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This brings to mind something that came up in the Schwager interview
with Robert Krause, in which the topic was 'perceptual filters.' Some of
it ran like this:
JS:"I believe a lot of these popular methods are really vacuous."
<small snip>
"All these technical methods are based on price. In effect, they're all
different colored glasses for looking at price. Proponents of RSI and
Stochastics...would see price patterns filtered through these price
derived series. Gann analysis enthusiasts would see the price patterns
through a Gann-based interpretation. In these cases and others, traders
accumulate experience on price patterns - albeit from different
perspectives. Some of the methodologies employed, however, are probably
totally worthless. It's simply that instead of looking at prices through
clear glass, traders who use these methods are looking at prices through
different-colored tints. The method, or tint shade, is a matter of
individual preference. To extend the analogy, I would compare these
methods to nonprescription sunglasses: they change the view, but don't
necessarily improve the vision. The bottom line is that these methods
seem to work only because the people who use them have developed some
sort of intuitive experience about price."
RK:"That actually fits pretty well with my own view. People need to have
a perceptual filter that matches the way they think. The appropriate
perceptual filter for a trader has more to do with how well it fits a
trader's mental strategy, his mode of thinking and decision making, than
how well it accounts for market activity."
<snip>
Regards,
monte
Frank Munouz wrote:
>
> Gerald:
>
> Nobody really knows for sure what drives the market. It could be a single
> event or a combination of things. Getting to the bottom of what actually is
> the cause can take considerable time and money and by the time you even got
> close, it would be too late and you still may never know.
>
> System traders seek to find correlations, essentially, between their system
> and the market. They know from back testing that historically system profit
> moves with the market. They don't know why it works or even care all they
> know is that it works.
>
> This is my point.
>
> We don't know why such a seemingly abstract correlation between basketball
> and the market would work but backtesting tells us that it does. So who
> cares what the reasons are. We can never know what all the reasons are and
> weather or not they're valid. The bottom line is statistically, it has
> shown to work and that's all we traders can really know.
>
> PS. If I were in your shoes, I wouldn't be bashing the idea that seemingly
> unrealted events can't affect one another, I would be skeptical of the
> methods that produced the result to being with.
>
>
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