unfair statements.
To me that is acceptable.
We can't expect ourselves to be perfect anymore than anyone else.
Please just don't do it on purpose.
BrianB2.
roker@xxxxxxxxxxxxxxx, "quanttrader714" <quanttrader714@xxx> wrote:
>
> IMO, Chi Square is a good test to use for stuff like this. In
fact,
> Arthur Merrill did several ground breaking TA studies using Chi
Square
> many years ago.
>
> Some would say the Yates correction (subtracting .5) is unnecessary
> in this example because of the high frequencies but I'd always
apply
> it because it makes the final value more conservative.
>
> --- In amibroker@xxxxxxxxxxxxxxx, "brian.z123" <brian.z123@> wrote:
> >
> > Hypothesis for Bill.
> > I promised Bill *The Wave Mechanic* that I would provide the
forum
> > with something more substantial than the *candy floss* of
philosophy
> > and psychology.
> > Honouring my promise here is my attempt.
> >
> > It is an example of proceeding from a subjective view of the
markets
> > (theory, intuition, guess, hunch etc) to an objectively verified
> > hypothesis that could form the basis of a trading plan.
> > It is intended as an introductory topic to trading.
> >
> > I dedicate this post to all mathematicians past and present.
> > God knows why he/she didn't include me in that group; it appears
> > he/she had other plans for me.
> >
> >
> >
*******************************************************************
> > General Theory (of market relativity) No1.
> >
> > The behaviour of markets in the major western cultures is
similar
> > (USA, Australia, UK & others?)
> > The markets are moved by institutional investors who control the
> > major portion of the money.
> > Institutional behaviour has characteristics that can be utilised
by
> > freelance traders.
> > Institutional investors are people and will exhibit some
behaviours
> > typical of people in general.
> > Based on personal observation of institutions, people and people
in
> > institutions I expect markets to exhibit some of the following
> > behaviours to some extent:
> > ( I don't comment on other markets because I haven't lived in
those
> > countries and don't understand the psyche the way I understand
the
> > psyche of the above group. That doesn't place any relative value
> > judgement on other cultures).
> >
> > Institutions have budget cycles (weekly, monthly, quarterly,
yearly?)
> > Institutions are bound by rules of governance and obligations.
> > It is not in the interests of institutional players to stick
their
> > heads up out of the trench.
> > Institutions set employees targets which are benchmarked against
> > industry norms.
> > People have short memories.
> > People *work* from Mon-Fri, 9-5 .
> > People get Mondayitis and Fridayitis.
> >
> > There are many more similar observations.
> > I have only provided a few as examples.
> >
> >
********************************************************************
> >
> > Hypothesis derived from General Theory No1.
> >
> > The markets will behave differently on Mondays compared to
average.
> >
> >
********************************************************************
> >
> > Verification of the Hypothesis.
> >
> > The following is summarised from R.W Colby's *Encyclopedia of
> > Technical Market Indicators*, published by McGraw-Hill.
> > The original is from the writings of Arthur A. Merrill author of
> > *Behaviour of Prices on Wall St*.
> > It is presented for educational purposes.
> >
> > The Chi-squared test ( a statistical method) is used to tell us
how
> > reliable an indicator is and if the patterns exhibited by data
could
> > have been produced by chance.
> > The source of the data that the test is performed on is not
given,
> > which means that the results are not independently verifiable by
the
> > forum.
> > On that basis it is only provided to demonstrate the principles.
> >
> > Trading from 1952 to 1983:
> >
> > the number of Mondays when the market rose was 669
> > versus Monday falls 865
> > (1534 in total).
> > Average for all trading days = = 52.1% updays.
> > Expected rises for Monday = = 52.1% x 1534 = = 799.
> > Expected downs for Mondays = = 47.9% x 1534 = = 735.
> >
> > Using the absolute of the (actual ? expected) values for up/down
> > days the Chi-squared test (with Yates correction) for
statistical
> > signifance returns the value 43.81;
> >
> > (((abs(a1-e1) ? 0.5)^2)/e1) + (((abs(a2-e2) ? 0.5)^2)/e2)
> >
> > (((abs(669-799) ? 0.5)^2)/799) + (((abs(865-735) ? 0.5)^2)/735)
= =
> > 43.81
> >
> > Based on the Chi-test score there is less than one chance in
1000
> > that the observed outcome for Mondays was due to chance alone.
> >
> >
********************************************************************
> >
> > Please note!
> >
> > I can't comment on the veracity of the Chi-squared test.
> > I will have to leave that to the mathematicians and rightly so.
> > I provided the example only to stimulate debate or interest in
> > statistics as a powerful trading tool.
> >
> > The general theory of the market is my own personal view.
> > I have not verified the above results myself nor have I
attempted to
> > develop a trading system based on a Monday trading cycle, or any
> > other calender cycle for that matter.
> > I have, however, successfully developed and tested a trading
system
> > based on another hypothesis that was derived from the above
> > GeneralTheory.
> >
> >
> >
> > BrianB2......<:-)......(the last of the coneheads?).
> >
> >
> >
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "brian.z123" <brian.z123@>
> > wrote:
> > >
> > > Statistics for traders.
> > > Can anyone recommend a book on statistics written specifically
for
> > > traders or that applies statistical methods to trading
examples?
> > > I am looking for an author who has done a good job on the
subject.
> > > Even if it is only a section of a book that would do provided
it
> > > goes beyond a superficial treatment of the subject.
> > >
> > > For anyone interested here is a link to a very good
introduction
> > or
> > > refresher for statistics.
> > > The HTML *book* takes your from 0-50kph in approx 100 pages.
> > > Please note; the site does contain a lot of advertisements but
it
> > is
> > > also a mini portal for stats and it does have links to free
> > > statistical stuff and free tools.
> > >
> > > Outside of writing indicators I find statistics to be one of
the
> > few
> > > maths disciplines that has a high degree of relevance to
trading.
> > >
> > > http://davidmlane.com/hyperstat/index.html
> > >
> > > BrianB2.
> > >
> >
>
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