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Isotopes

Author
Rthor
Smugglers Inc.
#61 - 2013-12-18 18:44:40 UTC
Debra Tao wrote:
Rthor wrote:


My position is that market is efficient because the current prices reflect all info out there at this time. But my view is that it is still possible to make money for someone who is smarter than average.




Then i kinda have to agree on your position that "prices reflect all info out there at this time" because i don't see any way to disprove it... and it sounds reasonable. However i think that a good part of the information included in prices aren't exogenous, i mean some people will buy a commodity, oil for instance, not because they think that Saudi Arabia will reduce its production but rather because of some sort of magical deduction from graphical analysis for instance. So even without exogenous factor prices fluctuate a great deal in a seemingly random way.

So for instance when a bubble appears it doesn't necessarily means that market are inefficient if you put the irrationnals factors as part of the information.

To sum up my point : I think that markets are efficient if you take into account all the informations available, like people's mood, fears and so on but they appear as inefficient if you only take into account exogenous factors.


I think that you want to have an opportunity to participate in an even completely baseless bubble. That is the only time when you can make a killing. In a perfectly rational and competitive market an opportunity to make a killing does not exist. Even if you know that the price is in the bubble territory it is still worth if it for you to pay it to buy into a bubble if you are expecting to sell it for a higher price to somebody else. So the calculation of the price in a bubble is rational even if everybody knows that the price will eventually fall. It is still a calculation of risk vs reward. If you sell for a higher price than you bought then you were right to pay the price that you paid even if subsequently price falls as a bubble pops.

So I think in this way, and I don't like it when people say that markets are irrational. If markets are irrational then it is easy for you to become a trillionaire. All you have to do is is get the direction right and then it is leverage and you are golden. So why are not there trillionaires around?

But maybe in Eve there are trillionaires but if so how did they do it? Charts? Fundamentals? Monopolies? PLEX? Insider info? What worked is what interests me.
Debra Tao
Perkone
Caldari State
#62 - 2013-12-18 20:17:03 UTC
Rthor wrote:

So I think in this way, and I don't like it when people say that markets are irrational. If markets are irrational then it is easy for you to become a trillionaire. All you have to do is is get the direction right and then it is leverage and you are golden. So why are not there trillionaires around?

But maybe in Eve there are trillionaires but if so how did they do it? Charts? Fundamentals? Monopolies? PLEX? Insider info? What worked is what interests me.



If markets are irrational then that means that in some situations at least no one can predict the evolution so i don't see how that translates into people being able to make a fortune out of it.

In Eve there are definitely trillionaires, i guess most of them are vets that have been able to farm their way through the market. I know at least one guy that has made his fortune from building supers. Patch specualtion is a good way to have an almost guaranteed return, i can see someone slowly grinding his way to a trillion by taking full advantage of patchs.
Also if you had some good moons you were able to make several billions each month...
Exploiting FW or incursions a dedicated farmer could have make a trillion isk (see Kwark for instance...).
Tsibelman
Garoun Investment Bank
Gallente Federation
#63 - 2013-12-18 21:05:45 UTC
It possible to make a fortune from path info but you just don't need it.

The major source of EVE profits is regional price discrepancies, the arbitrage between different locations allows for a daily profit of 3%-5% from a sum of up to at least a hundred billions. It's huge number it means that you can make a hundred billions a month if you trade daily.

In RL such arbitrage opportunities just don't exists they very quickly discovered and filled by traders until markets turn to equilibrium , in EVE because amount of people willing to invest their time into filling this 3%-5% holes in the markets is actually tiny, it just don't meter that much for a majority of players to be an EVE trillioner
Rthor
Smugglers Inc.
#64 - 2013-12-19 02:29:59 UTC
Debra Tao wrote:
Rthor wrote:

So I think in this way, and I don't like it when people say that markets are irrational. If markets are irrational then it is easy for you to become a trillionaire. All you have to do is is get the direction right and then it is leverage and you are golden. So why are not there trillionaires around?

But maybe in Eve there are trillionaires but if so how did they do it? Charts? Fundamentals? Monopolies? PLEX? Insider info? What worked is what interests me.



If markets are irrational then that means that in some situations at least no one can predict the evolution so i don't see how that translates into people being able to make a fortune out of it.

In Eve there are definitely trillionaires, i guess most of them are vets that have been able to farm their way through the market. I know at least one guy that has made his fortune from building supers. Patch specualtion is a good way to have an almost guaranteed return, i can see someone slowly grinding his way to a trillion by taking full advantage of patchs.
Also if you had some good moons you were able to make several billions each month...
Exploiting FW or incursions a dedicated farmer could have make a trillion isk (see Kwark for instance...).


If markets are irrational then it is interesting.

The issue then is whether markets are always irrational or whether they always or sometimes become rational after a period of irrationality.

If they are always irrational then I guess it is the time for throwing darts at the board and thus making your picks.

But if markets sometimes revert to rationality after a period of irrationality then it is easy to make money as I was trying to explain. Temporary market irrationality is an opportunity for you to bet on the market becoming rational again. If you are rational then it should be like shooting fish in the barrel.

If markets always revert to rationality then it is even easier. Then you just bet against irrational market phase and you can make unlimited money provided that you can get leverage. Like via loan requests on this forum.
Sabriz Adoudel
Move along there is nothing here
#65 - 2013-12-19 04:23:18 UTC
Vaerah Vahrokha wrote:

In a dark, dystopian universe where dog eats dog and everyone IS out to get you...













... Vaerah gives you a giant space hug! P


www.hellokittyonline.com

[/troll]

I support the New Order and CODE. alliance. www.minerbumping.com

Debra Tao
Perkone
Caldari State
#66 - 2013-12-19 06:52:25 UTC
Rthor wrote:

If markets always revert to rationality then it is even easier. Then you just bet against irrational market phase and you can make unlimited money provided that you can get leverage. Like via loan requests on this forum.



What does betting against irrational market means ? If it's that easy to take advantage please explain the method in great details because i certainly don't see it.Shocked

Can you really bet "against irrational market phase" ? what does that even mean in the real world ?
Vaerah Vahrokha
Vahrokh Consulting
#67 - 2013-12-19 07:45:39 UTC
Debra Tao wrote:

So prices follow a "random walk" pattern, that doesn't mean they are "random" in the usual sense. However chaotic pattern is probably what most people think when they talk about randomness.


And that's my (and Warren Buffet, probably) point. That confusing randomness with chaotic is not useful. Randomness means somebody can't approach the markets. Markets are MADE for people to meet in them. Implying price can't be used to make a profit would make people wonder why they'd trade in a market at all.
Being chaotic, on the other side, means that price acts as random but only "locally", one can filter out that "noise" and reveal the underlying trends and use them to make a profit.

Whenever I draw a trend line, all I do is to apply a low pass filter against "noise" (which is not really noise, but let's skip this step).
Vaerah Vahrokha
Vahrokh Consulting
#68 - 2013-12-19 07:52:25 UTC
Debra Tao wrote:
Rthor wrote:


My position is that market is efficient because the current prices reflect all info out there at this time. But my view is that it is still possible to make money for someone who is smarter than average.




Then i kinda have to agree on your position that "prices reflect all info out there at this time" because i don't see any way to disprove it... and it sounds reasonable. However i think that a good part of the information included in prices aren't exogenous, i mean some people will buy a commodity, oil for instance, not because they think that Saudi Arabia will reduce its production but rather because of some sort of magical deduction from graphical analysis for instance. So even without exogenous factor prices fluctuate a great deal in a seemingly random way.

So for instance when a bubble appears it doesn't necessarily means that market are inefficient if you put the irrationnals factors as part of the information.

To sum up my point : I think that markets are efficient if you take into account all the informations available, like people's mood, fears and so on but they appear as inefficient if you only take into account exogenous factors.


I could basically agree with what you say, but I have a comment: if markets are efficient PLUS a "bundle of (exogenous) factors", efficiency plus redundancy = inefficiency.

That is, if you have 10 = efficient and markets are 10 + 1, then that 1 is a measure of inefficiency. If you don't want to call it inefficiency then call it "Claretta". I and others make money on "Claretta".

What Rthor says would be true (me trading in EvE and being lucky), but please prove me how mathematically probable is that I am trading in RL (and not just EvE) since years and still going happy. Same for Warren Buffet. He really has to be a long term lucky mofo, eh? Blink
Vaerah Vahrokha
Vahrokh Consulting
#69 - 2013-12-19 07:58:54 UTC
Rthor wrote:

If markets are irrational then it is interesting.

The issue then is whether markets are always irrational or whether they always or sometimes become rational after a period of irrationality.

If they are always irrational then I guess it is the time for throwing darts at the board and thus making your picks.

But if markets sometimes revert to rationality after a period of irrationality then it is easy to make money as I was trying to explain. Temporary market irrationality is an opportunity for you to bet on the market becoming rational again. If you are rational then it should be like shooting fish in the barrel.

If markets always revert to rationality then it is even easier. Then you just bet against irrational market phase and you can make unlimited money provided that you can get leverage. Like via loan requests on this forum.


Markets are never irrational if talking about their microstructure, if we talk about the human sovra-structure then yes, there's irrationality and that's what I call "inefficiency" but it's purely a man made factor added to many others.

Markets are locally rational and efficient, globally are usually rational and less efficient (trends may be found), some times are very predictable even being efficient and rational (i.e. in confirmed breakout with a pin bar retracing over a previous resistance). Some times like at the top and bottoms they are less efficient (the double top / bottom and head and shoulders are THE overshooting symbol of a market being inefficient in that time) but still very rational.
Tsibelman
Garoun Investment Bank
Gallente Federation
#70 - 2013-12-19 08:51:56 UTC  |  Edited by: Tsibelman
Vaerah Vahrokha wrote:


And that's my (and Warren Buffet, probably) point. That confusing randomness with chaotic is not useful. Randomness means somebody can't approach the markets. Markets are MADE for people to meet in them. Implying price can't be used to make a profit would make people wonder why they'd trade in a market at all.
Being chaotic, on the other side, means that price acts as random but only "locally", one can filter out that "noise" and reveal the underlying trends and use them to make a profit.

Whenever I draw a trend line, all I do is to apply a low pass filter against "noise" (which is not really noise, but let's skip this step).


You using terms wile you don't understand their meaning, Chaotic is scientific terms that means that a slight change in starting conditions leading to large and very hard to predict change in behavior.

Markets are made to fulfill the needs of seller and buyer not for making of profits by techno traders like yourself, in commodity markets like EVE or RL you have 2 forces in play , supply and demand plus expectation of future supply and demand, when you follow a trend you just assuming that in the short term expectation of supply and demand will go in the same direction tomorrow like they did yesterday, It not particularly smart strategy, it just like predicting a weather by assuming that weather of tomorrow will move into direction that weather of today and yesterday moved, this assumption is basically flowed.

It the reason why in the long run all RL traders do not achieve above market returns on their investment.
Debra Tao
Perkone
Caldari State
#71 - 2013-12-19 10:11:34 UTC
Tsibelman wrote:

You using terms wile you don't understand their meaning, Chaotic is scientific terms that means that a slight change in starting conditions leading to large and very hard to predict change in behavior.




Exactly, thank you. Plus chaotic here means there is an invariance of scale. Random walk, and chaos are very well defined in math, you may not like how that sounds but these terms apply to describe the behavior of the market.

Vaerah Vahrokha wrote:

That confusing randomness with chaotic is not useful. Randomness means somebody can't approach the markets. Markets are MADE for people to meet in them. Implying price can't be used to make a profit would make people wonder why they'd trade in a market at all.
Being chaotic, on the other side, means that price acts as random but only "locally"


For instance take a man walking on a line. Let's say he has 2/3 chance of going on the right, 1/6 chance of staying in his position and 1/6 chance of going left. That's a random walk (quite simple i give you that). I can predict with precision where he will probably end up in 10-100-1000 iteration, i can even evaluate the interval of confidence of my prediction... There is a lot that can be said about this exemple while still being something "random" mathematically speaking.

I haven't said that prices are chaotic, however volatility follows a chaotic pattern, locally and globally. Hum, sorry it's in french but you can clearly see that on the graph at 7:55 here : http://www.dailymotion.com/video/xd1yo1_jean-philippe-bouchaud-des-marches_tech

Vaerah Vahrokha wrote:

but please prove me how mathematically probable is that I am trading in RL (and not just EvE) since years and still going happy. Same for Warren Buffet.


But that doesn't contradicts anything that i have been saying. More than 2/3 of professionals don't beat their reference (2/3 hedge fund managers don't beat S&P500 over a 20 years period). That doesn't mean you cannot be among the happy few, or among the lucky.
One can even not be better then the average while still making good money, if for instance you are clever and decide to invest in Asia, Brazil or whatever is booming you might make a killing while still not making returns above the average in these markets.

You seem to know Warren Buffet well enough to cite him as an example. I suppose then that you know the guy is no ordinary speculator. Buffet likes to invest a large enough amount of money to be on the board of the company and take part in decisions thus influencing the direction of the company. That's not what we are talking about here Smile


Vaerah Vahrokha
Vahrokh Consulting
#72 - 2013-12-19 13:17:02 UTC
Tsibelman wrote:
Markets are made to fulfill the needs of seller and buyer not for making of profits by techno traders like yourself, in commodity markets like EVE or RL you have 2 forces in play , supply and demand plus expectation of future supply and demand, when you follow a trend you just assuming that in the short term expectation of supply and demand will go in the same direction tomorrow like they did yesterday, It not particularly smart strategy, it just like predicting a weather by assuming that weather of tomorrow will move into direction that weather of today and yesterday moved, this assumption is basically flowed.


No, it's like assuming that weather in the next 15 minutes is the same we have right now. Sure, sometimes it will be blatantly proven wrong, but most of the time it will be right. Weather, like markets, does not instantly change, the forces at play are inertia + clash based. They usually start with a clash in interests that ends up in one side (buyers or sellers) suddenly losing their position, then price proceeds speeding up (trending) to a new equilibrium, where it overshoots it and then stabilizes in the next range market.


Tsibelman wrote:

It the reason why in the long run all RL traders do not achieve above market returns on their investment.


It's a close to zero sum game, if some win, others have to lose.

The majority of RL traders pertain to what Larry Harris (former SEC Lead Economist) in his book would define as "uninformed traders". Those are the sacrifical lambs for the others to earn (more than) a living, but having losers like them does not mean "all RL traders do not achieve etc. etc."
Vaerah Vahrokha
Vahrokh Consulting
#73 - 2013-12-19 13:34:31 UTC  |  Edited by: Vaerah Vahrokha
Debra Tao wrote:

For instance take a man walking on a line. Let's say he has 2/3 chance of going on the right, 1/6 chance of staying in his position and 1/6 chance of going left. That's a random walk (quite simple i give you that). I can predict with precision where he will probably end up in 10-100-1000 iteration, i can even evaluate the interval of confidence of my prediction... There is a lot that can be said about this exemple while still being something "random" mathematically speaking.


Ok, then please use the math and tell me a lot about how Crude Oil or Gold will go in the next month from now.

Because that's what I do every time I analyze them and find them in "pattern status", and I don't need any math.


Debra Tao wrote:

But that doesn't contradicts anything that i have been saying. More than 2/3 of professionals don't beat their reference (2/3 hedge fund managers don't beat S&P500 over a 20 years period). That doesn't mean you cannot be among the happy few, or among the lucky.


That's a quite (ab)used rebuttal. Fund managers are not there to beat the markets and that's it. They are there to *beat the markets with the least risk for investors*. Hedge fund managers are more biased towards gains than capital preservation but are still on the same boat.

Basically, it's intellectually dishonest to look at a fund long term profitability while willfully ignore its investors.
It's not easy to tell investors that they risk losing 40%. Fund managers will publish a prospectus with the maximum expected kind of loss (with a > 90% degree of confidence) and investors take THAT.

The difference between a professional and an hobbyst, in fact, is not about (want to) knowing how much to potentially make, but how much to potentially lose. Something EvE players call "undock with what you can afford to lose".

Therefore, if S&P loses 40% but then recovers 60%, fund managers will do their best to make their investors lose less than 40% (because investors might have to liquidate any time, even during bad times) even if that means their "investors capital protective strategies" imply they won't take the 60%.

So, the real sentence would be:

More than 2/3 of professionals don't beat their reference but protect their investors against the reference drawdowns.

Of course I am sure there are also bad or even dishonest fund managers, but hey, we have bad cooks, bad hairdressers and so on and they keep doing their job even being bad at it.


Debra Tao wrote:

You seem to know Warren Buffet well enough to cite him as an example. I suppose then that you know the guy is no ordinary speculator. Buffet likes to invest a large enough amount of money to be on the board of the company and take part in decisions thus influencing the direction of the company. That's not what we are talking about here Smile


He's a market maker, but market makers are market participants.

Actually, he puts a lot of his own at stake so if anything his opinions have even more weight.

Money talks.
The rest is chatter.
Debra Tao
Perkone
Caldari State
#74 - 2013-12-19 15:13:22 UTC
Vaerah Vahrokha wrote:


Ok, then please use the math and tell me a lot about how Crude Oil or Gold will go in the next month from now.

Because that's what I do every time I analyze them and find them in "pattern status", and I don't need any math.





Why the bitter tone friend ? The whole discussion isn't about finding a couple of tricks to make money but rather about trying to understand something deeper about the market, too bad you are missing that point.

money talks, science remains.

Vaerah Vahrokha
Vahrokh Consulting
#75 - 2013-12-19 23:29:40 UTC  |  Edited by: Vaerah Vahrokha
Debra Tao wrote:
Vaerah Vahrokha wrote:


Ok, then please use the math and tell me a lot about how Crude Oil or Gold will go in the next month from now.

Because that's what I do every time I analyze them and find them in "pattern status", and I don't need any math.





Why the bitter tone friend ? The whole discussion isn't about finding a couple of tricks to make money but rather about trying to understand something deeper about the market, too bad you are missing that point.

money talks, science remains.



I only appreciate science that tries to be practical and not dogmatic and self-referential.

We are in a trading forum of a quasi-realistic economy game and talking about trading and indeed money talks.

Not only that, but actual practice would easily tell people why prices behave like it does. I.e. a pin bar or a BUOB is just one or more large traders who brute force opposing ones, that happens all the time and is all but irrational, requires donkey math capability to pull off yet it's years I have to keep reading high solons claiming as irrational or impossible what's easily seen and experienced every day.
Debra Tao
Perkone
Caldari State
#76 - 2013-12-20 05:13:12 UTC
Again, read what i wrote i am not saying anything that you claim i am saying.
Nanny State
Doomheim
#77 - 2013-12-20 05:40:24 UTC
lol, only in eve are players smart enough to have a conversation like this, and only in eve is it rewarded "in game"

it's the only reason i play this boring game haha
Vaerah Vahrokha
Vahrokh Consulting
#78 - 2013-12-20 07:34:15 UTC  |  Edited by: Vaerah Vahrokha
Nanny State wrote:
lol, only in eve are players smart enough to have a conversation like this, and only in eve is it rewarded "in game"

it's the only reason i play this boring game haha


It's also rewarded out of game!

RL Trade running, using the same method explained on the EvE forums.
Rthor
Smugglers Inc.
#79 - 2013-12-22 07:26:54 UTC
Vaerah Vahrokha wrote:
Debra Tao wrote:
Rthor wrote:


My position is that market is efficient because the current prices reflect all info out there at this time. But my view is that it is still possible to make money for someone who is smarter than average.




Then i kinda have to agree on your position that "prices reflect all info out there at this time" because i don't see any way to disprove it... and it sounds reasonable. However i think that a good part of the information included in prices aren't exogenous, i mean some people will buy a commodity, oil for instance, not because they think that Saudi Arabia will reduce its production but rather because of some sort of magical deduction from graphical analysis for instance. So even without exogenous factor prices fluctuate a great deal in a seemingly random way.

So for instance when a bubble appears it doesn't necessarily means that market are inefficient if you put the irrationnals factors as part of the information.

To sum up my point : I think that markets are efficient if you take into account all the informations available, like people's mood, fears and so on but they appear as inefficient if you only take into account exogenous factors.


I could basically agree with what you say, but I have a comment: if markets are efficient PLUS a "bundle of (exogenous) factors", efficiency plus redundancy = inefficiency.

That is, if you have 10 = efficient and markets are 10 + 1, then that 1 is a measure of inefficiency. If you don't want to call it inefficiency then call it "Claretta". I and others make money on "Claretta".

What Rthor says would be true (me trading in EvE and being lucky), but please prove me how mathematically probable is that I am trading in RL (and not just EvE) since years and still going happy. Same for Warren Buffet. He really has to be a long term lucky mofo, eh? Blink


Consider the possibility that I am trading IRL too and I am successful in my mind over a period of last 6 yrs exactly.

Was I lucky?

Lets say I got 15 percent per year over the last 6 years per year. Was I lucky? Did you beat me?

If you did I would like to know that you are better. No problem. Grats if you did. I am just curious.

I need to calibrate myself since I am young.
Rthor
Smugglers Inc.
#80 - 2013-12-22 07:36:31 UTC
Vaerah Vahrokha wrote:
Rthor wrote:

If markets are irrational then it is interesting.

The issue then is whether markets are always irrational or whether they always or sometimes become rational after a period of irrationality.

If they are always irrational then I guess it is the time for throwing darts at the board and thus making your picks.

But if markets sometimes revert to rationality after a period of irrationality then it is easy to make money as I was trying to explain. Temporary market irrationality is an opportunity for you to bet on the market becoming rational again. If you are rational then it should be like shooting fish in the barrel.

If markets always revert to rationality then it is even easier. Then you just bet against irrational market phase and you can make unlimited money provided that you can get leverage. Like via loan requests on this forum.


Markets are never irrational if talking about their microstructure, if we talk about the human sovra-structure then yes, there's irrationality and that's what I call "inefficiency" but it's purely a man made factor added to many others.

Markets are locally rational and efficient, globally are usually rational and less efficient (trends may be found), some times are very predictable even being efficient and rational (i.e. in confirmed breakout with a pin bar retracing over a previous resistance). Some times like at the top and bottoms they are less efficient (the double top / bottom and head and shoulders are THE overshooting symbol of a market being inefficient in that time) but still very rational.


This reads like complete gibberish. Explain again.