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Isotopes

Author
Rthor
Smugglers Inc.
#41 - 2013-11-20 02:57:19 UTC
Vaerah Vahrokha wrote:
Rthor wrote:

Yes I could do that. That is exactly what I do regardless of what anyone says.

But here we have charts and science and centuries of statistics supposedly. Not just a hunch that I am being safe doing what I have been doing that worked in the past. I think that that the claim by VV is stronger here.

The specific question is whether it is science to invest in nitropes now or just a hunch.

From what I hear I would go all in. Should I?


Here I have posted 1 (one) analysis about Nitrogen Isotopes right?

The weekly chart statement is:

Vaerah Vahrokha wrote:

In my method, you can see buyers and sellers are fiercely battling over Big Round Number 800 ISK. They formed a tight range market I marked with a yellow rectangle. Whoever will win the 800 price level level fight will drag price outside that zone...


Does it read: "go all in NAO" in any way? If so, my problems with my English are devastatingly worse than I thought!

Instead, I have actually provided a trading plan, stated at the daily chart.

A trading plan is like a software:

- It starts from inputs, that is the market conditions at that given date

- it has got decisional "IF... THEN" clauses, see the three scenarios I have described. There are more scenarios but like for a software, I have decided to put all of them in a "default" clause (search for Switch() statement syntax in C++ or PHP) and ignore them as they are sub par or dangerous or at a loss.

- It delivers an output after those IFs: buy, sell or do nothing.

Since I don't know the future I have to plan in advance so that when the time will come (if it will come) then I will have everything setup already and I will switch from planning the trade to trading the plan.

Therefore, a guy who wants to trade with the method I have learned myself (I don't take any credit, I did not create it) would just keep checking the market every day and if it "activates" one of the IFs of the plan then he would buy / sell accordingly.
That's it.



As further reading and as proof that this is used in RL trading, here is the original website where it has been posted (in Italian) and here is the English version, posted on the world most famous RL trading forum, Forex Factory.


Your English is better than you claim.

You draw lines in the chart with ascending slope. That says "buy."

My curiosity is whether you trade in the direction of the lines you draw or against them.

We will meet in nitropes, it looks like. I also do not buy PLEX. :-)

The thing about MD is that there were always people here who appear as very good businessmen who somehow disappointed. You seem pretty good and good intentioned. I am not well intentioned. I am kind of curious how this will end up.

By the way, I do believe that markets are perfectly efficient at any given moment. So we have fundamental philosophical difference, which is why we probably will never agree.
Vaerah Vahrokha
Vahrokh Consulting
#42 - 2013-11-20 06:59:30 UTC  |  Edited by: Vaerah Vahrokha
Rthor wrote:


Your English is better than you claim.


I still have to use Google Translate some times, my sentences are longer than a Mississippi river and any time one uses some urban jargon I fall like an apple to the ground. Cry


Rthor wrote:

You draw lines in the chart with ascending slope. That says "buy."


No, they say: "you should have bought". Notice the past tense.

Trends do age. I won't abuse of your time with tedious considerations about how many mayor swings a market usually shows before correcting (or even reversing). I just want to warn you that you don't just draw a line and hop into a senile trend hoping to hold it for enough EvE time to make a good profit.

The #2 trader law, is "buy low, sell high". Otherwise you seriously risk putting #1 trader law at risk: "Capital preservation above all".

In the specific case, you should have bought well before 800. You can still buy once price leaves that "battle yellow rectangle" but you will still be exposed to risk, you will have bought high and eventually resell higher but it's neither risk-free nor the best profitable move.


Rthor wrote:

My curiosity is whether you trade in the direction of the lines you draw or against them.



I trade with the trend but while it's still fairly "young". This often means, entering the market after a major reversal happened and a new trend proved to be established. From that moment onward, you are still with the trend, but with less and less profit and safety till one day the trend hangs and then crashes.


Rthor wrote:

We will meet in nitropes, it looks like. I also do not buy PLEX. :-)


I hope that 30B "blocking order" of 2 days ago was not yours, because someone made it go "poof" in a second. Pirate


Rthor wrote:

By the way, I do believe that markets are perfectly efficient at any given moment. So we have fundamental philosophical difference, which is why we probably will never agree.


I believe markets are as efficent as they can be.
Markets are based on supply and demand but also on human feelings, there's nothing perfect or objectively efficient about feelings.
Rthor
Smugglers Inc.
#43 - 2013-11-20 12:55:28 UTC
But if markets are not efficient how can you tell? Do you mean that you know when markets are inefficient? BS. If anybody could tell when the price is wrong she would have unlimited money.

So is not it just hubris or academic to say that markets are inefficient because whoever says this at that particular point does not know that? Would not it be violation of trader rule #89, which is "dont argue with the price," to say that markets are inefficient?

Would not a better approach be to say that all given prices are correct and rather try to predict future? Alternatively, more agreeable or humble version of predicting future would be to try to predict what traders will do in the future and front run them.

What is the point of looking at charts if they only allow you to interpret the past and say nothing about the future? I think that charts do give you past info. Past info then gives you an idea of a range and a base and how traders could behave at various price levels.
Austa Ryer
Anthea Partners
#44 - 2013-11-20 14:52:07 UTC
Rthor wrote:

What is the point of looking at charts if they only allow you to interpret the past and say nothing about the future? I think that charts do give you past info. Past info then gives you an idea of a range and a base and how traders could behave at various price levels.


Hello,

The point of looking at charts is that they offer an objective view on whether to go long/short a position. Consistency
is the key. If you are doing it right, your entry condition can perform worse than random i.e < 50 % of trades ends up
being profitable and your overall profitability is still greater than zero.

If a trading system was to be described as entry mechanism + money management + psychology, the entry mechanism accounts for 10-20% of the overall performance. I can't provide actual numbers for this statement as its a general saying among systematic traders.

However, as part of my thesis in finance, I did develop a trading system trading equities based on consensus data from the industry "experts". Their accuracy of picking profitable stocks over a 10 year period was a little less than 50%. In comparing two portfolios, one allocating an equal amount of capital to each asset and one using a volatility formula to determine capital allocation, the difference was significant. The "volatility portfolio" performed better both in overall returns and return to risk over the period, with an average annual Sharpe of 1.56 vs. 0.66 using the same out of sample data. Based on that result I believe it confirms your doubt and the previous statement that the entry mechanism offers less value than one is to believe.

If you are interested in learning more about trend following and systematic trading I would recommend looking up Michael Covel who's an author writing about traders using different systematic trading methods. I really enjoy his podcasts where he interviews different traders and discusses their approach. My favorite are the ones with Tom Basso.

Cheers!
Vaerah Vahrokha
Vahrokh Consulting
#45 - 2013-11-20 15:36:18 UTC
Rthor wrote:
But if markets are not efficient how can you tell? Do you mean that you know when markets are inefficient? BS. If anybody could tell when the price is wrong she would have unlimited money.


There are multiple ways that make markets inefficient.
The most practical one: have you tried trading a future? They usually have 1 tick of spread. But that's not their real spread, not even on the Chicago Merchantile Exchange.
There are firms making a living buying and selling *inside* that 1 tick of spread yet most cannot do that, and by being unable to do that the spread cannot shrink and let the market become efficient. Because if all could trade inside the spread, that spread would further tighten up.

Furthermore, price is itself a lagging indicator. Price only changes after certain decisions have been made or after supply and demand conditions changed. The delta t between decision and act is an inefficiency in itself.

Furthermore, it's not important that markets are efficient, when the underlying supply and demand can't reflect their changes quick enough.

I.e. imagine that for some reason, the demand in a market suddenly forever rises by 20%. Will you see price suddenly going up by 20%? Not at all.

At first it will go down. Because the informed traders (*) (large institutions etc) will make sure to gather the maximum liquidity and this is done by pushing the market down, trigger tons of orders and then make them all go in stop loss and thanks to that, to get an added boost to the desired upwards momentum.

Then price will rise - slow at first. First inefficiency and this is where traders like me will enter.
Then price will rise usually quicker, at 30* - 45* pace.
Finally price will reach the new equilibrium... and won't stop. In fact it will overshoot the target because uninformed traders (*) will buy high.
At this point there will be a first, massive drop down to the new equilibrium, caused by informed traders dumping their stock. The first top has just been formed.
Highly aggressive smaller informed traders will buy that dip. They are much smaller than the institutionals but with enough liquidity to make price rise again. Not because of their strength (they lack of it) but because nobody will be in the market at that time to oppose them.
Price will rise almost at the same height it reached before and will overshoot the new equilibrium again. Aggressive small traders start dumping their stock, uninformed traders buy it.

At this point, with both large and smaller informed traders out of the market, volume drops to about zero and price hangs.
The second top has now been formed.
Now, not many large institutions short the markets so they keep staying out for now.

The first uninformed traders panic and dump at a small loss. Nobody is there to buy their little stock so price moves down fast and this scares the other uninformed traders who rush and panic sell.

If price rebounds a bit, small informed traders will start shorting. Those using price action will see a reverse being confirmed and will short as well.
At this point price is in free fall mode till it finally reaches the new equilibrium.

All of those exaggerated motions provide diverse opportunity to exploit them and make a profit.

I don't know how you'd call this, but it's certainly not the "square wave" it should be if the market + underlying supply and demand were truly efficient. Instead it will consist of many ripples, oscillations, swings, overshoots.

Call all of this "Philippe" if it makes you feel better. I call it "inefficiency" and I make a living out of it, both in EvE and outside.



(*) Definitions taken from former Chief Economist of the U.S. Securities and Exchange Commission Larry Harris cornerstone markets microstructure book: "Trading Exchanges: Market Microstructure for Practitioners".


Rthor wrote:

Would not a better approach be to say that all given prices are correct and rather try to predict future? Alternatively, more agreeable or humble version of predicting future would be to try to predict what traders will do in the future and front run them.


Those who can front run are the inside traders. I am not one of them, I am not a Mynna who knows how the whole scenario evolves, with huge intelligence feedback, ability to influence the markets and so on.

Also, you suggest calling a "better approach be to say that all given prices are correct and rather try to predict future".

There's a tiny issue with that. The issue is that money does not come in by "predicting the future", because predicting the future is impossible. Therefore I check the past prices doing a "Philippe" (the term I used above) and act on that.


Rthor wrote:

What is the point of looking at charts if they only allow you to interpret the past and say nothing about the future? I think that charts do give you past info. Past info then gives you an idea of a range and a base and how traders could behave at various price levels.


Because what's fool would believe that something can tell us the future? All we can do is to do what many math algorythms do: slice time and interpolate what statistically is probably going to happen in the immediately next slice. It works for small enough slices. Since we can pick the slices from the monthly prices, those slices are actually quite large, large enough to make a profit.
Rthor
Smugglers Inc.
#46 - 2013-11-20 15:41:26 UTC
Austa Ryer wrote:
Rthor wrote:

What is the point of looking at charts if they only allow you to interpret the past and say nothing about the future? I think that charts do give you past info. Past info then gives you an idea of a range and a base and how traders could behave at various price levels.


Hello,

The point of looking at charts is that they offer an objective view on whether to go long/short a position. Consistency
is the key. If you are doing it right, your entry condition can perform worse than random i.e < 50 % of trades ends up
being profitable and your overall profitability is still greater than zero.

If a trading system was to be described as entry mechanism + money management + psychology, the entry mechanism accounts for 10-20% of the overall performance. I can't provide actual numbers for this statement as its a general saying among systematic traders.

However, as part of my thesis in finance, I did develop a trading system trading equities based on consensus data from the industry "experts". Their accuracy of picking profitable stocks over a 10 year period was a little less than 50%. In comparing two portfolios, one allocating an equal amount of capital to each asset and one using a volatility formula to determine capital allocation, the difference was significant. The "volatility portfolio" performed better both in overall returns and return to risk over the period, with an average annual Sharpe of 1.56 vs. 0.66 using the same out of sample data. Based on that result I believe it confirms your doubt and the previous statement that the entry mechanism offers less value than one is to believe.

If you are interested in learning more about trend following and systematic trading I would recommend looking up Michael Covel who's an author writing about traders using different systematic trading methods. I really enjoy his podcasts where he interviews different traders and discusses their approach. My favorite are the ones with Tom Basso.

Cheers!


Cool I found the interview and will listen to this.
Vaerah Vahrokha
Vahrokh Consulting
#47 - 2013-11-20 15:47:58 UTC
Austa Ryer wrote:
Based on that result I believe it confirms your doubt and the previous statement that the entry mechanism offers less value than one is to believe.

Cheers!


I have barely mentioned "money management" because we are still stuck at talking about the the trade entry.

The trade entry is not meant to be the profitability driver (as you found out) but to be the launching platform that allows later to make the profits.

That is, the entry has to be "good enough", that is, the trader has to enter and not be kicked out (i.e. stop loss) before price returns to his chosen direction. Don't forget I said above that price very often reverses at first.

Once the position is secured, that is once price is back up to the entry point, we are just at the beginning!

Money management now kicks in. It's a complex art that based on a dozen of hints, tells the trader what to do in the next bars.

In the method I follow, I am meant to not move the stop loss until price has formed a "barrier" bar (i.e. a BUOB after my entry point at a pin bar below it) and then move the stop loss right after the barrier bar. The subsequent bars, price should reach the so called "first money management target", usually it is the next swing. Then, depending on the price levels, big patterns shapes (triangles and so on) there are further money management targets, till a last take profit target.
Each money management target is the place for a decision: close a portion of the position, close it completely or... even buy more stock! It's a very diverse activity as you see.
Reached the last target, if price closes above said target it's preferable to not close the position yet but let profits run till they can and just trail the stop behind the last bars.

End result: without money management in the modern markets it's hard to even achieve 2:1 reward:risk, with multi-time frame money management it's possible to reach up to 5 and even 6:1.
Rthor
Smugglers Inc.
#48 - 2013-11-20 16:04:17 UTC
I am not a short term trader. I am outgunned. My computer is not as fast, my internet connection is not as fast, and I do not have the information that you have. So I leave this game to others. Most likely you are collecting tuition money in the way you described. I paid mine ten years ago so I am now interested in a different game.

The different game is trying to game short term traders. Since short term traders have a short term timeframe that is a source of my advantage if I have a long term timeframe.

My theory on business is that, among other things, the better you are the longer you can predict the future. Most people cannot do it at all. Many people predict wrong. Sometimes bad luck gets in a way. But if you are good at predicting future you will succeed in investing partially thanks to short term traders. Short term traders are noise in a long term trend but they can help to get you a deal inadvertently, too.

More specifically to your point about nitropes, I have a feeling, and it was said by devs at some point that they view ice as something worth fighting over. That is a pretty clear indication that ice price is going up long term. Now a bunch of things can happen along the way. And most likely the obvious plays have already been made thus providing noise in the charts. However, take it for what it is worth, my theory on investing is that if you go for the obvious play you will most likely lose even if you are right on the trend. The real money is in the second or third derivative of the trend because in figuring it out I or you may be able to outgun the computer, the internet connection and even be helped inadvertently by short term traders.

Kate 'on
DevonCorp
#49 - 2013-12-13 18:09:08 UTC
outgunned, internet speed?

I'm sorry, I don't know if you know what you're doing. I am by no means a guru of any sort here, but unless its too slow to even create an order, it's fine. If you're on more than twice a day for 20 minutes at a time regularily, then you're on too long.

If you're properly reading trends this stuff should mostly handle itself while you are away, you just don't plan well is my guess.

Take a very simple trade, nothing at the level of candlestick mastery VV has.

during the day, a good will ebb and flow over many different ranges, settling on a price that day. if you're constantly there, you're riding the wave constantly, and spending way more money than you need to. Just place that order as low on that scale as you're comfortable with, with only enough numbers to keep from moving the price. It's a hard mix, because markets push and pull between your capital moving the price, and the daily price fluctuations becoming smaller, the more velocity there is in the market.

then instead of riding micro waves all day, you come back that evening, find 60-70% of the same amount of product in your hangar, all bought at a daily low. But each one was bought at lowest daily price, and you can then do the same thing on the sale. Put at the top end of what the days performance offers, and just wait it out. So long as you aren't in a downward trend, you're golden.

TBH, when you read VVs posts, they look like someone who knows what he's talking about. Yours seem more like you are a little girl wearing moms wedding dress. All the right stuff is there, but it ust seems off
Nanny State
Doomheim
#50 - 2013-12-16 21:32:24 UTC
Patri Andari
Thukker Tribe Antiquities Importer
#51 - 2013-12-17 01:00:46 UTC
Necro BOO = Best Boo (other then boo hoo)

Be careful what you think, for your thoughts become your words. Be careful what you say, for your words become your actions. Be careful what you do, for your actions become your character. And character is everything. - author unknown

Vaerah Vahrokha
Vahrokh Consulting
#52 - 2013-12-17 07:59:46 UTC  |  Edited by: Vaerah Vahrokha
Nanny State wrote:


I'll take the bait, as I finally had 3 free minutes since a week.

- Price performs the so called "price discovery" with seemingly random motions. They aren't really (they do appear like it), as they are just the non random effect of a guy buying and another selling and so on. Put 10 people buying / selling the same item in the same sequence and you'll get 10 identical charts. If it was random, then it would not happen.

- Warren Buffet (not a random guy) rebutted it and the ridicolous theories behind it.

- The last decade, China became a super powerful nation. They bought enormous amounts of commodities including copper. Did copper price go random, or did it promptly rise? Guess what? It rose.

- It takes a good dose of being a moron to say that this PLEX price evolution is random or efficient.

- Every undershoot and overshoot (there are zillions) affecting markets is a sign of inefficiency, otherwise price would adapt in an efficient and "square" or "rounded" way with no over-reactions.

- Markets are made by humans who love to manipulate them. Many markets go exactly where somebody powerful enough wants, not "random".

- I have posted hundreds of charts, a number of them has "lines", triangles and whatever that were dutifully followed for months past me having updated them. Am I a wizard or is it just price who follows its own rules?



Last but not least: these kind of books and theories are written by "I seek fame" guys who probably have never made a trade in their life.

Or, worse, self important professors and economists who without an ounce of practice, invent moronic theories that lead to a disaster after the other. LTCM and stuff.
Rthor
Smugglers Inc.
#53 - 2013-12-18 06:00:16 UTC
Vaerah Vahrokha wrote:
Nanny State wrote:


I'll take the bait, as I finally had 3 free minutes since a week.

- Price performs the so called "price discovery" with seemingly random motions. They aren't really (they do appear like it), as they are just the non random effect of a guy buying and another selling and so on. Put 10 people buying / selling the same item in the same sequence and you'll get 10 identical charts. If it was random, then it would not happen.

- Warren Buffet (not a random guy) rebutted it and the ridicolous theories behind it.

- The last decade, China became a super powerful nation. They bought enormous amounts of commodities including copper. Did copper price go random, or did it promptly rise? Guess what? It rose.

- It takes a good dose of being a moron to say that this PLEX price evolution is random or efficient.

- Every undershoot and overshoot (there are zillions) affecting markets is a sign of inefficiency, otherwise price would adapt in an efficient and "square" or "rounded" way with no over-reactions.

- Markets are made by humans who love to manipulate them. Many markets go exactly where somebody powerful enough wants, not "random".

- I have posted hundreds of charts, a number of them has "lines", triangles and whatever that were dutifully followed for months past me having updated them. Am I a wizard or is it just price who follows its own rules?



Last but not least: these kind of books and theories are written by "I seek fame" guys who probably have never made a trade in their life.

Or, worse, self important professors and economists who without an ounce of practice, invent moronic theories that lead to a disaster after the other. LTCM and stuff.


But the question remains whether all these chart rules are made true by people believing that there are chart rules and trading accordingly.

And in Eve even more so it is possible to make chart rules come true with PLEX possibly funding trades. Not as much IRL.

So does Eve confirm that there really are chart rules or does Eve suffer from manipulation based on chart rules?

I am not yet sure either way.

But my feeling based on what I see, and I am more into watching both price and volume not just price, is that there are bunch of chartists and manipulators around here. With manipulators citing charts to make their speculation seem educated. Maybe it is maybe not. But it is OK. Let's see how this plays out in the long run.
Vaerah Vahrokha
Vahrokh Consulting
#54 - 2013-12-18 08:04:51 UTC
Rthor wrote:


But the question remains whether all these chart rules are made true by people believing that there are chart rules and trading accordingly.

And in Eve even more so it is possible to make chart rules come true with PLEX possibly funding trades. Not as much IRL.

So does Eve confirm that there really are chart rules or does Eve suffer from manipulation based on chart rules?

I am not yet sure either way.

But my feeling based on what I see, and I am more into watching both price and volume not just price, is that there are bunch of chartists and manipulators around here. With manipulators citing charts to make their speculation seem educated. Maybe it is maybe not. But it is OK. Let's see how this plays out in the long run.


This is quite easy.

1) It does not really matter if chart rules are made true by whoever (it isn't), what it matters is that people make money with that or not. They do. Otherwise, why would people bother with the time and therefore money investment of using them? After so many years they'd have learned they are useless if they were so, at least hedge fund managers and other "upper class" finance guys should.

2) How many in EvE use charts, expecially the difficult to make ones I seldom post? An abysmal minority. Yet the charts do show patterns and whatsnot.

3) There are things that charts augment, but not in EvE. I.e. certain "obvious" levels, certain "Fibonacci" retracements etc. are also called "self fulfilling prophecies" because large RL institutions know that small fish use those concepts and so they adapt accordingly. In EvE there's very little who even know what a Fibonacci number is, so the related effects don't show.

But the "real" market structures (flags, triangles, range markets etc.) do keep forming, despite they are often invisible with the regular EvE charts, those are due to supply and demand levels filling up in orderly amounts over time and not to manipulations.

4) "Manipulators", I suppose you are very wrong here. There are some massively huge alliances who don't even need to manipulate markets, they can make them (market makers). They hardly use charts. On the other side, I use charts yet don't manipulate markets. This goes to the point I often refuse to post charts during "hot times", that is as against manipulation as it gets.
Debra Tao
Perkone
Caldari State
#55 - 2013-12-18 09:06:30 UTC  |  Edited by: Debra Tao
Rthor wrote:
But if markets are not efficient how can you tell? Do you mean that you know when markets are inefficient? BS. If anybody could tell when the price is wrong she would have unlimited money.



I think the main point you aren't talking about is the very definition of an efficient market. Are markets efficient if they can put a price to any goods at any given time ? Are you talking about http://en.wikipedia.org/wiki/Efficient-market_hypothesis ? Or do we want markets to be efficient in the distribution of wealth, to be fair, to be Pareto optimal and so on ?
Depending on your definition of efficiency the answer may vary greatly.
Debra Tao
Perkone
Caldari State
#56 - 2013-12-18 09:39:58 UTC  |  Edited by: Debra Tao
Vaerah Vahrokha wrote:
Nanny State wrote:


I'll take the bait, as I finally had 3 free minutes since a week.

- Price performs the so called "price discovery" with seemingly random motions. They aren't really (they do appear like it), as they are just the non random effect of a guy buying and another selling and so on. Put 10 people buying / selling the same item in the same sequence and you'll get 10 identical charts. If it was random, then it would not happen.

- Warren Buffet (not a random guy) rebutted it and the ridicolous theories behind it.

- The last decade, China became a super powerful nation. They bought enormous amounts of commodities including copper. Did copper price go random, or did it promptly rise? Guess what? It rose.

- It takes a good dose of being a moron to say that this PLEX price evolution is random or efficient.

- Every undershoot and overshoot (there are zillions) affecting markets is a sign of inefficiency, otherwise price would adapt in an efficient and "square" or "rounded" way with no over-reactions.

- Markets are made by humans who love to manipulate them. Many markets go exactly where somebody powerful enough wants, not "random".

- I have posted hundreds of charts, a number of them has "lines", triangles and whatever that were dutifully followed for months past me having updated them. Am I a wizard or is it just price who follows its own rules?



Last but not least: these kind of books and theories are written by "I seek fame" guys who probably have never made a trade in their life.

Or, worse, self important professors and economists who without an ounce of practice, invent moronic theories that lead to a disaster after the other. LTCM and stuff.



I will take the bait too as i am very qualified in this field and i wholeheartedly disagree with you. The thing is that people because they can make money off the markets don't necessarily understand them at all. It would be very long to just take all your points and refute them with references and the appropriate explanations.

Let's just say that you can have a bahavior similar to a random walk and still have long-term predictability. For instance you can have a steady rise of coper's price while still having a random walk-like behavior of that market. Randomness or chaotic behavior is very different from unpredictability (at least when used in math).

Volatility of markets displays a chaotic pattern, this is a fact. (see the work of http://en.wikipedia.org/wiki/Jean-Philippe_Bouchaud for instance)

Warrent Buffet is great at making money, he has some fantastic insights when it comes to the economy. However he cannot, nor anyone else, "rebbut the ridiculous theory" that are statistically right and based on solid data and solid demonstration. Even him cannot disprove something that is mathematically right.

edit : sorry for my english
Vaerah Vahrokha
Vahrokh Consulting
#57 - 2013-12-18 13:43:40 UTC
Debra Tao wrote:


I will take the bait too as i am very qualified in this field and i wholeheartedly disagree with you. The thing is that people because they can make money off the markets don't necessarily understand them at all. It would be very long to just take all your points and refute them with references and the appropriate explanations.

Let's just say that you can have a bahavior similar to a random walk and still have long-term predictability. For instance you can have a steady rise of coper's price while still having a random walk-like behavior of that market. Randomness or chaotic behavior is very different from unpredictability (at least when used in math).


Price shows a random walk affinity indeed but it's only apparent. Whereas with a truly random motion you cannot "backtrace" to a known initial configuration, with price you theoretically could.
I.e. for a small enough number of actors, you can "go back" in time, transaction by transaction and see how price formed.

Basically, price becomes unpredictable because actors are so many and because their choices are varied. But unpredictable does not mean "random".


Debra Tao wrote:

Volatility of markets displays a chaotic pattern, this is a fact. (see the work of http://en.wikipedia.org/wiki/Jean-Philippe_Bouchaud for instance)


Chaotic, true, but for me chaotic <> random. That is, something becoming unpredictable <> something inherently unpredictable since the origin and impossible to backtrace.


Debra Tao wrote:

Warrent Buffet is great at making money, he has some fantastic insights when it comes to the economy. However he cannot, nor anyone else, "rebbut the ridiculous theory" that are statistically right and based on solid data and solid demonstration. Even him cannot disprove something that is mathematically right.


History is full of mathematically right theorems that later revealed to be wrong or to have missed some "details" (see Newtonian physics vs Relativity).

So, I admire people who are willing to spend their life creating scintillating theories but I'll take a true practitioneer with ideas that *work* over any amount of more or less proven theory.

I'd truly love to see a Herr Professor approaching Warren Buffet and telling he's an ignorant and doing it just wrong. Warren could just hint at the little detail about the professor's lifetime income being a pico-fraction of his yearly revenue.
Debra Tao
Perkone
Caldari State
#58 - 2013-12-18 14:30:06 UTC  |  Edited by: Debra Tao
You can argue over words but the pattern observed are statisticaly close to randomness. So yeah volatility is truely a chaotic thing and that means that it is unpredictable.

A mathematically right theorem is never wrong, by the very definition of it. Also what i am talking about isn't a modelisation of nature, it's the analysis of data. So you just apply formula to put a name on some phenomenons in order to understand them so yeah in this case it cannot become "wrong" in the future. Saying that the means of 1 and 11 is 6 cannot be disproved. Maybe in the future people will lose interest in that number and prefer to analyse something else but that won't make that figure "wrong".

Your argument about Buffet is laughable, Buffet has proved us that he is good at making money, nothing more. Your personality cult is disturbing, do you really thing that because the guy is rich and has a high income what he says has more intrinsic value than a brilliant analysis ? The point of this very discussion isn't about making money off the market but rather understanding it, that's completly different.
One can be extremely good at betting on horses without knowing **** about how to heal them.

edit : i don't understand what you are saying about random motion, and i think you are confusing several things. If i give you the price of a good, let's say the share of a company, even given the financial data related to that firm or anything you would like to know about it you cannot backtrace the price. Of course we have the data that enables us to backtrace the price but one cannot backtrace the price without that data.
Also some phenomenons are inherently unpredictable (think about quantic stuff) yet one can totally backtrace then. Backtracing and unpredictability are two totally different things.

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.
Rthor
Smugglers Inc.
#59 - 2013-12-18 16:27:11 UTC
Debra Tao wrote:
Rthor wrote:
But if markets are not efficient how can you tell? Do you mean that you know when markets are inefficient? BS. If anybody could tell when the price is wrong she would have unlimited money.



I think the main point you aren't talking about is the very definition of an efficient market. Are markets efficient if they can put a price to any goods at any given time ? Are you talking about http://en.wikipedia.org/wiki/Efficient-market_hypothesis ? Or do we want markets to be efficient in the distribution of wealth, to be fair, to be Pareto optimal and so on ?
Depending on your definition of efficiency the answer may vary greatly.


We are not talking about distribution of wealth at all. I mean its eve so we can at least be heartless without being accused of being politically incorrect and not being able to discuss the topic.

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.

Some people like to say that markets are inefficient because prices fall or rise in an unpredictable way. I dont hold these views.

Or some people say that prices are wrong because they say so. I want to know how they know what prices should be.

VV believes that market is inefficient and he has trading skills to take advantage of the alleged market inefficiency and his proof of his skills is that he made money.

You seem to agree with me that just because VV made money does not make what he is saying true. VV might have gotten lucky, eve market may be structured in such a way that a trader is well protected from implosion, or VV might actually be making money for different reasons than he thinks. That is why a theory would be nice, not just evidence of success in a form of pile of isk.

I think that this is what we are talking about.
Debra Tao
Perkone
Caldari State
#60 - 2013-12-18 17:53:18 UTC  |  Edited by: Debra Tao
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.