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At 05:40 PM 3/26/98 -0500, Troy Kelley wrote:
>Message-ID: <351A008D.3B4F@xxxxxxxxxxxx>
>Date: Thu, 26 Mar 1998 02:15:25 -0500
>From: Troy Kelley <tkelley@xxxxxxxxxxxx>
>Reply-To: tkelley@xxxxxxxxxxxx
>Organization: arl
>X-Mailer: Mozilla 3.01C-DH397 (Win95; I)
>MIME-Version: 1.0
>To: realtraders@xxxxxxxxxxxxxx
>Subject: Randomness
>References: <199803260014.QAA06248@xxxxxxxxxxxxx>
>Content-Type: text/plain; charset=us-ascii
>Content-Transfer-Encoding: 7bit
>
>I just had a long argument with a friend of mine who says that
>predicting the market is impossible. It is randomness. I counter with
>the fact that new theories of chaos say randomness is predictable. And
>randomness is predictable, my friend concedes, but that doesn't mean I
>can make money from it. I say some people make money in this profession,
>but my friend just said they are all snake-oil salesman. And the real
>traders that make money can't do it for very long. They just discover
>some random variation in the market and exploit it for a short time,
>then write books about it and sell systems.
>
>I started thinking too, that he might be right and that is one reason
>this is so stressful. Because your mind is telling you that it is not
>predicable, but everyone in the business is telling you it is. Everyone,
>that is, with something to sell you. If they can convince you that it
>is not random, they can sell you something. I pay 300 bucks a month for
>real-time futures data. THAT IS OUTRAGEOUS. I could be driving a very
>nice car for that amount of money. Just because someone has some
>information that I think I can figure out and predict, they make a
>fortune from me. It must be true, or I wouldn't have to pay so much
>money for the data -right? So, it is like a casino, and the only people
>getting rich are the people who own Wall Street.
>
>I am even starting to think that people like Jim Rodgers and Warren
>Buffet were lucky too. They were just lucky with a different strategy,
>buy and hold. I would argue that even that strategy has so many
>variables in it, that it is difficult to predict on a consistent basis.
>Then the only people who are really right are the people who take the
>long term approach and the academics. I always wondered way so many
>people criticize the random walk theory. All of those people want your
>money. They are the practitioners not the academics. They don't care
>about theory, they want to make money, and they do a good job.
>
>OK realtraders, convince me otherwise.
>
>Troy
>
>
Troy,
If you were paying attention to the right participants in this listserver
you would have noticed that some are earning a living at this farily
consistently. They could be said to have found rigorous techniques for
interpreting price movements that make 60% or more of all trades profitable.
As for Buffett and other fundamentalists, they get to know companies and
research what their competition is, who their market is, project out what
future earnings might become, stop to check if there are cars in the company
parking lots on Sundays, take a stab at figuring that silver can't get much
lower than xxx or oil lower than yyy, etc.
In other words, while the market is a random walk, there are still pockets of
inefficiency. There are opportunities to catch what others do not notice.
There are good values that are being ignored, there is a new interest or
disinterest in a stock or option or commodity that seems to mean I can catch
a ride on a new trend (however short).
This is not an argument that absolutely must convince anyone. The evidence is
nevertheless there that people are getting it right more than 50/50. That's
all it takes. And I'm referring to people who have nothing to sell you.
Pete
petena9090@xxxxxxxxxxxxxx
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