Although you make a case against divining what to do from charts, I think there might still be a case for doing things like this.
I think this because I rely heavily on inference from charts to do my job, but these are charts telling me about the behavior of computer systems via telemetry rather than stocks. Now, there’s some big differences here to be sure. I’m trying to infer the behavior of a mostly deterministic thing that, while complex, is complex like a clock rather than complex like a school of fish.
Nonetheless, this suggests to me that charts should still be useful for inferring things about how the market works and then being able to use that model to create a strategy. To the extent it doesn’t work, I would say you probably need more and better charts to help you make sense of what’s going on, since that’s usually the answer in my world, rather than that things are just random and you can’t find evidence of what’s happening.
Maybe the argument is something like financial markets have so much noise that you’re more likely to accidentally overfit to noise rather than find real patterns that let you infer a useful model, but if that’s the case that’s a problem everywhere, and you just have to get more aggressive about dealing with it up to some limit where there’s simply not enough signal to determine anything useful.
Maybe the argument is something like financial markets have so much noise that you’re more likely to accidentally overfit to noise rather than find real patterns that let you infer a useful model
That is pretty much my argument, yes.
Emotional trading is such a danger that I also want my trading to be in principle something that I could program into a computer, even if I do, in practice, execute the trades manually. This isn’t compatible with “eyeballing it”.
I do look at price charts. I use Heikin Ashi candles, Bollinger bands, probability cones, moving averages, volatility graphs, and I even eyeball support and resistance levels. But I mostly don’t expect to predict the future with these. It’s more about noticing when my initial assumptions have been violated, by past behavior.
but if that’s the case that’s a problem everywhere, and you just have to get more aggressive about dealing with it
I thought that’s what I was doing. What else would you suggest?
up to some limit where there’s simply not enough signal to determine anything useful.
I think this is the case in some markets. You can still sometimes get enough signal for alphas that affect multiple assets in similar ways, by trading ensembles.
Although you make a case against divining what to do from charts, I think there might still be a case for doing things like this.
I think this because I rely heavily on inference from charts to do my job, but these are charts telling me about the behavior of computer systems via telemetry rather than stocks. Now, there’s some big differences here to be sure. I’m trying to infer the behavior of a mostly deterministic thing that, while complex, is complex like a clock rather than complex like a school of fish.
Nonetheless, this suggests to me that charts should still be useful for inferring things about how the market works and then being able to use that model to create a strategy. To the extent it doesn’t work, I would say you probably need more and better charts to help you make sense of what’s going on, since that’s usually the answer in my world, rather than that things are just random and you can’t find evidence of what’s happening.
Maybe the argument is something like financial markets have so much noise that you’re more likely to accidentally overfit to noise rather than find real patterns that let you infer a useful model, but if that’s the case that’s a problem everywhere, and you just have to get more aggressive about dealing with it up to some limit where there’s simply not enough signal to determine anything useful.
That is pretty much my argument, yes.
Emotional trading is such a danger that I also want my trading to be in principle something that I could program into a computer, even if I do, in practice, execute the trades manually. This isn’t compatible with “eyeballing it”.
I do look at price charts. I use Heikin Ashi candles, Bollinger bands, probability cones, moving averages, volatility graphs, and I even eyeball support and resistance levels. But I mostly don’t expect to predict the future with these. It’s more about noticing when my initial assumptions have been violated, by past behavior.
I thought that’s what I was doing. What else would you suggest?
I think this is the case in some markets. You can still sometimes get enough signal for alphas that affect multiple assets in similar ways, by trading ensembles.