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RE: End-of-Day Internet data



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John,

In layman's terms, the theory is applied to such things as flipping a coin. Depending on the outcome of past occurrences (heads or tails), an optimum time to stop is determined from a risk/reward standpoint based on a finite number of random variables. Interestingly, the calculations are independent of future occurrences. Future independence is a unique and powerful attribute of this theory. 

An analogy of the "secretary problem" (see section 3.2f) and a "stock trade" is as follows:
A trader is faced with the problem of exiting a trade after N number of intervals (minutes, days, weeks etc.). She gets the data one at a time (closing price). Once a data is rejected it can not be traded (yesterdays price). And so on......

Also, consider the G. Elfving problem of Chapter 5, Section 4. The analogy is as follows:
A trader has an open position which is consolidating sideways. He receives closing prices he must accept or reject. The longer he waits, the more money market interest or alternative trade profit he loses by being in the open position. What should he do????

Comments?
PS. I have the republished version - Dover press ISBN 0-486-66650-6.


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From: 	John Sweeney  S&C
Sent: 	Friday, September 05, 1997 1:53 PM
To: 	metastock-list@xxxxxxxxxxxxx
Subject: 	RE: The Theory Of Optimal Stopping

Why do you think this applies to market indicator parameters? And how?

[By the way, the books was also republished in 1991 ($6.95 from Amazon)]

John

>I purchased a book recently titled "The Theory Of Optimal Stopping" by Y.
>S. Chow et. al. published in 1971. Searching the net revealed the theory
>has been advanced the last two decades mainly applied to optimizing Monte
>Carlo run time parameters. It seems to me the theory can be applied to
>market indicator parameters as well. Does anyone know about this?


John Sweeney, Tech. Editor  Technical Analysis of Stocks & Commodities
Technical Analysis, Inc.    The Traders' Magazine
4757 California Ave. S.W.   Phone: 206 938-0570  Fax: 206 938-1307
Seattle, WA 98116-4499 USA  Web: http://www.traders.com/
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