Even people with very high level math knowledge fails to predict the market (remember the two noble prize scientists who failed?).Since you're out of school when you were 17, I doubt you'll able develop complex schemes (unless you are a very very rare genius).
I might be a complete failure (after 8 years of work)
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Re: I might be a complete failure (after 8 years of work)
#42Look to none other than Long Term Capital Management[1] back in the 90s to see how dangerous a game it is to either algorithmically predict or automate a thing as emotionally wrought and, at times, institutionally manipulated as the market.
[1] http://en.wikipedia.org/wiki/Long-Term_Capital_Management
Re: I might be a complete failure (after 8 years of work)
#43After eight years, I have nothing concrete to show for my efforts. So sad, so true. This is what happens when you play a zero-sum game. Even if you win, someone has to lose. Here's an idea. For the next 8 years, why don't you do something that helps others by making the pie bigger for everyone instead of just trying to game a bigger piece of a smaller pie for yourself. When you do for others, you always have somethin…
This is what happens when you play a zero-sum game. Even if you win, someone has to lose. I don't see the causality. He has yet to succeed because it's an incredibly difficult problem domain. There are problem domains of similar difficulty that benefit people that he could have chosen and still be in this position.
Some problems just can't be solved with the current toolkit. Sometime you need a different toolkit.
For example, ESR derives a development methodology for open source software using Austrian economics.
Re: I might be a complete failure (after 8 years of work)
#44Look on the bright side. Many people dedicated their lives to the search for a process to turn lead to gold. This seemingly fruitless search lead to all kinds of neat discoveries. You've learned lots of valuable things that you wouldn't have learned otherwise as well. Keep searching if you must but start benefiting from that knowledge.
The real secret about turning lead to gold is that it is possible, but by the time you have mastered the skill to do so, you no longer need to or want to.
Re: I might be a complete failure (after 8 years of work)
#45Re: I might be a complete failure (after 8 years of work)
#46I find myself excited over the preliminary results of my increasingly sophisticated simulations
This. The vast majority of the money being made in the market is being made by people with what you may consider a laughable lack of "sophistication".
Start simple. Complex modeling of stock market behavior only makes sense if you think the stock market has a complex underlying structure.
Re: I might be a complete failure (after 8 years of work)
#47Look on the bright side. Many people dedicated their lives to the search for a process to turn lead to gold. This seemingly fruitless search lead to all kinds of neat discoveries. You've learned lots of valuable things that you wouldn't have learned otherwise as well. Keep searching if you must but start benefiting from that knowledge. The real secret about turning lead to gold is that it is possible, but by the time…
Alchemy and transmutation of lead to gold is a pretty apt analogy for John Nelson's quest to turn his model of the market into gold.
a) The alchemical belief in transmutation was based on a thoroughly wrong understanding of the underlying processes. John's (and other's) lack of success indicates a faulty model.
b) Ironically, it transpired that, under true nuclear transmutation, it is far easier to turn gold into lead than the reverse reaction, which was the one the alchemists had ardently pursued. Nuclear experiments have successfully transmuted lead into gold, but the expense far exceeds any gain.
Re: I might be a complete failure (after 8 years of work)
#48A lot of people are leaving comments critical of his goal of beating the market as playing a zero-sum game, just pushing wealth around, having no value for society, etc. This strikes me as dubious and high-handed, to say the least. First, as to the value of the endeavor. He is trying to, in his words, "come up with an algorithm that finds pockets of profitability in a cloud of probable randomness." If he could really…
I agree. Disparaging speculation as "zero-sum" and therefore inherently bad is non-sense. In almost all mature industries such as grocery stores, auto sales, lumber, appliances, etc., any individual seller's gain is some other seller's loss. So what? They are providing a valuable service and if profitable in the long-run are doing so at lowest cost, highest value to their customers. Financial speculation has a long h…
> Speculation is a zero-sum activity between speculators
I agree.
> any individual seller's gain is some other seller's loss
I disagree. A farmer can sell to a grocer and both can gain.
Re: I might be a complete failure (after 8 years of work)
#49After eight years, I have nothing concrete to show for my efforts. So sad, so true. This is what happens when you play a zero-sum game. Even if you win, someone has to lose. Here's an idea. For the next 8 years, why don't you do something that helps others by making the pie bigger for everyone instead of just trying to game a bigger piece of a smaller pie for yourself. When you do for others, you always have somethin…
> This is what happens when you play a zero-sum game. Even if you win, someone has to lose. How is it always a zero-sum game to win? Fundamentally, trading stocks is not that at all. If I buy one of the first issued shares of "Tasty Ice Cream" for $1 because I want the company to spread their goodness as well as get a return on my money, no one has lost. If I lose my job the next week and need to sell my share which…
I think this is the way capital markets were originally supposed to work; matching companies in need of growth capital with investors seeking to earn a risk-adjusted return on their long-term savings.
Unfortunately, the financial markets have morphed over time such that now, traders trade for the sake of trading. Instead of our work being our wealth, trading securities somehow became an end unto itself. What's worse is that there really are two markets today: one for the individual retail investor and a second for institutional investors.
Retail investors are taught to 'invest for the long-term', and 'not try to time the market' meanwhile hedge-funds and high-frequency traders play a different game with different rules. Their profits come primarily at the expense of retail investors and in many cases investment banks 'front-run' their own clients taking advantage of their customers in a way that would be illegal in any other industry.
John Stewart explains it better than I ever could in his face to face indictment of Jim Cramer of CNBC: http://ccinsider.comedycentral.com/2009/03/13/jon-stewart-an...
(Link for the Canadians: http://watch.thecomedynetwork.ca/the-daily-show-with-jon-ste...)
Re: I might be a complete failure (after 8 years of work)
#50Earlier quoted context omitted.
This is what happens when you play a zero-sum game. Even if you win, someone has to lose. I don't see the causality. He has yet to succeed because it's an incredibly difficult problem domain. There are problem domains of similar difficulty that benefit people that he could have chosen and still be in this position.
Almost anything where you create something would be better. Then again he/she is creating software and algorithms.
Yes, but to what end? When it comes to creating things that have value, I like objective standards and my favorite definition is Buckminster Fuller's: "Real wealth is whatever nurtures and accommodates human life." Anything else is pointless.
Incidentally, a recent study claims that 60% of UK workers feel that their work is of no use to society. Financial Services, Telemarketing, Spammers, High-Frequency Traders and many other 'professions' would fit this description. Here is the link: http://www.reddit.com/r/Economics/comments/cjgx7/60_of_uk_wo...