Wrong way go back

speeding down the highway - wtf? - wrong way go back

Just another useless rant - no content here - move along.

Was hoping the predictions of an announcement today would be realised because even before the open, the market was set to open at best, flat.

Today marks a major milestone in my foray on the market.. 20% minimum in the red across the portfolio - going to celebrate with some cheap plonk after the kids are down and I've sent my more sensibel half to bed - alone.

Again, the philosophical navel gazing rapmps up. To me it seems that the market is inherently chaotic and the only way to look at it is through the lense of probability theory. I'm seeing many parallels with how the casino works. Those are unpleasant parallels given that we spend so much time on researching funamentals, what we beleive to be profit drivers and therefore share price drivers.

I'm conviced however that the evil that undermines that reasoning is the technical analysis (and i'm not talking about "engulfing green candle" type TA but the bot type TA algorithms that operate in the technical sphere, but with the added sting of introducing their own technical stimuli in the form of market manipulating pip trades). Sophisticated TA seems to dominate the trading behaviour of the market and to me at least conjures up imagery of sharks devouring sardines. Like it or not, we are sardines; we neither have the speed, or weight or agility or killer-vision of the sharks so try as we might to swim with them, eventually we find ourselves swimming behind a cage of razor sharp teeth.

The problem with TA is that it is based on history and the development of empirical rules. The rules aim to predict price dynamics based on perceived historical price and volume movement patterns. What this is, is a model of reality, not reality. However, when it is applied, and particularly aggressively by big players, it alters the behaviour of what is being modelled and so the rules no longer fit the behaviour. Now introduce many big TA players all trying to develop competing technical trading rules what you get is all of them tripping over themselves and ultimately throwing the market into chaotice volatility that is completely detached from the fundamentals. To be viable in that environment they have to be constantly evolving like the market they are trying to beat but the more they try and adapt, the more unstable the market becomes.

This is why my long term goal is to put my eggs somewhere where the sh*t cant be technically analysed and pip traded out of them by sociopaths who have employed and army of PHD mathematicians and statisticians and spent millions on finding better ways to separate me from my hard earned money and my kids from an essential leg up in this highly competative world.

@pintohoo. You have teased us with veiled references to a system you have, Purrs? (acronym?) that you beleive can swim with or even take some bites out of the sharks. My curiosity is aroused now so I thought about what it might look like.

If you're analysing historical data of all the symbols on the ASX on a regular basis you're either subscribing to data or have a scraping system to get it from the likes of the ASX website, Yahoo etc. That would be the easy part, but what would you do with it? Searching for the well known TA indicators is really hard without sophisticated pattern matching techniques, and it really gives you no advantage over the really good TA players - bit like pitting a robot chess program against a chess master.

You are big on fundamentals, and obviously patient so you have to be parameterizing (and therefore refining) your algorithms with fundamental data. That makes it trickier because then you would be trying to align truth with a model of behaviour based on empirical observations of a chaotic system. Even doing that successfully I'm still convinced it would not be reliably accurate.

I knew a guy who was a guru at computational fluid dynamics and who was head hunted by a bank to work on market modelling. If you think about it, you are dealing with share volumes, momentum and pressure. Modelling price action would have parallels with modelling the flow of fluid in a channel where things like voluminous mass, gravity waves, manifolds and compressibility all play a role in determining exactly what is happening at the outlet. And if you can do that then you can reliably predict what is going to happen in the future.

If that’s what you are doing then that's really out there on the edge and very exciting. Whatever you are doing, I wish you all the success. Those brokers and banks are all a bunch of sophisticated and organised crooks and deserve to be beaten at their game (I watched the Big Short too – many adjectives come to mind that I cannot say here). Did you hear how Standard & Poors lost a huge class action for $220 Mil in relation to the collapse of Lehman Brothers. Small change for them I guess, but you can rest assured that it’s is only the tip of the iceberg.

GLTA