Market Inefficiencies Thread - Page 2
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Thread: Market Inefficiencies Thread

  1. #11
    I'd love to see you begin a thread on this study you are conducting.

    The issue with this approach is curve-fitting.

    You can have an entirely random data collection (the market) and discover what appears to be a border with an indior that could have done nicely. In reality, you'll have 6 or 5 years of information, and have nothing more than coincidence.

  2. #12
    Quote Originally Posted by ;
    In blackjack, card counting gives you approximately 2% edge over the house (maximum ). So it isn't a huge edge, but enough that it'll get you booted from a casino if they believe you're doing it.
    I always heard that it was closer to 1 percent, lol. Which is quite huge given big enough trials the reason they'll boot you. Give me a 1 percent advantage in the markets and I will own the world. =-RRB-

    Quote Originally Posted by ;
    One job I have running in the background is measuring the statistics of how well indiors forecast the future. Most indiors are a coin flip, but I've some on the time frames (4 hour to day) that show a 5% to 8% advantage. Time frames below 4 hours are almost always a coin flip, at least with everything I've attempted so far.
    Very nice, once you're done do inform us. What indiors have you tested?

    I guess most indiors do not read anything you can not already see via price. Of course you do not need to always predict direction, you just need to forecast one element of a trade (direction or momentum) to possess a border.

    Quote Originally Posted by ;
    The problem with this approach is curve-fitting.
    But are not all techniques curve-fit? I would surmise there exist no techniques now that are guaranteed to operate in all markets for the rest of time.

    Quote Originally Posted by ;
    You can have a completely random data set (the market) and find what appears to be an edge with an indior that could have done very well. In reality, you can have 6 or 5 decades of data, and still have nothing more than coincidence.
    The thing about arbitrary data is that there are patterns within it. Take for instance easy standard deviation from the mean.

    Set your entrance orders and SLs based around standard deviations, use good money management... sure some will prevent you out, but most will reverse ahead of the end loss and go in your favor. Yes the data is arbitrary to a point, but the random data is generated by something non-random (with a certain number of outcomes). The approach could work or numerous versions.

    That is the comedy in the arbitrary number argument. Just because you can't predict the exact next flip of a coin does not mean that you can not predict with a 50.01% edge precisely what the typical of the following X coin flips will be given the ideal data. Away from the mean at some point that the odds always regress to the mean, then over a large series of trials.

    The irony here is that it might actually be a lot easier to generate income in a purely random data set since we know beforehand the number of feasible outcomes and it is mean. This is not something we could know in the markets. Ie: arbitrary data could be, the market will defy that.

  3. #13
    I will argue back and say if the regression to the mean will happen that you never know. A trend can continue to keep the price from a moving average for months at a time.

    As for curve-fitting.... If the market is truly random (which I do not believe there is any question that it is) then expecting a curve fit egy to produce pips is a logical fallacy. Its an manmade that are incorrect assumption that history will repeat itself. Hell, just look your charts are from year to year about the same instrument!

    Quote Originally Posted by ;
    That is the humor in the random number argument. Just because you can't predict the specific next flip of a coin doesn't mean you can't predict with a 50.01% advantage what the typical of the following X coin flips will receive the ideal data. Over a large collection of trials the odds regress to the mean away from the mean at some point.

    The irony here is that it might actually be easier to make money in a just random data collection since we all know in advance the amount of feasible outcomes and it's mean. This isn't something we can know in the markets. Ie data can be efficiently curve-fit, the market will withstand that.

  4. #14
    Quote Originally Posted by ;
    I'll argue back and state that you never know if the regression to the mean will take place. A powerful trend can continue to keep the price from a moving average for weeks at a time.
    Surely, but does it matter as it will take place? At a random set of information there isn't any strong trend, merely.

    Quote Originally Posted by ;
    As for curve-fitting.... If indeed the market is really random (that I don't believe there's any question that it is) then expecting a curve fit egy to produce pips is a logical fallacy. Its an incorrect manmade assumption that history will repeat itself. Hell, just look how different your charts are from year to year on the same instrument!
    The random walk theory was disproven for decades, you need only look at human behaviour to see the patterns. But that debate is tangental, in an entirely random data set a curve-fit egy is exactly the best way to make benefits.

    The decay of one atom is random but the half-life of a substance remains accurate enough to fuel a society.

    I've gone back 100 years on some tools (look at commodities, there is some good information there), and above 20 on any I purposely trade (with the obvious exclusion of the euro). Yes they change, but they change in cycles. You may be unable to predict if the bicycle will change, however you can realize when it has changed or is in the process of altering.

    History does repeat itself tho, even in an entirely random atmosphere. If you flip a fair coin (50/50) and sign up if it is heads and down if it is tails... you'd get a random data set, right? However there are only 2 outcomes, tails and heads. You won't receive a coin landing sideways, or spinning, or an unclear outcome or an unpredictable outcome.

    In this respect the market is most certainly not a coin flip, it is closer to a roll of the dice where sometimes people ignore certain rolls. My analogy that is 9 or higher works here.

    Picture a game in which you roll a die twice. If the dice roll is 9 or higher then you get whatever you have bet returned plus that amount (1:1 payout), if the roll is less than 9 you receive nothing. You can bet before the first roll, or after the initial roll, but obviously cannot bet after the 2nd roll.

    You cannot predict which results will result from any given roster, but you can still create a profitable method by waiting to get a 6 to the initial roll before betting. Work out the chances, you will see how it works. There's no guarantee win on any given roster, and there is no guarantee that there won't be a series long enough to wipe out your pot, but given tens of thousands of 6 rolls that the chances will gradually regress back and give you your edge. It's just mathematics.

    Even tho the person rolls are completely random (assuming a fair dice and a fair roll), you still have an edge.

  5. #15
    Quote Originally Posted by ;
    Potential inefficiency: The rollover egy Brijon speaks about. Too early to tell, but there may be some meat on that bone.
    yes. Maybe there is something. The issue is the best way to locate WHEN the setup will begin. Price can fall 3000 pips 1 hour then the run up starts. Using indior is not a means for certain.

    Ps: I sent a pm for you about another item

  6. #16
    Quote Originally Posted by ;
    The primary inefficiency (and just one which I am aware of) is trading nondealing desk broker spikes. It works in this way. Require 10 brokers and examine their own feeds. If one travels far away from all the other people, have a trade.

    It's very likely the price will return to the others.
    Could you describe your perspective? Because it vary from what I read. The way I understand should be: observe the prices in the real feed data like Reuters, then since they are lag set the transactions on the MMs. So you can trade in the MMs accounts, not the opposite. But I see it don't work anymore.

  7. #17
    Quote Originally Posted by ;
    A second kind of inefficiency is ceased hunting. Basically, you find out where the stops on currencies are predicated on a news services. When there is a lot of news about a certain stop degree, you can watch for all those ceases to be broken from the banks as they search for liquidity. If stop levels are broken, often price will significantly rise or fall beyond those levels (consequently, support and resistance as chartists say.)

    All these are the Fundamentals.... I don't have details, but rumor has it that there are a number of people trading this manner.
    Would you give a example? Although it works this is not the way I. Maybe is my english and also the meaning of news service

    thanks in advance.

  8. #18
    Quote Originally Posted by ;
    4th inefficiency: space-time analysis applied to the market.
    I suppos you not talking about Gann. Could you explain this in detail?

  9. #19
    Very interesting thread.

    I've experimented with sudden spikes but I discovered that the broker which makes these synthetic spikes never stuffed my orders without slipping me in my drawback and which makes this egy useless.

  10. #20
    Hello FF,

    I have been a completly passiv associate of ff, however I do and did appreciate the highest qualitly of the forum.
    I have been busy in the markets for a couple of years, and finally got the courage to speak up in this excellent forum.

    Efficient Market Theory:
    Is your market random? Well do traders exchange? My guess is no. Furthermore there's to my own ideas a relation between the market motion as well as the behavoir of traders.

    Market Inefficients:
    I believe I have certain understanding of market inefficiencies, and have exchanged particular market inefficiencies. What are market inefficincies? Market inefficincies is.
    A example might be Merger Arb., CEO are under pressure, thus they attempt to land an coupe by taking more than a business, frequently paying a too large price. These get noticed by someone, and he/she makes a ton load of cash. Is Merger Arb. Coming to an end? Probably!
    There are most likely numerous inefficieny in the worldwide markets, plus it boils down to human behavoir, at my studies give me this gut sense, however I have not yet discovered the proof!

    I could go on and on forever, however I ll make my initial stop here, feel free to challenge me anyway you desire.

    Best regards
    Oliver

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