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The chapter in Jurik's book on preprocessing has an interesting chart which
describes how they try to predict the effects of noise trader's behavior in
the financial markets.
The chart shows a pyramid .. from the bottom layer to the top layer it
reads.
a) Really stupid noise trader
b) Moderately stupid noise makers
c) Plain stupid noise traders
d) Index holders (risk aversive)
e) Information based Traders
f) Insiders with inside information
The noise traders (who are attracted by technical analysis) ... to their
varying degrees ... are distinguished by "rules of thumb" that are
inconsistently applied.
The main purpose of the "... Three classes of noise traders (is to) provide
liquidity and price changes used by the information traders to make
money...."
This is their basic analysis of the market structure that all of their
preprocessing programming for their neural nets is based on. The guy who
wrote it has serious credentials on Wall Street.
FWIW ... I think that I've moved up through the ranks from the "really
stupid" to the "moderately stupid" level after years of hard work. I'm
hoping to graduate to "plain stupid" by next year. <G>
Best regards
Walter
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