Daily Speculations

The Web Site of  Victor Niederhoffer & Laurel Kenner

Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.

 

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The Chairman
Victor Niederhoffer

4/07/2004
Pretense and Promotions

Slow-moving, inflexible participants are always going to make a much greater contribution to the frictional upkeep of the market than they have any right to make. The idea that it's possible to profit from a simple system like following TRIN, or the 95%-correlated-to S&P-change advance-decline, or the opening-range breakout with a 2-tick stop is on its face incompatible with market dynamics. The weak would then profit at the expense of the strong, and the market infrastructure would cease.

However, something much more insidious is going on. The system of never accepting a 2-tick loss can be tested readily with tick data. Any such testing of such a system would show a terrible loss, as 99.999% of all prices during the day at one time or another have a 2-tick loss -- especially when you only get a fill when all the bids before you have been filled at your limit, thereby making it proper to assume that if you're buying at 1000.50, you don't get filled until the price of 1000.25 has been realized.

What I see at work here is simple promotion. The people purveying these systems never tested them, and try to make a fast buck by selling something guaranteed for failure. A good litmus test for such promoters is that they claim great accuracy and success in their predictions when no falsifiability or market movement is involved.