Apr

8

PitcherI heard a spot on NPR yesterday about a statistics study of major league baseball that concluded that all the runs and records in major league baseball were consistent with randomness. I find that hard to believe, and that brings up the general feeling that many of statistics' conclusions are hard to believe. But there they are. A random generated time sequence has many apparent trends when looking at a chart. The tests of market statistics seem hard to believe, but are verifiable within its model. This phenomenon highlight the problem of purely subjective trading and the place of feelings in trading. Vic and Laurel's book talks about runs and hot streaks. Many of the conclusions arrived at scientifically are counterintuitive at first. It's like the greatest pain entry point of a trade is often the best entry.

Victor Niederhoffer remarks:

Jim is talking about the randomnes of basketball, and how the runs and streaks are consistent with randomness. They're consistent the same way the market is consistent. If you don't take account of the lead at the time or the changing significance as other markets move and time passes within the day and week, and you're an ignoramous, then yes, things are completely random.


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