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Forgive my naiveness, and allow my 2p. contribution.
In my opinion it doesn' t matter if one constructs a
timeseries out of flipping coins or examines a
historical price of an equity. The issue is if the
events HAPPENED REALLY, whether this is experiment or
real life trading activity, then same principles can
be applied in both occassions. T.A. can be applied.
There is nothing that T.A. can do to select between a
"real" timeseries and a "fake" timeseries. What is on
paper is there. No questions asked (how, from where,
who, etc.)
T.A. is helpfull provided the user decides it is worth
applying it on a timeseries. TA itself cannot
discriminate - let even reject - the quality of the
time series.
AlexAtreides
--- sebastiandanconia <no_reply@xxxxxxxxxxxxxxx>
wrote:
> "...This is the sensational bit! You can use random
> noise, smooth it, and generate nice looking,
> systematic effects. What
> Slutzky did and what shocked the academic world at
> the time was to
> mimic an actual trade cycle using only random
> noise..."
>
> Burton Malkiel ("A Random Walk Down Wall Street")
> describes an
> experiment where the outcome of coin flips (+1 for
> heads, -1 for
> tails, and doing a running total) is displayed on a
> stock chart.
> After a few hundred coin-flips, the resulting
> pattern of numbers looks
> just like the activity of a "real" stock.
>
> These are not just meaningless egg-head, academic
> thought
> experiments. The implications are profound for
> traders/investors
> using most kinds of TA, including moving averages.
> If your favored TA
> method can't distinguish between randomly-generated
> data and the real
> thing, is it really measuring what's going on in the
> market or is it
> just measuring the characteristics of a data-set?
>
> Since we know that most stocks travel together ("the
> rising tide
> raises all boats"), can any indicator that ignores
> the activity of the
> overall market really be valid? Stocks also rise
> and fall based on
> earnings, dividends and valuations. Can any
> indicator that ignores
> these factors be considered valid? What about
> economic factors?
> Liquidity? Fed policy? Float size? Short
> interest? Volume?
>
> I stand by my original point that massive historical
> back-testing
> using the arbitrary mathematical formulas of the
> vast majority of TA
> methods only produces unimportant coincidental
> correlations, and I
> would welcome any logical argument or proof that
> this isn't the case.
>
>
> Luck,
>
> Sebastian
>
>
>
>
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