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For people who read the previous post on statistics, and didn't get
what was being said, here's a loose translation.
A gaussian distribution is a normal distribution. Stock prices are
rarely distributed according to a normal distribution so when you
apply things like standard deviation calculations, which assume a
normal distribution, you don't get exactly correct answers. The same
is true for linear regression applications, etc.
Stock price distributions have to be figured out one symbol at a time
and then the correct statistical formulas for that distribution have
to be used to calculate Std devs, etc. Time consuming and impractical.
Therefore, most TA programs assume a normal distribution and most of
the users don't know enough to know that ain't right.
>From my studies, I have found that traders do not comprise a normal
distribution either, so my theory is that the errors in one non-normal
distribution offset the errors in the other non-normal distribution.
In other words, even if you had the correct price distribution for
each symbol, traders wouldn't, couldn't, shouldn't, can't or ain't
going to read it correctly. If you give traders a calculation with
errors in it, the laws of probability suggest that some traders will
create compounding errors and lose all their money forthwith. This has
been proven by prima facia evidence, QED. However, some traders will
make mistakes in reading the charts and those mistakes will offset the
mistakes in the data. Therefore, through no fault of their own, they
will make money.
Ehlers has taken a less elegant approach than mine and used a Fisher
Transform to smooth the data into an approximately normal
distribution. Just the term Fisher Transform makes me suspicious. Who
is this Fisher guy? Could he trade quarters with this grandmother? I
doubt it. Then there's the issue of the Transform. Transformed into
what? A loser! I don't know about being Transformed into anything.
Ehlers is definitely worth a look but you will need Brad's software to
really make it perform properly.
--- In Metastockusers@xxxxxxxxxxxxxxx, "bradulrich33"
<bradulrich@xxxx> wrote:
> Yes, some peeople seem to think holy grail for some reason when you
> mention Dr. Ehlers or signal processing techniques. I don't ever
> remember him saying that. His stuff is meant to:
>
> 1.) Smooth data with less lag time through the use of filters designed
> for signal processing.
>
> 2.) Look for and quickly measure cycles in the data. Sometimes there
> are cycles, sometimes there are not.
>
> 3.) Transform the very un-gaussian distribution of price data to a
> more gaussian distribution. (TradeStats!!! I like that term) in order
> to make more realistic, but obviously not perfect, measurments of
> statistical extremes. Many people ignore this VERY important fact when
> trying to apply statistics to price data. Price data has almost the
> exact opposite of a gaussian distribution.
>
> All of these are applied to real measured data, and do not make
> assumptions about future data. These are referred to as causal
> filters, as opposed to non-causal filters which require data from
> ahead of the measured point to create the filter.
>
> Only one of Dr. Ehlers techniques, the Sinewave indicator, attempts to
> use a non-causal filter, in this case, he assumes the the cycle phase
> will exist as it does now for another few bars, and advanced a measure
> of this phase in order to make a prediction.
>
> You are right, you cannot assume that the cycle and phase will stay
> the same in the future...You just have to make a measurement with as
> little lag as possible, and sometimes make the assumption that they
> will stay the same, or at least in the general vicinity.
>
> It seems as though the Stationarity principle can be applied to cycle
> and phase the same as it can to mean and variance???
>
> There are ways of measuring cycle and phase in price data the same as
> there are ways of measuring mean and variance, both require a bit of
> lag of course, but that does not make them unusable. In fact, Ehlers'
> methods of measuring cycle and phase are very responsive. Everyone
> acknowledges that both are simply measurements of previous activity,
> and not necessarily an indication of future activity.
>
>
> I am by no means an expert on the subject, but I think the idea of
> Stationality applies mainly to the ideas in Signal theory regarding
> sampling and reconstruction of signals, which is not what we are doing
> here. We are borrowing some techniques related to the field to let us
> make a more "informed" model, but there are still many assumptions left.
>
> That being said, there are still limiting assumptions, and thus
> improvements that can be made on top of Ehlers' stuff given a general
> understanding of the reasoning behind his ideas. Non of these
> improvements will come close to the theoretical holy grail, but they
> will remove a few false signals, and they will get you in a bar-or-two
> earlier on some decisions.
>
> People should not look at his techniques as alternatives to most
> others. I have found the best results come from using his stuff with
> many other techniques that make improvements upon "traditional"
> indicators and techniques.
>
> Thanks,
>
> Brad Ulrich
> www.thedml.com
>
>
>
>
>
> tecto put is shortly
>
> --- In Metastockusers@xxxxxxxxxxxxxxx, "teclogeo" <teclogeo@xxxx> wrote:
> > >Engineers agree with Mark Twain: there are lies, damn lies, and
> then there
> > is statistics
> >
> >
> >
> > Err.sorry, but that is a slightly misplaced quote. Yes, Mark Twain
> said it
> > and yes it can be true when statistics are deliberately used to
mislead
> > people as in the way politicians regularly use them. But engineers.?
> I know
> > you are one, but I would like to venture a bit of personal
> experience that
> > may persuade you and others interested in how statistics are regularly
> > applied in a Real World application that you may not have considered
> before
> > now. Perhaps that may then help you shed a more favourable light on
> the way
> > stats are applied in the world of trading.
> >
> >
> >
> > In my previous life I was a geologist working for a large mining
> company. My
> > claim to fame in that area is that I was on the (small) team that was
> > responsible for one of the more significant gold discoveries of
> recent years
> > (for those interested, the Geita deposit in Tanzania.now belonging to
> > Anglogold-Ashanti). So, the point here is that I have some
experience in
> > using statistical modelling.namely in the practical application of
> > "geostatistics".
> >
> >
> >
> > Geostats is nothing fancy.it's just the name given by geologists
to the
> > practice of determining the size and internal grade distribution of
> an ore
> > body using statistical methods. Basically one has a limited data
set of
> > samples from drill holes and uses that to come up with a 3-D model
> of the
> > ore body and the distribution of metal within that body.and then
to put
> > levels of statistical confidence in that model. Those levels of
> confidence
> > determine (usually within industrial standards) how much more, if any,
> > drilling is required to satisfy the *mining engineers* that what you
> have is
> > not just a mineral deposit but an ore body (the former is just metal
> in the
> > ground, whereas the latter can actually be mined economically).
> >
> >
> >
> > Mining engineers know that this is only a model. They know that it
> is not
> > 100% fact (as the only way to determine that is to actually mine the
> thing).
> > They know the statistical confidence levels and therefore they
know that
> > there are likely to be some errors in the model. This means that
> when the
> > miners actually come to take the gold out of the ground there will
> be less
> > in some places and (more pleasantly) more in others. And yet, look
> at what
> > happens.capital flows, mines get built, people get employed, dirt gets
> > shifted, metal comes out of the ground. And all that hangs on a few
> > statistical inferences made by a bunch of Neanderthal geologists.
> Not bad,
> > eh?
> >
> >
> >
> > So there is no question of "lying". To do so would involve not only
> gross
> > professional negligence on behalf of the geologist, but it would
> mean that
> > everything that else that normally follows would fall
apart.usually long
> > after all the capital has been spent and the people have been
> employed, i.e.
> > when it's far too late. Also, in the case of deliberate scams like
> Bre-X,
> > the use of geostatistical "lies" can affect the whole industry.
> >
> >
> >
> > Now, with all that said, you might be surprised to find that the
> principle
> > of stationarity is relaxed almost to the point of irrelevance in
> > geostatistics. Nature is a wonderful thing, but it rarely conforms
> to simple
> > mathematical models and so, skipping over the jargon, we basically
> find that
> > we have to make some pretty sizeable assumptions and generalisations
> when
> > coming up with the models. Are we lying when we "bend the rules" so?
> I don't
> > think so.we are not agreeing with Mark Twain at all. He was
implying, I
> > think, that statistics are determined and then manipulated for an
> ulterior
> > motive. That is different from honestly recognising, discussing
and then
> > trying to work around the limitations of the practice.
> >
> >
> >
> > All this has direct implications to the world of trading. I've
> already gone
> > on too much so I'll only say now that you can draw two direct
parallels
> > between geostats and "trading stats" (Tradstats??!!). One is that
> there is a
> > known quantity.the drill hole data is dirt already taken out of the
> ground
> > and analysed - this compares with the historical data set in
> trading. The
> > second is that there is an unknown quantity that you want to
> estimate, or
> > model.the very sizeable un-mined bits of the deposit between the drill
> > holes(!) and the future data in trading. The only problem I can
think of
> > there is to do with continuity. The drill hole data is not spatially
> > continuous in 3D, whereas the time-series trading data is. Oh well,
> that's
> > not relevant.what I'm trying to say is that you should not confuse
> > statistical modelling with any sort of "holy grail". Perfection
does not
> > exist when dealing with models, as any experienced mining engineer
> will tell
> > you.but that doesn't mean in any way that a good model will not
help in
> > getting the job done. And engineering is, after all, about getting
> the job
> > done.
> >
> >
> >
> > Hope that's helped open your mind a bit?!
> >
> >
> >
> >
> >
> > _____
> >
> > From: Metastockusers@xxxxxxxxxxxxxxx
> [mailto:Metastockusers@xxxxxxxxxxxxxxx]
> > On Behalf Of jawjahtek
> > Sent: Friday, July 01, 2005 11:07 PM
> > To: Metastockusers@xxxxxxxxxxxxxxx
> > Subject: [Metastockusers] Re: New Adaptive Tools for Metastock
> >
> >
> >
> > Random question and comment:
> >
> > 1. Superfragalist, have you tried CSI data (assuming you use EOD
data)?
> > There is no such thing as a good data provider, but at least CSI is
> > honest and up front about continually cleaning their data AND telling
> > users what errors were made. If you use intraday data, I can see how
> > you have been hosed. The only option that I have seen is to match the
> > professional set ups: use multiple intraday suppliers.
> >
> > 2. While I wish the developers of the new adaptive tools all of the
> > luck in the world, I don't believe that ANY application of
> > Communications (Signal) theory can be successfully applied to price
> > data. In academic terms, these theories require Stationarity. In
> > layman's terms, this means that the theories require a constant range
> > of frequencies (cycle) and phases (time lag). Unfortunately,
historical
> > price data tells us nothing about the future prices' frequency and
> > phase.
> >
> > Statistician's definition of Stationarity: a statistical name for
> > expressing degrees of invariance in the properties of random
functions;
> > it refers to the statistical model, and not to the data. Most
commonly
> > used to indicate invariance in the mean and variance, but also in the
> > variance of first differences.
> >
> > I am an Electrical Engineer. Although EEs use the concept of
> > Stationarity, its meaning is slighly different in engineering.
> > Engineers agree with Mark Twain: there are lies, damn lies, and then
> > there is statistics.
> >
> > I will try the free trial, but I already know that the holy grail
does
> > not (and cannot) exist.
> >
> >
> > jawjahtek
> >
> >
> >
> >
> > --- In Metastockusers@xxxxxxxxxxxxxxx, "superfragalist"
<jackolso@xxxx>
> > wrote:
> > > Well, I've got all those IVs hung off my wallet also. Reuters at
least
> > > cleans their data, which esignal doesn't do. In fact, esignal can't
> > > even adjust for splits.
> > >
> > > I didn't know netflix had DVDs on trading. I've just been
trading DVDs
> > > with them.
> > >
> >
> >
> >
> >
> >
> >
> > _____
> >
> > YAHOO! GROUPS LINKS
> >
> >
> >
> > * Visit your group "Metastockusers
> > <http://groups.yahoo.com/group/Metastockusers> " on the web.
> >
> > * To unsubscribe from this group, send an email to:
> > Metastockusers-unsubscribe@xxxxxxxxxxxxxxx
> >
<mailto:Metastockusers-unsubscribe@xxxxxxxxxxxxxxx?subject=Unsubscribe>
> >
> > * Your use of Yahoo! Groups is subject to the Yahoo!
> > <http://docs.yahoo.com/info/terms/> Terms of Service.
> >
> >
> >
> > _____
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