Yeah whatever. And I took it the way I chose to. So what? But I think it's your market analysis that's the tip of the iceberg and it's that monster underbelly of the market I'm talking about.
Last edited:
Yeah whatever. And I took it the way I chose to. So what? But I think it's your market analysis that's the tip of the iceberg and it's that monster underbelly of the market I'm talking about.
Hoggums
Senior member
- Messages
- 2,176
- Likes
- 878
Markets are not random.
Otherwise you are trading purely in the hope that you are in the top end of the bell curve that makes a profit. If that was the case I might as well employ a monkey to make my trades - he would have as equal chance of making a profit to everyone else.
Otherwise you are trading purely in the hope that you are in the top end of the bell curve that makes a profit. If that was the case I might as well employ a monkey to make my trades - he would have as equal chance of making a profit to everyone else.
Stochastic Calc is part of the whole host of things that are irrelevant to trading, i doubt banks/"pro" traders use it, they want you to think they use it so they seem smart and clever and so people fight for their services and superior brain power, academics reinforce this so their lives have meaning.
Skill Lev said it right financial maths is nothing to do with trading, VAR, Black Scholes, random walk theory is all sh**...it has no relevance in real life, how can the markets be random on one hand and then have 3/4 sigma moves multiple times in a week, the probability of a 3 sigma moves once in ages is something like 0.01% (or around this region in gaussian distribution, which is what black scholes, Var all assume)...
in conclusion, black scholes is the perfect example of the application of fin maths to trading, traders say they use it, academics think they are clever, but when it comes down to it they trade the way they always did, through feel.
Skill Lev said it right financial maths is nothing to do with trading, VAR, Black Scholes, random walk theory is all sh**...it has no relevance in real life, how can the markets be random on one hand and then have 3/4 sigma moves multiple times in a week, the probability of a 3 sigma moves once in ages is something like 0.01% (or around this region in gaussian distribution, which is what black scholes, Var all assume)...
in conclusion, black scholes is the perfect example of the application of fin maths to trading, traders say they use it, academics think they are clever, but when it comes down to it they trade the way they always did, through feel.
Shakone
Senior member
- Messages
- 2,460
- Likes
- 665
The markets are both structured and random. Market/technical analysis will reveal some structure to you, though the structure can change.
They don't all necessarily agree on a target, and some are not holding for just one session so their limit for the session doesn't make sense. That's the beauty. Some people will want to sell at the last resistance, or a floor trader pivot, or will wait for a bounce at resistance and then short, wait for a Fib, or just trade with the trend, and a hundred other reasons to enter including because they actually need to purchase the currency/commodity. This is why some traders like confluence. Because if you have a confluence of several of those things, with trend, resistance, floor trader pivot, fibonacci, price action then you have a lot of people all wanting to trade in unison.
They don't all necessarily agree on a target, and some are not holding for just one session so their limit for the session doesn't make sense. That's the beauty. Some people will want to sell at the last resistance, or a floor trader pivot, or will wait for a bounce at resistance and then short, wait for a Fib, or just trade with the trend, and a hundred other reasons to enter including because they actually need to purchase the currency/commodity. This is why some traders like confluence. Because if you have a confluence of several of those things, with trend, resistance, floor trader pivot, fibonacci, price action then you have a lot of people all wanting to trade in unison.
Technically Fundamental
Senior member
- Messages
- 2,810
- Likes
- 178
So you agree with my hypothesis that market prices are the result fundamental x human intervention.
You can understand that this fund can buy up stock to keep things afloat but before you understood the impact of fin maths you though it was all random
yes, goldman will wait for you to close out before selling the hell out of it.
I meant forced out
Yes, it's random. Because you don't know they'll do that until they do. And you don't know what their reasons are for doing so that day. They may not do anything. You can't count on it. It's not random to them, but it's random to everyone else.
"Stochastic calculus is a branch of mathematics that operates on stochastic processes. It allows a consistent theory of integration to be defined for integrals of stochastic processes with respect to stochastic processes. It is used to model systems that behave randomly.
A very important application of stochastic calculus is in quantitative finance, in which asset prices are often assumed to follow geometric Brownian motion."
Technically Fundamental
Senior member
- Messages
- 2,810
- Likes
- 178
do you work in financial services?
Technically Fundamental
Senior member
- Messages
- 2,810
- Likes
- 178
So neither of us do and we're discussing things that we don't fully understand.
I'm learning nothing I've had enough. Hometime
Bye
I'm learning nothing I've had enough. Hometime
Bye
Yes but it has no application in real markets, the only application it has in academia...it just has no basis in how real traders make decisions...
Technically Fundamental
Senior member
- Messages
- 2,810
- Likes
- 178
Even in hedging? :-S
arabianights
Legendary member
- Messages
- 6,721
- Likes
- 1,380
This thread amuses me for many reasons
i dont know...i wouldnt think so as much of what has originated out of academics relating to hedging is often completely impossible in real life...i'm not trying to pretend i know more than i do...all im saying is the role of quants/quantitative finance is often overstated (i believe, could be wrong) and that much of what has originated out of the presumption that markets are random has caused a lot of trouble, ie VAR and is woefully inaccurate...i hope i havent overstepped my mark though, as i am not a professional, more an interested observer.
Technically Fundamental
Senior member
- Messages
- 2,810
- Likes
- 178
Speak up boss. I've been waiting for one of you lot to come in here and have your say. Goose came but he just insults people.
Yeah, I agree. I can see that it's just a way to explain seemingly random price movements along with any other kind of random movement. Brownian motion and particles of dust, etc. But you can't 'work' with that and I'm sure traders don't.
But what I've been trying to get at (maybe I'm not very articulate, don't know :|) is that I think there is a controlled 'randomness' in the markets and that it's determined by the larger players (and I'm sure many would agree with this). I didn't say I thought there was no value in fundamental/tech analysis (read earlier posts if interested). After all, tech analysis does work on things that seem completely random e.g. hand-draw a squiggle on a peice of paper that roughly resembles a stock chart and you'd be amazed how many basic tech indicators would work on it i.e. give you buy/sell signals.
I started the post because I was interested to know what most people here base their strategies on and their views on fundamental vs technical vs random theory.
Thing is, when you have an aggregate of millions of opinions, emotions, rumours, news, MA breaks, support bounces, etc etc - although each thing on it's own may not be completely random (as in cause + reaction = outcome) I wonder if the AGGREGATE of all those things at once is not perhaps random? And that there isn't some control that has to be put in place to stop the lid blowing off?
Also, I do have a trading strategy based on the assumption of random price movements and it works surprisingly well. And I use tech analysis. I use fundamentals to choose stocks though, not to trade them.
Last edited:
Shakone
Senior member
- Messages
- 2,460
- Likes
- 665
This is not true at all. Financial mathematics does have many applications in real markets. Banks don't employ entire teams of PhD quants, coding in C++ just for fun. But if you're talking about support, resistance and entries into a market, stochastic calculus probably isn't going to tell you anything useful. And for the record, when it comes to VaR the academics have long told the banks about its problems, but the banks used it anyway.
This comment adds nothing to the discussion for many reasons.
