Earlier quoted context omitted.
He traded forex and futures, not actual stocks. Headline misleading.
How is the headline misleading? It says 'traders' not 'stock traders' specifically.
It got changed later, earlier it was stock traders...
Training Rats as Traders
41–44 of 44 posts
Re: Training Rats as Traders
#42Earlier quoted context omitted.
Your response indicates that you did not understand the parent post. Assume I have some system where I guess right only 25% of the time, but if I guess right I get $5. If I guess wrong I lose $1. My expected return is (0.25 * 5 - 0.75 * 1) = 0.5, which is 50 cents. So, I'm doing worse than a coin toss, but still making money. This is what the parent poster meant by a "skewed bet". The payoff for guessing "heads" or "…
I still don't get it: A. I guess correctly 25% of the time (via some method) and make money because of the skewed payoff. (0.25 * 5 - 0.75 * 1) = 0.5 B. I flip a coin and guess correctly 50% of time and make EVEN MORE money because of the skewed payoff. (0.5 * 5 - 0.5 * 1) = 2 Why should I ever go with option A? Furthermore if your method lets you guess correctly 25% of the time, why don't you simply make the opposit…
Ah, ok. If there's a skewed payoff for B, then yes, you're correct. I read your post to mean that you were not considering the payoff, and only the probabilities.
As for the rest, what does "opposite trade" mean? For instance, going short versus going long carries very different risks. It's unlikely that your payoff would simply be mirrored.
Re: Training Rats as Traders
#43Awesome! Spoiler alert, predicting a self aware system like the stock market not so much possible in the long run. But profiting from the lucky guesses of rodents in the short term - possible and awesome. (As long as it's not your money on the line.)
> "predicting a self aware system like the stock market" Please elaborate on why you think the stock market is self-aware!
The market makers, those tend to be human beings who buy and sell stocks, watch the market and continuously adjust their actions based on their observations of the market.
No elaborate theory here, just stating the oversimplified obvious.
Re: Training Rats as Traders
#44Earlier quoted context omitted.
I still don't get it: A. I guess correctly 25% of the time (via some method) and make money because of the skewed payoff. (0.25 * 5 - 0.75 * 1) = 0.5 B. I flip a coin and guess correctly 50% of time and make EVEN MORE money because of the skewed payoff. (0.5 * 5 - 0.5 * 1) = 2 Why should I ever go with option A? Furthermore if your method lets you guess correctly 25% of the time, why don't you simply make the opposit…
Ah, ok. If there's a skewed payoff for B, then yes, you're correct. I read your post to mean that you were not considering the payoff, and only the probabilities. As for the rest, what does "opposite trade" mean? For instance, going short versus going long carries very different risks. It's unlikely that your payoff would simply be mirrored.
> I read your post to mean that you were not considering
> the payoff, and only the probabilities.
If we live in a universe where you can under-perform a coin toss and still make money because of how the bet is skewed, then I can do better by flipping a coin!
If the bet is skewed the other way, then we will both lose money but my coin toss will lose less.
Let me restate that: you can completely dissociate your prediction algorithm from your cost function
> As for the rest, what does "opposite trade" mean? For
> instance, going short versus going long carries very
> different risks. It's unlikely that your payoff would
> simply be mirrored.
There are only four outcomes here (as I understand it):
* Predict Up, Moves Up
* Predict Down, Moves down
* Predict Up, Moves Down
* Predict Down, Moves Up
If you were able to predict at 25% accuracy, I would take what you told me (up or down) and flip it-- because you are actually performing at 75% accuracy, you just don't know it. Then I would make a trade. I don't know what the most clever trade that could be made based on that knowledge, or what the various payoffs associated with them are, but as I showed above, it doesn't matter for the analysis.