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Ben,
This seems unlikely. Please document your answer -
where does Arnstrong say that.
Jim
----- Original Message -----
Sent: Wednesday, December 10, 2008 7:40
AM
Subject: Re: Re: Re:[RT] A note on
Forecasting / Mandelbrot
2 decreases in monthly payroll
employment
or hourly worked week
Ben
----- Original Message -----
Sent: Wednesday, December 10, 2008
10:24 AM
Subject: Re: Re: Re:[RT] A note on
Forecasting / Mandelbrot
I have finished reading the essay and find many
concepts that agree with my methodology. However, I find his concept of
money creation to be flawed.
Also on page 18 he says "the economic high came
precisely to the day on February 27th, 2007." In the past he had correlated
his turning dates with the stock market indices. However this statement is
clearly referring to some other measure of the economy since the highs in
the market indexes did not occur until 10/11/07. I found no
explanation in the document of what he was referring to. Do you know what
his measure of economy is?
Jim
----- Original Message -----
Sent: Wednesday, December 10, 2008
5:00 AM
Subject: RE: Re: Re:[RT] A note on
Forecasting / Mandelbrot
http://www.contrahour.com/ItsJustTimeMartinArmstrong.pdf
?It?s
Just Time? goes far beyond his 8.6 cycle. It appears to be TYPED on
the original typewriter used for his other texts implying he wanted to be
possible to authenticate the text (I can?t do that). But from my
reading of this and previous texts, the thought processes, depth and style
indicate it is bona fide. The first chapters are the most important
and the latter chapters devolve into his personal situation. Most
importantly, he is looking for a high the first week or two of March
before a greater collapse into the ultimate bottom in the first half of
2011.
Jim
From: realtraders@yahoogroups.com
[mailto:realtraders@yahoogroups.com] On Behalf Of Jim
White
Sent: Tuesday, December 09, 2008 10:29 AM
To:
realtraders@yahoogroups.com
Subject: Re: Re: Re:[RT] A
note on Forecasting / Mandelbrot
I am a big fan of
Armstrong. Can you provide a reference to the essay you
noted?
----- Original Message
-----
Sent:
Tuesday, December 09, 2008 7:23 AM
Subject: RE: Re: Re:[RT] A note on Forecasting /
Mandelbrot
I?m not
a statistician, but what my little accounting mind derived from reading
Mandelbrot was not so much that he envisioned a ?solution? as he saw
chaos that could only be interpreted in fractal generation. What
was so interesting and has been profitable to me in degrees I never
thought possible, was his assault on Black Sholes. His proof via
the frequency of ?long tailed events? in the market entirely laid waste
to the idea that a normal distribution could be applied to the
market. And further, that distantly out of the money options were
dangerously UNDERPRICED. Well, those 9000 contracts $.14-.21
October 38 QQQQ puts that I purchased in exactly the first 90 minutes of
trading on September 19, 2008 became $8+ intrinsic before they expired
in October. How many bags is that? No, I didn?t hold out for
$8 intrinsic, but it was a big number. Mandelbrot, obviously,
rules in my book.
Conversely, when VIX spikes,
it?s not time to buy premium. The majority still rely on Black
Sholes. Who needs ?the solution? when you can see the fallacies on
which others are writing options contracts?
Martin
Armstrong has a very similar view of the non linearity of the market.
He sees multiple cycles converging to provide the ?perfect storm?
or ?deadly wave? with chaos ordered by ?self generating? fractals or
?schema?. His latest essay (?It?s Just Time? 10/8/08), which I
believe is authentic, is amazing. I?m into my tenth reading, at
least, of it (err, the early chapters).
Very,
very interesting people. Wish I had a tenth of their insights.
From:
realtraders@yahoogroups.com
[mailto:realtraders@yahoogroups.com] On Behalf Of Bob
Pardo at Mindspring
Sent: Tuesday, December 09, 2008 9:50
AM
To:
realtraders@yahoogroups.com
Subject: RE: Re: Re:[RT]
A note on Forecasting / Mandelbrot
I don?t think
?Mandelbrot conclusion has many conditions attached to it? is an
accurate conclusion.
The fractal distribution has qualities that make it
almost totally unlike the distributions used in classical statistics.
However, since it is rather obvious that billions of
dollars have been earned using these ?flawed statistics? and variants
thereof (see D. E. Shaw and Renaissance Technologies) it is also obvious
that the entire matter is amazingly complex.
Since all of these firms are secretive almost to a
paranoid degree, a determination of the actual technologies they employ
will require a major piece of detective work.
As Sergey indicates, the devil is in the
details.
Regards,
Bob Pardo
From:
realtraders@yahoogroups.com
[mailto:realtraders@yahoogroups.com] On Behalf Of Stan
Rubenstein
Sent: Monday, December 08, 2008 9:33
PM
To:
realtraders@yahoogroups.com
Subject: Re: Re: Re:[RT]
A note on Forecasting
Is it possible that Mandelbrot conclusion has many
conditions attached to it not spelled
out in your comment that has a bearing on
it?
Also isn't it the "log normal" distribution that's
applicable to financial stock returns
----- Original
Message -----
Sent:
Monday, December 08, 2008 10:03 PM
Subject: Re: Re: Re:[RT] A note on
Forecasting
These are too
general statements about too general subject. The most
important is in details. Here I agree with you.
And I use the
models with a lot of added conditions. The complexity of some model is
not a problem for the kind of research that I
do.
As to
Prediction Company and their technologies, I have some questions
for you as a professional.
What exactly
did you use from Chaos Theory:
1) Non
parametric statistics? If so, how did you use
it?
Information
for those who are not familiar with
it:
Mandelbrot
found that the normal distribution is not working for financial data.
It means that we cannot apply classical statistics for financial
data.
For
example, traditional calculation of profit of
some trading system, or Black-Scholes option pricing
model, are not applicable for the real stock market.
2) R/S
analysis? If so, how did you use it?
Information
for those who are not familiar with
it:
----- Original
Message -----
Sent: Monday, December 08, 2008 8:15
PM
Subject: [Bulk] Re: Re:[RT] A note on
Forecasting
All trading systems
are based on some assumption about market behavior. In simple form a
trading system says "If A occurs then B follows."An another example
If an oscillator reverses in oversold territory, buy next bar at x
price.We all know that such a system may have remarkable results
over a given time period however in the long run it will fail
because it does not accurately describe the way markets work.
Markets can trend for long periods, yielding many false signals and
failed trades. However, suppose we add another condition to the
model that describes when the extended trend will end. Now we have a
model that more accurately describes how markets work and should
prove more reliable over longer periods. If we add enough conditions
to accurately describe market behavior under a number of market
scenarios, then we have a model that will have consistent returns
over time and markets. And the statistics will be a realistic
expectation of performance. This , of course, is the dream of
all system builders.
You may make the
case that markets are so dynamic that one can never detail
conditions enough to create a model that will yield reliable
performance over all time frames but I beg to differ. Both
Mandelbrot and Peters agree that markets may be predictable in the
short run. I, in fact use the work of both in my market model. And
the Prediction Company certainly succeeded, did it
not?
----- Original
Message -----
Sent: Monday, December 08, 2008 2:23
PM
Subject: Re:[RT] A note on
Forecasting
Static
cycles are not my favorite or special.
The real
question is a fundamental one: how to verify any trading strategy,
based on anything.
10 years
ago I have participated in a big research project. Its purpose was
to test and verify different trading systems based on methods of
technical analysis. Our group has found that the application
of methods of classical statistics to the stock market
analysis is an extremely dangerous
thing.
Let me
explain it better on this
example.
Let say
we have found a system that provides 70 winning signals from 100.
The university's course of statistics says that this fact is not
occasional with the probability of 99.5% (Chi
Square=20x20/50=400/50=8 => P=99.5%) It means that we
can assume that there is a high possibility that this system will
work well in the future as it does in the present. And
somebody may decide that the Holy Grail is found finally. But - it
is not true. Statistics of the real stock market and the market's
logic are different from this one. If the system works good
enough for 100 current examples, it does not mean that it will
work the same for other samples.
Jim, I
want to emphasize that I do not name here the models that we
used for the research. My group tried different things: TA
indicators, risk/money management, arbitrage systems, then
different math models (like Spectrum, autoregression), astro
cycles as well. This problem still presents for all of
them.
I believe
that this problem is described well in these
books:
1) "The (Mis)behavior of Markets" of Benoit
Mandelbrot;
and 2) "Chaos and Order in the Capital Markets: A New
View of Cycles, Prices, and Market Volatility" of Edgar E.
Peters.
In financial analysis, we
have to work with big data samples.
PS. Jim,
it seems to me that you are mixing two different things: fixed (or
static) cycles and dominant cycles. As an example, I would not
believe if somebody states that the 20-days cycle is found that
has worked for 20 years. From another side, if somebody states
that withing the last 100 days the 20-days cycle has been found,
it is quite possible.
Next 100
days there might be some other cycle (27-days, for example). It is
closer to MESA and wavelet analysis, not to normal fixed cycles
analysis.
----- Original
Message -----
Sent: Monday, December 08, 2008 4:27
PM
Subject: [Bulk] Re: [Bulk] [RT] A note on
Forecasting
The inability
of a methodology to return reliable and consistent performance
is an indication that the underlying hypothesis is flawed. For
example, methods based on static cycles or projections based on
static cycles will have inconsistent performance over different
stretches of time because static cycles are not fundamentally
correct model of market activity.
There are
characteristics of market movement and trader psychology that do
not change over time and methods based on these will exhibit
consistent performance. be it 100 or 700
samples.
-----
Original Message -----
Sent: Monday, December 08, 2008 11:52
AM
Subject: Re: [Bulk] [RT] A note on
Forecasting
Actually, the question about financial
statistics is a tricky one. The important things there are not
only win/loss ratios, the intervals where these ratios are
calculated should be considered as well. I have had many cases
when a trading strategy worked very well for a half a year.
And then it died forever.
As an
example, see this intermediate backtesting result
for huge intraday data:
The
system provided 65% good signals (469 win./ 247 los.) during
some perios (several months).
After
that 53% only, and then 59%.
100
trades is not enough to get the reliable statistics (we use at
least 500 trades, in this example 700
trades).
One
of this forum's participants is Robert Pardo, he can comment
this better than me.
-----
Original Message -----
Sent: Monday, December 08, 2008 12:31
PM
Subject: [Bulk] [RT] A note on
Forecasting
My pivot
trading methodology depends on anticipating and trading as
close to the pivot points as
possible. My argument is that trades near the pivot points
are the lowest risk and highest reward points to trade. I
operate my trading as a business - I buy inventory and
sell to capture a minimum profit margin. I have spent most
of my trading career studying the characteristics of markets
at turning points (pivots) and constructing trading tools to
anticipate and trade near those points. These tools deliver
consistent reliability of profitable trades between 70% and
80%.
I document
my trading concepts by forward testing, not computer
generated back testing. In other words I trade the tools in
real time and record the results. For example, my latest
application to the ESZ08 has generated about 78% profitable
trades on a five minute chart over the past 6
weeks.
One of the
issues I have with the people that post forecast on this
list is that they do not provide reliability measures of
their techniques. Failed forecasts are rarely addressed and
specific application details are not provided. Consequently
I usually delete them without consideration - after all - a
stopped clock is right twice a day.
So I
recommend that anyone who posts a forecast provide the
statistics documenting the same performance of technique
over at least 100 applications. For example my techniques
are good within one bar of the forecast 70% to 80% of the
time depending on market. With that information, readers can
better judge the value of the post.
Jim
White
Pivot Research & Trading
Co.
PivotTrader.com
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