Bitcoin Forum

Its been pretty stable for over a month now, sitting around 10 to 11 bux even during the weekend down time.  Now its pretty quickly dropped to 8 bux a coin.  So how low we going this time.  I bought a bunch when it hit 9 today, now wish I would have waited of course.  Problem is, if bitcoin keeps freaking going from 11 to 7, to 12, to 8 back and forth its just making it harder and harder for there to be a strong bitcoin economy.  Sellers are not going to want to sell products and services for something that changes its value so dramatically and so quickly.  We need to fix that somehow, it has to stabilize even if its at 5 bux a coin, it just has to be stable withing a dollar for there to ever be any future economy for bitcoin, or at least thats how I feel.

The more it swings, the more it will attract day traders.

They will eventually stabilize the economy because eventually they will cancel each others trades out, making manipulation much harder.

what bitcoin needs is Derivative!

i dont mind if its low or high.  ;D

We have to mind if you use or want bitcoin to grow.  You cant buy something for 5 bitcoins when there `12 bux each, then someone 2 weeks later buys same product for 5 bitcoins when there 7 bux each, thats going to lessen people that are sellers accepting bitcoin I belived.  And yes I do day trade and I agree its good for day traders when you get them low.  My issue with that is theres a 4 day delay to get money from bank account, to dwolla to MTGOX so bitcoin changes so much in 4 days, from 11 to 8 just like that, but if u wanted to buy, it would take 4 days just to get money in the account.  That is hurting too.

I've been waiting for the dip - I'm not necessarily happy or sad, just that I had set some buys two weeks ago and just waited for it to happen.

I had a buy order in . I missed the bottom by .09 too low :( now it's .75 higher.

A bitcoin is supposed to be worth what someone will trade for it... not how many dollars its worth.  if you want a currency that is pegged to dollars then go buy dollars.... in fact you can mine dollars, except in the dollar world its called "working".... catchy eh?  ::) ;D

Wrong wrong wrong. You'll just have to trade higher and higher volumes to make a profit. Stop trying or desiring to control bitcoins. You may have high goals and aspirations, but this "we need to" bullshit must end. Bitcoins lead the way. People watch, analyze trends, speculate...etc etc. Bitcoins just ARE. Accept it or get out, but do not think you will lead the way.

That's the problem with a free market, it's always subject to manipulation by the big players.
The free market only works a sandpit, with the big players leaving it alone to keep the small fry happy and playing along.

Its not about control, its about stability.  For bitcoins to become mainstream and not just an interesting play too with 25 people at a conference, be seen as just a nerdy interest or pyramid scam, it has to stabilize enough to make trading items, or services for them to make it a good working currency.  As it stands now, it is just a neat play tool to mess around with, what else would you buy bitcoins or mine bitcoins for?  If theres no stability they will just remain some crazy math problem that creates a number.  That is awesome, and the theories behind it are solid, so lets get it into real business, sales, products and services.  Stability is the only way I see that ever coming about.

This is the chicken and the egg problem. Businesses want to see a stable currency before even being involved in it, however to get a stable currency it needs to be huge already, with tons of people involved.

i think this is just a natural thing that needs to happen.  The bitcoins need to be spread out from the early adopters.  Every time someone dumps 25k bitcoins, they get spread around to ALOT more people. 1 bitcoin to this guy 10 to that guy 3 to that other guy.   It can't go on forever.  So everytime you see a huge dump be happy instead of sad.  (unless its Mt. Gox or something doing the dumping then there is a problem)

I don't understand why you need a stable currency when there are already payment processors that allow you to instantly adjust your price based on the market rate.

Because, you sell say a computer for 30 bitcoins.  That laptop cost you 200 bux lets say to build, and you sold it for 300 dollars worth of bitcoins worth 13 dollars a coin at the time.  That works out fine, but then next month bitcoins are worth 5 bux a coin, you now lost money on that laptop.  Its great that you can adjust the price of your next selling computer to be more bitcoins because there only worth 4 bux each now, but every sale before that you now lost a lot of money on.  Thats not good business, it can work in the reverse though, which is what I think many sellers are hoping for, the sell item, service for something worth 10 bux now, and that same item is worth 40 bux each in the future.

This is true, but after the sale is made, the bitcoins need to be converted to dollars right away to negate any exchange rate risk.  If that is accomplished, then bitcoins can go up, down or sideways, and it will not matter to the merchant.  They get dollars no matter what.  We offer this service to all our merchants.

Or, you have something like Bit-pay that automatically converts your BTC payment into USD for the merchant.  No need to worry about market volatility at that point.

The problem with BTC is the same problem with the US $. You have to MAKE SOMETHING and sell for BTC. The US doesn't make as much as they used. Everything is about middle management where the "value added" is dubious. We need more guys like the Bitcoin Leather guy and The Bitcoin Silver guy. If People want to resell electronics they should converting BTC into Tiawanese or Chinese currency instead of just buying from another middle man.

Also we need more practical services. Like plumbing for Bitcoin, or legal services for Bitcoin. Services people NEED.

These are the activities that will build a strong base.

We are adding more every day.  I have convinced my gardener to let me pay him in bitcoin! 

The best way to grow the bitcoin economy is just mentioning it to every place where YOU would like to pay with bitcoins.

Show them the http://weusecoins.com (http://weusecoins.com) video, and ask if they would like to take people's money this way for their business?  If they say yes, point them to my site, or I'd be happy to talk with them personally.  We have the easiest system out there.

I sold my type 1 silver rounds a few weeks ago right on the cusp of the MyBitcoin - price drop fiasco , at that time I didn't have a "bank" of bitcoins in Britcoins exchange which would have helped me to sell some as soon as I had sent invoices (manually) out to customers which would have helped me avoid any fluctuations in the price of bitcoin. This I didn't do so I ended up chasing the price down and selling at the bottom leaving me with a loss. I could have hung onto them and sold as the price did rise again , but as I'm not a trader as far as I know the price could just keep dropping .  >:(

Yesterday I undertook the sale of my type 2 silver rounds , to avoid the situation above , I had a quantity of bitcoins in Britcoins exchange ready to sell once I sent out customer invoices , this would of been fine If it hadn't been for Britcoins exchange going down , which unfortunately coincided with another price drop . Today im still holding the 60 bitcoins I made yesterday at around £5.80 per bitcoin , now the price is £5.31 , I'm in the same boat wondering wether to sell and loss £30.00 or hang on to them . Anyone got a crystal ball , or a better question is , is there any rhyme to the bitcoin chart a day during the week where the price tends to spike ? If that makes sense .  ???

Unfortunately, there is no simple, reuccring "rhyme" in the bitcoin market nor in most other financial markets, otherwise it would be too easy...
Fortunately, technical chart analysis of bitcoin prices can really help a lot to guide you.
Have a look at http://blog.bitcoinwatch.com/ (http://blog.bitcoinwatch.com/) or subscribe for newest and deeper bitcoin price forecast to guide bitcoin trading.

Currently, there is no reason for me to buy. We need to see either a high volume rally that breaks through at least the 12 $ area, or more likely there will be a steeper drop before attempting to bottom out

... is your opinion. Another opinion would be that there's no case ever of technical analysis outperforming chance in predicting market movement.

Ever. There are however lots of people not understanding what chance means when you have lots of actors, and humans ARE hard wired to see patterns in everything.

I can only speak for me: In financial markets, more than 70% of my trades are profitable, and the profitable ones are bigger than the losing ones. I do this with 100% technical analysis, I don't read / watch finnacial news, nothing, only look at charts. And this works for bitcoins brilliantly as well.

But you are right, not everyone is skilled to do it and more importantly, has the proper money management discipline. This is where most people fail, whatever method they use, be it fundamental or technical.

Derivatives require a counter-party which can be trusted, or forced, to pay up when they lose. The Bitcoin world lacks any such counter-parties.

I've heard of race traitor... but a race trader? 

LOLOLOLOLOL

You fail at understanding chance. If a thousand traders decide whether to buy or sell depending on coin flips, some of them will outperform the market and some won't.

The ones who outperformed the market when looking back will claim it's due to their skills at flipping coins. Yet it's still not predictive.

 ;D

defxor, I'm not a financial person by any means, but I'm guessing that the technical analysis works because most people aren't doing it.  If everyone traded purely objectively like that, then yeah it would be as random as flipping coins.  

I could agree with you if I have done 5 trades, but I have a 70% success rate since 8 years, with more than 5,000 trades.

If you will look at Bitcoin without funneling it through the fact that you may be vested in Solidcoin, you will clearly see it is superior in many ways.

Primarily, because it's already larger and more widely accepted.  When it comes to a currency, a larger economy determines superiority.

Whether or not the theory is better doesn't really matter yet.  Bartering/swapping is the best means of exchange in theory but nobody uses it without considering a product value pegged to some other corrency.  How superior would people claim bartering is?

I doesn't. It's a well researched topic and anyone who could provably show their TA works would be instantly world famous and talked about everywhere.


See above.

And if you know statistics, which I assume you do, you also understand that statements about the past can never support your claim. You need to have a provable track record of predictions, published before the fact and not after so that there's not bias of underreporting bad traders and overreporting the good.

If you are that successful, you should start now. There's a Nobel Prize in Economics waiting.

There are good fundamental analyst, i.e. Warren Buffet at least was picking some good stocks. And there are a number of good technical analysts who can strong track records.

It's like sports, there are good and bad left handed tennis players, there are good and bad right handed tennis players, and both can be world class.

It is commonly accepted that technical analysis works. But I don't want to persuade you, it is perfectly fine that you do not want to use it.

You fail at understanding chance - you just described my coin flip scenario again.

I take it you're not interested in getting a Nobel Prize?


Yes. It's also commonly accepted that ghosts exists1, and that it's a good idea to let mediums help in police investigations2.

1: http://www.cbsnews.com/stories/2005/10/29/opinion/polls/main994766.shtml

2: http://news.bbc.co.uk/2/hi/uk_news/8369369.stm & http://www.cbsnews.com/stories/2002/04/29/opinion/polls/main507515.shtml

Chance is a really weird way of saying something has a cause.  "It was caused by chance."  Just because you don't see a causal mechanism behind something doesn't mean there isn't one.  Chance/probability is abides by its own syntax.  And just because this syntax seems to conflict with typical causality, it doesn't mean it isn't still causal.

Technical analysis takes into account statistical data in order to form a conclusion within a certain degree of probability.  I don't think the comparison to ghosts is a fair one (you also seem to have the a priori assumption 'ghosts' do not exist or that your definition of 'ghost' is the same as others').

And then there is the "un-free market" where the state owns everything so there's no such thing as commerce except amongst the politburo.

"Big players" in the market don't manipulate simply by participating in exchange. If you argue this point, then you need to define at what monetary point does someone become a big player. So let's say that number is $1,000,000. That's not really that large of an investment but suppose for the argument that is what you consider a "big player". Does that mean $999,999.99 is not a big player? At some point a single penny determines whether an individual is a big player or not.

Actual manipulation comes from fraud, specious statements (strong dollar policy) and false statistics (GDP, core inflation, etc).

I like how in your first sentence you say "a free market" and then in the second sentence it is suddenly "the free market." Do you understand that "the free market" does not exist? It's a concept. More precisely it is the aggregation of voluntary exchanges. There is no problem with an economic system fundamentally based on voluntary exchange.

defxor seems to think that being a good trader is about knowing whether to buy or sell. It isn't.

As S3052 says, it's about good money management, and what that means is regardless of if you buy or sell, being a good trader is about knowing how much to place on a certain trade, and at what % to take profits and cut losses.

Nothing to do with whether it's a buy or a sell.

Even if 100 people just took a random guess, let's say 50 chose to sell and 50 chose to buy... that doesn't mean there are 50 successful trades, because they still don't know how much % they should be putting on the line and what their exit points are.

Thanks for summarizing so well. +1

Thanks for being funny.


What?

"Chance" is that if you have a thousand people flip coins, some will flip more heads than others. It doesn't mean they're "better" at flipping coins.

Repeat: No analyst ever has outperformed chance. Ever. No one has ever shown that their analysis method has predictive powers. Ever.

If you disagree with the above, feel free to prove your statements. If you can, you will get a Nobel Prize.

Now you made my day. I can't stop laughing. ;D

"You don't understand chance".

If you disagree with the above, feel free to prove your statements. If you can, you will get a Nobel Prize.

It is no chance if someone has consistently a track record of over 70% success.

This is based on statistics.

And no: I don't think that for just being 70% right I deserve a Nobel price.

Thank you for proving conclusively that you have absolutely no idea what chance is :) With enough analysists, someone will - by pure chance - outperform the market for X time. It's still completely expected, and is no different from flipping coins. It does not in any way point to the analyst using a method which has predictive power.

(I'm also quite positive your track record isn't 70%, but that's beside the actual point)

This comic describes the situation pretty well:

http://abstrusegoose.com/strips/mr_market_is_a_drunken_dirty_old_man.png

"So, which way is the market going to move today, Jim?"

Once again defxor demonstrates that he thinks being a good trader is about knowing whether to buy or sell.

Pretty much an irrelevant question if you want to be profitable.

How about:

"So, if it starts to move up, what is your exposure and entry point and stop loss/take profit levels, or, if it starts to move down, what are your exposure amounts, entry point and stop loss/take profit levels, Jim?"

is functionally equivalent to

Are the methods for analyzing the charts made for something with this kind of inflation?

Yes, the charts work for very well for this. If you are interested, I can share some examples, but don't have time today.

For a good analysis on how chance compares against market experts, I suggest reading The Drunkard's Walk, by physicist Leonard Mlodinow. Dexfor's point is valid, I'm afraid. The key statistical issue isn't whether someone has made money in over 70% of his or her trades (whether by choosing when to buy/sell, or how to apply stop-loss is irrelevant).

The question is, given that there are x number of traders, all trying their best, what are the chances that, in any given time frame, ONE of them at least will hit 70% of positive trades... And the answer the chances are really quite high. The ones who didn't reach 70% we simply don't know about. But the fact remains that with nothing more sophisticated than a coin toss SOMEONE would have hit 70%.

In his book, Mlodinow explores the case of one Wall Street trader who was hailed as a financial hero because he outperformed the Dow 17 years in a row. On the face of it, it seemed like almost insurmountable odds, but when properly analyzed it turned out to be something closer to one in two.

It's exactly people with such beliefs allow some analysts to outperform chance.

Someone skilled in the art of money management can be profitable even if only 30% of trades go their way.

Because they know when/how to cut the losing trades, and let the winning trades run.

Didn't you say we were in rally mode after we broke 11?

None. If you want to claim differently, feel free to prove your point. Start with understanding chance, though.


Which is exactly functionally equivalent to "buy and sell". If you need "functionally equivalent" to be explained just let me know and I'll try to use other words.

Don't worry, prices are going to be more stable. just give it some time :-)

We are seeing large price drops because a few early adopters are selling large amounts at once (the last major sale was 24k bitcoins)
OTOH, buyers tend to buy much smaller amounts, typically a few hundred bitcoins.
This means that those 24k btc, that were owned by a single person, are now in the hands of dozens of people.

Bitcoins might represent a large percentage of the wealth of some early adopters; for these people, it makes sense to diversify their assets, this is why they sell.
However, each of those large sales tends to spread bitcoins among more people.
As time passes, there will be less and less people capable of causing these large prices drops.

http://bitcoincharts.com/charts/chart.png?m=mtgoxUSD&t=S&height=320&width=750&c=1&s=2011-06-15&e=2011-09-01
Now, 2 1/2 months of the long, slow slide.

Since the bubble popped in June, we've had 2 1/2 months of long, slow slide. The pattern is clear enough. There is no "crash". There is no "rally". There is just some noise on top of a long term drop of about 20% per month.

There's a lot of volatility because the market is thin relative to the number of Bitcoins outstanding. Any big trade can disrupt the market. But it comes back to the long, slow slide trend line each time.

Each time there's a drop, some recovery follows. Each peak, though. has been consistently lower than the previous one.  This is normal post-bubble behavior.

Many people here seem to be in denial about this. 

lol bitcoin is a bubble! it poped 2 1/2 months ago!

get out while you still can SELL SELL SELL!

Are you claiming there's predictive information in that graph?

http://www.propertysecrets.net/images/blog_images/gold_graph.jpg

I can only assume you were on the barricades in the year 2000 telling everyone that the gold bubble had burst.

(My point has nothing to do with gold per se, only with predictions-based-on-graphs)

I guess you're right, just like 1 billion shades of gray is functionally equivalent to black and white.

Let's say in your world of black and white we decide to flip a coin and sell. How many should I sell? All available? Half of them? 14.5892% of them?

Actually we are at 75 in this graph, not 00

Irrelevant for the argument. I still believe it's the "functionally equivalent" part you're having problems with. Since I have no idea what your education level is I don't know how best to explain it.

You know that absolutely everything you can do with a computer is in reality done by just flipping bits, right? In the same way everything you can possible dream up with trading strategies boils down to "buy and sell".

I believe another poster referenced a book on the topic, where they show how traders don't outperform chance. I suggest you go read it if you want more details.

I think you're wrong there, because at any given moment in time, a trader really has 3 options: buy, sell, wait.

The impatient trader sells for a small profit and congratulates himself on a 'successful' trade, when he could instead wait, wait, wait, and sell for a large profit.

Are you even trying to be serious?

Yes, of course there's not-buy/not-sell also. In my computing example, that would be an idle CPU. It doesn't change the argument whatsoever.

Duh, it's still the programming that decides when a computer should be idle.

If you have a while loop which randomly does the trading for you, you still need it to contain 3 options:

buy()
sell()
sleep()

Thank you for answering my question. You're not even trying to be serious.

Yes, and we also gave a sell signal after prices did not hold above 10.5$, which was a critical requirement.

Oh please. Surely you are not suggesting a relaa... oh my!

http://bitcoincharts.com/charts/chart.png?noheader=1&height=100&width=450&m=mtgoxUSD&i=Daily&c=1&s=2011-05-08&e=2011-11-10&t=W
http://goldprice.org/charts/history/gold_all_data_o_usd.png?0.9803310840325336

Maybe we can use a GPU farm to work out our trades.

We'll need two decisions: buy/sell and amount (zero or one Satoshi).

So each loop cycle we decide whether to do a buy or a sell then whether the amount of the buy or sell should be zero or one.

SInce transaction fees would slaughter us if we actually posted single-satoshi buys or sells to the blockchain, we can accumulate the amount, and unless someone sees some point in posting both a buy-minimum-transaction-amount and a sell-minimum-transaction-amount if both the buy amount and the sell amount accumulate together, both hitting the minimum-to-transact at once, I suspect we might well be able to accumulate the buy satoshis with the sell satoshis in one value that is eiter positive or negative depending on whether the buy total or the sell total (not necessarily respectively) is higher.

Thus coin-flips might with enough GPU cycles hit a run of enough more buys than sells, or sells than buys, to accumulate an absolute value equal to te minimum amount we want to actually transact on the blockchain, and if the Nobel people have been correctly withholding that nobel prize we should have a robot no past technical analyst was better than?

-MarkM-

If you have X such trading robots, and X is a high enough number, one or several of them will outperform the market. To get a feeling how high "X" needs to be you'll need to do the calculations.

Do remember that for every market-beating robot there would be an equal amount of loss making robots. If you fund them all you will only do (on average) as well as the market.

This is the same as with any trader. We only hear of the successful ones - and then believe them to have special abilities.

Correct.

I have no idea what you were trying to say with your edits.

While I think I understand what you mean when you say for every Up there is a Down, what you actually said was both incorrect and irrelevant. Your argument seems to be that because a system is closed it is therefor homogeneous (no entropy) or unpredictable (maximal entropy).

In my own experience, I matched the market on the rise up, and tend to under perform the market on the way down. I do not conclude that day trading is impossible. No, I conclude that I am bad at it. I suspect you are as well, but you blame 'random' for your consistent performance.

As it happens, patterns emerge in chaotic systems. Indeed there is a branch of mathematics dedicated to the study. Even if you argue that humans are non-deterministic, they are after all human.

No, that's not at all what I said. I was specifically talking about what happens when you have many actors essentially performing at random on any market.

Nicholas Taleb wrote a book about it called "Fooled by randomness".

http://en.wikipedia.org/wiki/Fooled_by_Randomness

I have no critique of Taleb's book as presented by Wikipedia (http://en.wikipedia.org/wiki/Fooled_by_Randomness). If I recall someone earlier made the (99:1 bet in which you almost always win, but when you lose, you lose all your savings) point that successful trading is more about money management, setting stops, investing a small percentage of your treasure to invest in a single trade according to risk, etc.

I also agree with a statement you made earlier: "If a thousand traders decide whether to buy or sell depending on coin flips, some of them will outperform the market and some won't. The ones who outperformed the market when looking back will claim it's due to their skills at flipping coins. Yet it's still not predictive."

It is true that within a large body of seemingly random noise, it is highly probably to find instances of pattern/consistency. For example, if ten people flip three coins, it is quite likely that at least one of them will flip heads, heads, heads. And you are correct that this says very little about his next coin flip. However, if after taking note of this ONE individual, he continues to flip heads, heads, heads, heads then you should start suspecting a duplicate sided coin, because this is statistically significant.

Yes! :D The point is that so far there's no trader ever that has outperformed chance, that is, has been trading at a statistically significant level that cannot just be explained with being one out of all traders in existence.

If someone claims to be such a trader, and in addition claims to have a method behind it, that will result in an instant Nobel Prize.

i guess you never heard of the trading computer on wall street that buys low sells high ... a trade algorithm that make millions!

heh... is that head of yours hurting from bashing it against the wall enough times already? I feel for you, defxor  ;D

Perhaps someone should start a thread on statistics. Or a thread called "No matter how well you're doing, if you're one of many it's still pretty much random".

Oh, well, like the endless discussions on deflationary spirals and "what backs Bitcoin", I'm afraid we're destined to have this conversation with the uninitiated many, many times.

Hehe. At one point in time I was really surprised that people who worked in the financial industry didn't know statistics and randomness inside out. Then I realized that if you do, you probably don't work in that sector at all (or you make sure you can cheat, like implementing HFT algo's in co-located servers).

I have a special pet peeve with TA though. I can understand people who do FA to really really believe that they're basing their trades on valid data, but ... TA? Really?

"No matter if Bernanke decides to hike the interest rate hundreds of points tomorrow my charts with pretty trendlines says we're in a head & shoulders touching feet kinda pattern and that means that we will break out of this downward channel .. "

But I guess I'm just not good at it ;)

He is drawing the parallel between your post and the financial concepts of alpha and beta.

The method as you have it sounds like computer program. If you'll accept a human and computer combo that can do it as sufficient evidence of a method, then I think you'll find such individuals. I ramble here because what you seem to require is that the best chess/go/poker player can create an AI or that the best programmers can play chess.

I think more interesting terms would be this: Given a fixed amount of money ($100) and a fixed time frame (month), can a specific trader in isolation beat the market by at least some percentage (3%) using only charts and indicators but no news media? Then do it again next month and next?

The answer is no. However, since there are lots and lots of such traders someone will - but it's not due to skill but simply chance.

Netrin, turn the question around. If the analysis is so definitive and the options are so easy to understand, how come not ALL TRADERS always perform significantly above market averages?

This is my last post here in this thread about the topic of "can a trader beat the market regularly, without being lucky all the time", as I do not want to take more time to debate this with people not even trying to understand.

Trading, using technical analysis, and the proper money management is a skill that you can learn. But it is hard work. You can compare it with learning to play a music instrument or playing tennis.

If a musician or tennis player practiced for years, he will likely be better than others who are less talented and / or trained less hard.

It is no chance or luck that they beat others on a regular basis, the may lose some matches, but will win the majority of matches.

The same applies for trading and other activities.

There's no data that supports your position. There's plenty of data to support ours.

Well, there *is* a way to test this hypothesis. Any contestants?

You can read "market wizards". There is no need to reinvent the wheel.

You still don't understand the concept of chance.

start a thread with your trades posted as you make them, including the stop losses etc & everyone can clearly see you beat the market, not only that they will soon mirror your trades to your advantage

all the rest is just talk talk

Trading seems to be very similar to playing poker. There is a significant variance involved in the form of luck but a skilled player will win in the long run for sure. I happen to be a long time poker pro, not a big level pro but I've made a living from that. As a trader I'm very amateur but I have already seen there are many similarities and a lot of the same skills are needed, most importantly money management.

Feel free to quantify your "for sure" with actual data, showing that there are "skilled" traders that can outperform chance.

The point is that no one has been able to show that.

Chance is a BS word. 
"Derrr it was chance I tell ya!"
"Really?  Chance caused it?"

There definitely is no hard data that shows a skilled trader can beat chance.  I studied economics, stock market etc and we did multiple tests doing all the analyzing, buying stocks, trading, selling and then also did it by throwing darts at a dartboard of stocks randomly and 60 percent of the time, the dartboard did better.  They also have done this test in multiple schools and it is common practice.to prove the chance involved in stocks.  Same thing applies to bitcoins, and more chance with bitcoin is involved since its small short lifespan.

Somewhat unrelated, but consider the "Probiwon" website then.  It's literally Bitcoin darts.  I'll confirm that it's still working as of yesterday.

I was just about to write the same thing--comparing trading to poker. Maybe we've sat at the same table(s) together: Vegas? Tunica? Biloxi? Poker Stars?

Bruno

I don't see your point.


Exactly.

Let us remember protagonists who also make side bets such as "I bet some folks would pay for ________" where the ________ can be something along the lines of "the special magic seed used in the (ahem) predictive numbers generator routine by the robot that beat the market by the largest amount".

(Or even something along the lines of "a subscription to my analysis ezine / mailing-list".)

We could sell the robots that provably historically beat the market.

This is kind of similar in its roots to sending half your subscribers one prediction and the other half the opposite prediction and only keeping the subscribers who get the correct side of the coin/ezine/choice, but  conserving subscribers by selling collections of back-issues of only those branches of the decision-tree that worked out.

(Maybe don't sell it as something meant to work in the future but as something to study to try to learn how exactly it managed such a run in the past. "Learn to progam trading robots! Fully commented code of bot that beat the market X% for Y years in a row! Only $1499.99!")

-MarkM-

I've mostly played online cash and mostly at ongame/bwin network or the ipoker network, although I've won a couple of tournaments at stars. I've seen my share of casinos as well. I was in Vegas once for 3 weeks and played in almost every casino on the strip.

And back to topic, question to mizike29: what was the timeframe of your test of analysis vs dartboard? As I said, there is a very significant luck factor involved in both trading and poker in the short run. The luck factor will matter more than skill which means that it's possible, not too unlikely even, that a "random" approach will work better.

But when the timeframe gets longer, months, years, eventually the luck factor will dwindle down to 0, or close enough to 0 to not matter anymore. A professional trader can calculate exactly what his hourly wage is, what his monthly wage is etc. but he needs a long timeframe to do it, just like a poker player, because one month you might lose a lot and the next you might win a lot.

I would like to add that I'm very certain that just like in the poker world, there are traders that think they are making money but actually aren't, in the long run. There are serious poker players around who manage to break even in the long term or even lose. It's not only amateurs that lose, small time pro's can think they are better than they actually are.

I certainly don't have any data on beating the Bitcoin-market, I'm just trying out occasional trading with small volumes and even my own results are so short-term yet that it's pointless to even speculate if I'm doing well or not. But there are serious players out there and most of them aren't there for long if they don't think they can beat it.

I think it's ridiculous and ignorant as hell to think there aren't traders who beat markets in the long run, in fact it's fairly certain that there are successful traders in pretty much every market possible. I only understand a little something about trading but this is already very clear. Thinking otherwise is just as stupid as thinking that poker is a game of luck and you can't beat it.

I am not sure that luck/chance is really fundamental in games, especially zero sum games (though economies are hopefully not zero sum within human history timespans maybe not even in geological timespans going forward) where humans are pitted against one-another.

You can try to retrofit statistics, claiming after Bill Gates resorts to paying terrorists to nuke Warren Buffet or vice versa that of course a certain percentage of humans might resort to nukes upon occasion, but does chance really govern which human does, and when, and against who, and for what motive?

Sure if you throw umpteen coin-tossers into a game of heads or tails runs or umpteen monkeys into a type-Macbeth-or-Hamlet contest chance might play quite a role. But replace the monkeys with professional authors or toss shot-puts or "tennis balls and only using a raquet and only within a court like so with a net like so and scoring like so" and is it really chance if those who dedicate their lives to it outperform those who prefer to toss coins?

On the other hand, I think there are authors and tennis players who have beaten chance. If no traders have surely one has to wonder why?

-MarkM-

Belief is not relevant, actual data is. Yes there are successful traders. In fact, just as many as chance predicts there will be. It doesn't mean that they're better than anyone else, it just means that out of a population of X performing essentially at random in a non-deterministic market some will "win", some will "lose".

The wake up call is when you realize that the above means that it's irrelevant whether a certain fund manager/TA-specialist/Buffet-clone has beaten the market for 10 years straight - historical performance is no predictor for the future.

This has been tested and tried over and over again. If you want to claim differently, we eagerly await your data :) And no, "I believe" is not data.

You only way to make real money here is if you are the person handling the monies or clairvoyant.
Meaning if you have enough volume you can completely overtake any exchange.
The last indication of proof I noticed was 21K in BTC the other day.
I wish I was better at clairvoyance.  :P

We did the dart test over a year in college economics class.  It has been done before in 1988 till 2001 I think it was.  Here is a link, it was monkeys throwing darts to pick the stocks vs the pros

http://www.automaticfinances.com/monkey-stock-picking/

THe numbers were effected by pros choosing riskier stocks, and some inflated winning in the very begining from the announcements. But in the end it came down to this.



Pros picked riskier stocks: Case Western Reserve University professor Bing Liang says that, adjusted for risk, the pros' would have lost 3.8% on the market over the six-month period.
The Dartboard stocks continued to do well:

 After the contest ended, the dart stocks continued to perform, while the pros' picks fell from their initial highs after publication.

So it basically showed, and there were more tests done very similar to this, that there is a small very small minority of investors that do really well based on facts, knowledge etc.  When in reality, it has most to do with luck, or insider trading, like knowing the bitcoins were going to jump to 30 bux a coin before they did, now that would have been nice lol

Whats the easiest way to buy bitcoins?

All this doom jibber jabbber is making me want to buy.

It seems weird to me that the data would show that human beings do not have the capacity to foresee future unmet demand.  If we're no better at this than chance, then this is the logical conclusion, correct?

I think the data actually shows that humans are no better on average than the average.  But that's not really surprising, is it?

The conclusion is simply that the market is not moving in a predictable way.


No. If so you would still have traders outperforming chance.

Usually, sure.  But not if you can find informational edges.  Then it's predictable.  Outsiders trading well-regulated, deeply traded stocks probably aren't the traders we're looking for here.  The ones we're looking for probably just aren't part of your data set, perhaps for good reason.

Insider trading or outright theft is not considered trading in this aspect, no :) We're talking your regular naïve fund manager or TA scammer.

Oh, if we're only talking about traders that don't know anything that everybody doesn't already know then sure, I agree.  But shouldn't the fact that they don't outperform chance be obvious?

I fail to understand what it is you want to discuss.

I didn't realize at first that what we were discussing wasn't interesting.  ;)

Oh it could probably be interesting, I just don't understand what point you're trying to make. If you're claiming that by using FA or TA (that is, no insider trading nor theft) it's possible for a trader to outperform chance then feel free to support that viewpoint with data.

If you don't claim that, if your point is that the only way to beat the market is to cheat, then I fully agree with you.

No discussion of stock picking is complete without The Tao of Alpha (http://www.ilukacg.com/articles/Tao%20of%20Alpha.pdf).

No, there are information propagation and price reaction delays in any market.  I just gave an extreme example that I fear is much more common than we'd like to believe.

I guess my point then is that your data set is probably biased heavily in favour of traders that don't have informational edges.

I hope everyone can agree that if there is a real statisitically significant pattern in the data and if someone can recognize it when others do not, then they can beat the market in a statistically significant way, not just in the sense of "well there're lots of participants so some must win."

So, are there real patterns in financial markets?  To me the answer is clearly yes for these reasons:

• Historically there have been many patterns. They existed due to real-world factors like financiers liking to sell off some of their assets before going on holiday, like certain international events making people think more optimistically about life in general, like corporation taxes being levied at particular times of the year, like breweries being anti-correlated with GDP and so on and so on.  Shortly after they are identified publicly they disappear, because the market starts to predict them ahead of time, hence smoothing them out.  So how come you can look back and see all those patterns historically and yet you look now and there doesn't seem to be any patterns?  Well it could be because there are in fact no more patterns because they've all been discovered, but much more likely it's because there are patterns that exist now but they have either not yet been discovered or have not yet been made public.  In ten years time, today's patterns will have been revealed and made public...I wonder if in ten years time people will still be saying "but now is different, now I can quite surely say that there are no more patterns because they have all been discovered".
• With the (possible) exception of modern algo trading, trades are done by humans.  Humans have emotions, they trade partly on sentiment, they make flawed analyses. They buy because they want to impress the hot sales girl.  They sell because the risk-manager is breathing down their neck.  They double up when they get drunk.  Humans cannot even generate random numbers if they try...how can one plausibly claim that a price series generated by humans is perfectly random when humans don't seem capable of generating a random series of numbers at all?
• Just because a trader cannot stay ahead of the pack indefinitely, that does not mean that he never spotted a real (statistically significant) pattern.  It would be like saying there's no evidence Pele was a good footballer because he currently cannot get into the Brazilian team. Maybe one day I'll spot something that nobody noticed about company X.  I'll trade it, make some money and that would be it.  I wouldn't become famous, I wouldn't get a nobel prize, maybe I would never spot any pattern again, maybe I would never trade again. But that doesn't mean that my trade was random, it just means that it would never be picked up and given as evidence for the existence of patterns.  Remember, there's a world of difference between on the one hand patterns actually existing and on the other being able to statistically prove that patterns exist given public data.

So I hope I've given pretty strong arguments that patterns exist, and that some people can use them to make money, even if you can't necessarily prove it using statistical means and even if it gives you no indication of what those patterns actually are.

If you are saying it was due to chance, you are saying it was caused by chanced, or caused by the acausal.

I don't need the dictionary to think.  Just because you cant predict it, understand it, or control it does not mean there is no cause.  It means you don't know what it is and you don't understand it, so you input the word chance instead.  "I don't know" governs all.  Chance (subject) governs all (object).  The thing acts upon a thing.  You really don't get this?

To me, it looks like somebody bought over 5,000 BTC, then three days later sold them all for a different amount, just to make a profit.

How DARE he?! :)

Buy Low, Sell High   8)

There are patterns to everything, thats what the world is, live, die, stocks, bitcoins, they all have patterns.  But I think the same amount of people could study those patterns to make decisions to buy stocks and make money, buy low, sell high, as a monkey throwing darts at stocks.  The patterns do not mean you can win or take advantage of them to make money any better then taking lucky shots at a stock or bitcoin market.

I guess I haven't engaged in enough stock picking discussions, cause I've never read that.  Really fun and informative read, highly recommended.  Thanks.

"Between them all, they will share the zero dollars of alpha available in the world."  :)

I still don't understand what the point you're trying to make is. Are you talking about trading in the marketplace or cheating? You seem to seriously confuse the two.


"I guess" and "I believe" is considered to be quite poor data.

Fact: No trader ever has outperformed chance.

The hell?  Of course they do!  All the time!

Some glaring examples:

• arbitrageurs
• short sellers who uncover dirt on companies
• traders who uncover market manipulation
• those who trade on insider information

You can reliably find 'alpha' by having an informational edge.

I strongly suggest you read the Tao of Alpha link posted above.

I'm sorry. The rest of us weren't talking about cheating.

FFS, 3 out of the 4 examples I gave didn't involve cheating.

Alright, let's do this again: No trader has ever outperformed chance.

If you have knowledge that is not available to the market, that is cheating, and isn't covered. We're talking about your regular FA fund manager or the TA scam-cooks. Not the CEO telling his friends the results of next week's laboratory testing.

If you want to claim that traders outperform chance you're free to source that information. "I believe", "It's obvious", "This book here about successful traders" etc aren't valid sources - usually because they don't take chance into account.

There are traders who beat the market 10 years straight. It doesn't say anything about year 11, and it doesn't mean you could've predicted who they would be. That's what chance means here.

Oh yes they do!

Silly monkey, there is no such thing as chance.

For anyone looking for a laugh I strongly recommend reading through bonker's posting history :) There's some really well done trolling in there.

Please explain to me how exploiting arbitrage opportunities or uncovering fraud and market manipulation is cheating?  They're certainly not illegal.

Read the article kjj posted.  I promise you it'll clear everything up.

I don't think you understand the qualitative difference between actual research and people's beliefs :)

There's no data set in which a trader has ever outperformed chance. Ever. The only way to do so is to not base the trades on available market data - which is usually referred to inside trading or other forms of manipulation.

If you want to claim differently I urge you to source that information. Please. There's still a Nobel Prize waiting ;)

> There's no data set in which a trader has ever outperformed chance. Ever.

To know this would require knowledge of all details of every trading decision ever made.  Obviously you don't have such knowledge, and neither does anyone else.  So why do you keep stating stuff as fact when everyone knows that you are in no position to know that?  As an aside, can *you* actually define precisely what "outperforming chance" means?

> If you want to claim differently I urge you to source that information. Please.

Many people have given your examples of how you can beat the market.  e.g. investigating company fundamentals that others haven't noticed e.g. spotting patterns that nobody else has.  Contrary to what you claim this is not illegal at all.

> There's still a Nobel Prize waiting

No, there is no Nobel Prize for beating the market.  You would also not win a Nobel Prize in economics for beating the market, because you would not be showing anything surprising.  There are no serious economics who believe that markets are 100% efficient.  Highly efficient, maybe, 100% efficient, no.

Your claim is that there is no statistical pattern in any data and that all information about all companies is spread across the whole market.  This is an extraordinary claim that I don't see you backing up with any data at all.

The chance that, out of the entire universe of traders, the precise number who beat the market should beat it. If there was such a formula you'd have EVERY trader beat the market.

The best a trader can claim is that, within the realm of chance, he or she is the one that consistently achieves these results. But the point being made is that if you had a similar number of monkeys as you do traders, and they based their decisions on throwing darts at a map, you'd consistently get a similar number of monkeys beating the market as you do traders... so there is nothing statistically significant in having analysis charts versus throwing darts at a map as a strategy.

And actually there is a Nobel Prize for this, if you were to be able to prove it. It's called the Nobel Prize for economic science (bit of a misnomer there).

... and there's no support for the hypothesis that anyone has ever beaten the market trying to do that. That's the whole point. A lot of traders claim they do, but every time (plenty) anyone has looked into this it turns out that there's no predictive ability involved and the number of traders who beat the market is the same as is predicted by chance alone.

If you're really interested there's a lot of literature on the subject available. Taleb's "Fooled by randomness" is a great start.

This is a ridiculous claim. I make thousands of dollars EVERY WEEK simply by playing the stock market, not to mention the fortune I will make on bitcoin. I'm obviously not going to disclose my methods ( ;)), but I can assure you that it has nothing to do with "random chance". Go into any bookshop and you wil find many books on how to invest... I myself am thinking of writing one. Why would there be so many books on this topic it if it wasn't possible?

There are two sorts of people... Smart guys, who know the system after years of study. And then there's the primitive guys that don't quite follow what's going on. They look at the economy, but it is too complicated for them, so they just think everything happens randomly...

There are millions of books on god, on how to beat the odds at the casino, on astrology and on any number of things for which there is no evidence.

Once again, what defxor is saying is that all those thousands of dollars you make EVERY WEEK are precisely in line with what would be expected out of a universe of traders all trying to make money.

Wall, meet head... head, meet wall.

If you have more money in the market than what you have cashed out and spent, you haven't beat the market yet. The game ain't over.

There may not be any evidence of God or beating the odds at a casino or astronomy, but there are THOUSANDS of pieces of evidence for the effects of intelligent investing. These pieces of intelligence are in my banks vault. Actually banking is a good point. I let the bank look after some of my money. They invest it and GUARANTEE a modest interest rate of a few percent a year. Banks around the world all work the same way. How is that not PROOF? If it was all "random chance", these banks could offer no interest at all.

Again, there are A LOT of dummies out there who play but don't UNDERSTAND like some do. Perhaps the losses of these dummies means cancel out the profits of the more shrewd investors. That does NOT make investing a "random" process.

Man... Let me try one last time, for this I will borrow from Douglas Adams. He wasn't talking about investing, but I think the analogy will hold.

Imagine a little puddle of water wakes up one morning, looks around and thinks: Wow, I must be a really special puddle, because look, someone has gone to the trouble of making a hole in the ground into which I fit perfectly!

It is incontrovertible that the puddle fits perfectly in the hole, but there's nothing special about it. If there wasn't a hole, there wouldn't be a puddle to make the claim.

Now, you may think your special powers of analysis are what separate you from those who don't understand. But that is exactly what everyone thinks. And as has been demonstrated with the dartboard experiments, out of any given population, there will be some who will outperform, some will underperform, the curve is fairly well established here.

Take heart, though. If the variables were knowable, the whole market idea thingie would have collapsed decades ago... because someone would have written the book and... oh well, head and wall all over again.

I think I understand now. I am pretty sure you are in the second category of investors... I have read almost every "investors guide" which is available and frankly I have never even heard of this Douglas Adams...  I suggest you take some time to research better advice and read a few more books before making your mind up... In particular I would recommend http://www.amazon.com/4-Easy-Steps-Successful-Investing/dp/038097472X/, this is a good all-round introduction for novices, and it has served me well.

No. Actually there's none.


Adjusted for inflation, no.

Successful trading lesson 1:

1) The markets do not operate by chance.

I was prompted a few days ago to have a look at my trading history on TH from when I started a few months ago (purely out of interest).  Over three months and 300+ trades my buy price is 10% lower than my sell price, and that's been pretty consistent, and not on trivial volumes.

A lot of trading I have done arbitrages between currencies and exchanges, and on occasion there have been opportunities to take USD1 per BTC out of the market.  Not much to do with chance there - more to do with people, their beliefs and insecurities.

I already pointed out the example of arbitrageurs, but dexfor seems to think what they do is "cheating".  Not exactly sure why.

Can everyone make money on arbitrage?
Is there a guaranteed window of opportunity where you can lock down the trades?

Now go back to the earlier posts I did in this thread and ask yourself why I already back then suggested doing colocated HFT as one way you indeed can make money on a market. It's not however part of what the FA fund managers and TA scam artists claim that a successful trader does when outperforming the market :) The so-called "skill" that never turns up in any documented research.

Oh, I missed that other rule you've laid out.

Is your argument then that the search for alpha is just so hyper-competitive that only the wealthiest, well-equipped of fund managers will ever get to it first?

If so, I'd still argue differently in the case of markets with capitalizations so small that big-time funds can't play them.

No. I'm saying that there's no such thing as "alpha" in FA fund management or TA scams. Do you agree? Your own list of "alpha" examples brought up insider trading, uncovering dirt not known to the larger market etc.

Btw, when you talk to someone who studies actual research papers using terminology from get-rich-quick books doesn't infer a lot of confidence in your argument :)

And, as you admitted, arbitrage opportunities.

"Alpha" is a very commonly used, and precisely defined quantity.  That you haven't heard it before doesn't infer a lot of confidence in your argument.

I'm sorry, but this is getting retarded.  I'm out.

... which only exist if you cheat [colocated HFT], else the only factor deciding whether you're successful in using them or not is "luck", not skill, which is what we're discussing.


Quantity? Of all the words that's not the one I would've used. But sure, if you want to use that specific definition I would say that available research puts it at 0%.

(Your terminology, "getting to it", made me quite sure you were not using the accepted definition but something dreamt up from someone who indeed knows how to make money off traders. By selling them get-rich-quick books)

You "make thousands of dollars EVERY WEEK simply by playing the stock market" so assuming as you're so onto a sure thing you would naturaly be also reinvest nearly all your gains & are therefor are getting exponential returns, soon you will own the whole world or perhaps it's just not that simple or scaleable

how many $ thousands per week on average do you make & from risking or playing with just how much capital, without this info & more then "This is a ridiculous claim"

I should have added that most of my trades were not simple arbitrage, but coincident trading definitely helped with some of my profits (that is, I did have opportunities to buy and sell BTC at the same time with large spreads either in the same currency or multi currency).  Not sure why that would have been cheating anyway.  Maybe because I used my brain.

Historically, one of the nice things about analytics is if they work, everyone uses them and the advantage is removed, or else the real world effects get in the way.  Fischer, Blanck and Scholes didn't get rich off their work playing markets, but they did nicely out of their fame as economists/mathematicians.  (a further option is they do work, and no one would publish the info, they'd use it instead).

Yes, that's the myth. It's also unscientific in that it's not falsifiable.


It isn't, of course, you just answered it yourself:


The only way to know (not guess) that your arbitrage trade will result in a profit is however if you cheat. Else you're just lucky in that your trade was executed before someone else's trade. After all, you're not trading based off knowledge no one else has.

FA fund managers and TA scam artists claim that they can beat the market with their "skill". There's no data set, and there have been much research into this topic, that indicates there is such a "skill". If there were, we'd see a skewed bell curve.

There are size limits on any trade, so the exponential returns complaint is false.

There is no chance in trading, you've just got to learn the rules.

You can't really gain an 'upper' hand in trading without a HFT bot or insider info.
Of course quality access to real-time news feeds & an ability to interpret them helps (if you just buy low & sell short after minor price increases) but that's about it.

Buying stocks is very much chance just as buying bitcoins or any other commodity.

The price is determined only by other sellers and the market can panic at any time.
If you don't have a cutoff where your program automatically attempts selling off all stock you could lose a lot in a short timeframe.

I'm sorry, but if you want to participate in a serious discussion I suggest you do it from a non-troll account. While I applaud the troll posts you have in your posting history (some of them are really really funny) it's just impossible to take anything you write seriously even if that would suddenly be your intention :)

I agree some of his posts are hilarious.

But, there is no chance in trading.  There may be factors unknown to you, but that does not make it chance.  Everyone is placing conscious bid/sell orders and the bots are running according to algorithms dependent upon set parameters.

The more factors you are aware of, and the more you can understand the interrelationships between these factors simultaneously, your returns will be better.

I said this in another post, but chance in itself is a bogus word.
Saying something is due to chance is saying that acausality caused it.
Even probability theory doesn't rule out causality (e.g. the rate of decay of radioactive isotopes is said to be acausal) because one cannot assume that they can necessarily perceive/understand the logical syntax that guides this unique process.  Just cause you don't understand it doesn't mean it was luck or chance.

And, the Bitcoin market is far from the probabilistic nature of radioactive decay.

What's the weather going to be like in six days?

(Traders still don't outperform chance. If you want to claim they do, please point to relevant data)

Re: what is random and what is not, I would encourage anyone who is interested to learn about modern probability theory (laid out by Kolmogorov in the '30s) and stochastic processes.  One nice thing about this theory is the prominence that conditional probabilities and conditional expectations take.  This allows you to describe 'deterministic' and 'random' as simply two extreme points on a spectrum.  Something is deterministic when conditioned on a large information set, something is random when conditioned on a small information set.  Probabilities are always relative to an information set*.  Something that seems random is actually highly predictable given the right information, and something that appears predictable would have appeared random if you knew a little less.

One person may consider rolling a six being p=16.67%, whereas another person who noticed the die being slightly oblong might consider rolling a six being p=20%.  Another person with a supercomputer and highly accurate motion detectors might see it as p=0% (or 100%, depending on what number his supercomputer spits out).  All three people can be right in their own assignments of probabilities, the different numbers just illustrate that the probability of an event is always with respect to a particular information set.  Two people with different information will assign different probabilities to the same event.  It's not that one is wrong and one is right - they're both assigning the correct probabilities as they see it, it's just that one knows more than the other.  The more you know, the less random things become.

Trading is like that - you have some people who know almost nothing about what's going on..they don't read the news they don't read company reports they don't look at historicals; they don't analyse anything.  You have other people who spend their entire life reading all this stuff and conclude slightly different probabilities for assets rising or falling.

The point here is that the uninformed trader will see everything as random because from his perspective it actually is random.  It's wasn't that mortgage-backed securities actually had an objectively high probability of default as such, it was just that he didn't go out and grab enough information that would have revealed to him a high probability of default.  He sees things go up and down and has no idea why.  He sees some people make money and others lose money and that too looks random.  He sees the smart people who made money betting against subprime and assumes they were just lucky because, after all, this event was pure randomness.  Then he looks to the people who lost money on subprime and says, "well they wore the same pinstripe suits and they worked in the same bank and they drank the same fine wine, so they're clearly indistinguishable from those other guys that made money...hence verifying my position that it's all just random and unpredictable".

If he was uninformed but smart he would realize that while to him things appear indistinguishable from noise, it could be that to people better informed it would be more predictable.  On the other hand if he was closed-minded he might think "well if it appears random to me then it must be genuinely random."

This is the problem here...it's easy for things to look random or unpredictable, you just have to bury your head in the sand and ignore all the information that comes your way.  For things to become predictable you need to do hard work, hence not very popular.

* A good candidate for an absolute probability may appear to be the unconditional probability.  However, for any probability space with measure P you can always embed it in a larger space with a new measure Q that agrees with P in the small space but disagrees outside the smaller space.  So while the unconditional probability looks unique and objective once you've constructed the probability space, if the space had been constructed differently then the unconditional prob would have been different too.

Yup, Doctor House expressed this wonderfully in an episode.



Actually, radioactive decay has a very certain and well understood cause.  Unfortunately, that cause is a quantum effect, so we can't predict it.  And if all of the experiments into J.S. Bell's theorem are right (and they certainly appear to be), we won't ever be able to predict it.  It isn't just that we don't know about the internal wheels and gears inside the particles, it really appears to be that there really aren't any.

At any rate, this isn't the right discussion to be having.  The bitcoin market is chaotic, not stochastic.  Actually, markets in general are chaotic.  Chaotic phenomena are totally deterministic, in principle, but never predictable.

And they both do equally well/bad in the market, according to available research.

catching up to a different timezone, I'm happy to be "lucky" using the information I have on unknown causality.  Knowing the speed of trades helps when placing opposing bets, but that's moot.  I did both Classical and Bayesian stats at uni, but for post grad my Professor was very much the Bayesian school focused.

I was interested to wake up today and see I had sold a block of coins (about 60) around $10.50 when most of the trading was $8.40-$8.50.  I must be truly ignorant to have that happen :)

Where did you sell coins for $10.50? Mt. Gox has been trading 8.71 - 8.21 in the past 24 hours.

http://bitmarket.eu is a good place to sell at a premium. I know because I usually buy at a premium there. There are large differences in price just depending on whether you want to look at trades in USD or EUR.

(Since it's P2P it's difficult to arbitrage though since you get a several day delay)

Now, if only bitmarket.eu finally got their Paxum option running, like they said they would :D

Helps to hold coin and $ in several places/currencies at once.

BTW the trades were in TH-LRUSD  It's hardly giving away any information to say the smaller/less liquid boards have some fun opportunities.  I've done some "interesting" trades on wbxAUD and B7EUR recently (although I have some issues with B7 switching currencies unexpectedly).  A few weeks ago it was TH-AUD, but I don't have many AUD left there at the moment.  I don't bother trading on Gox much - no fun.

Edit: an afterthought, now Gox is doing JPY I might play there a bit more, but none of the exchanges uses my home currency so I don't particularly care which is which - I started originally with PLN (zloty's?)

Traders don't have to outperform chance because markets simply don't move by chance. Why is this so difficult to understand?

Likely because you haven't understood the discussion you replied to :)

Don't say you sold at a $2 premium through PayPal. Please.

Just laying down the facts, man. Chance is an illusion conjured by the ego of a poor trader.

To do that you need to learn the facts first ;) Sorry, trolling doesn't cut it.

I loose far more money in the markets than I could by chance alone.

The weather example is irrelevant.  You don't need to know what the exact market value will be to make a profit.  You just have to know which direction it's going.

I'm in Chicago.  We just got out of a very warm front and a cold front is moving in today.  It has been over 90 degrees the last few days.  I predict the weather will be cooler than 90 degrees in 6 days. 

And, I predict it will be even colder in 2 months from now.

About 90% of my trades have been profitable ones.  I've made approx. 30-40 trades on tradehill.  Try flipping a coin 30-40 times and see how often you get 90% heads.

Since you're the one claiming it would be out of the ordinary, why don't you do the math :) You of course know how to do basic statistical calculations.

(PS: Traders talking about their success rates after the fact, using words like "about" and "approx" don't ever show up in scientific research. Can you guess why that would be?)

Ugh fine.
Trials = 40
40*.9 = 36
What is the chance that I flip AT LEAST 36 heads (at MOST 4 tails) -- That is, if the choices are profiting vs. not profiting on a trade, what is the likelihood that I will profit AT LEAST 36 times?

Total possible outcomes = 2^40 = 1024^4 = 1099511627776
nCr  (40,4) = 91,310 possible 4 tail outcomes
nCr (40,3) = 9880 possible 3 tail outcomes
nCr (40,2) = 780 possible 2 tail outcomes
nCr (40,1) = 40  possible 1 tail outcomes
nCr(40,0) = 1 possible 0-tail outcomes
= 102011  possible outcomes or 4 tails or less
(91,310/1099511627776) + (9880/1099511627776) + (780/1099511627776) + (40/1099511627776) + (1/1099511627776) ~ 9.279^-8

.00000009279 = .000009279% chance I will flip at least 36 heads (i.e. trade positively at least 36/40 times)


.000009279 * x = 100
x = 100/.000009279 = 10777023.38614075

Yep, I guess I got really lucky!  There was only ABOUT a 1 in 10,777,023 chance that I was as least as successful as I was!

That is because, as you know...I profited purely by chance.

Edit:  Note this calculation is an oversimplification of the problem and impossible to truly demonstrate.  There are fees, there is a possibility the market will not move at all, or will not move enough to compensate for the fees.  Simply put, it is impossible to create a formula for calculating the 'chances' of profiting x number of times after y trades because there are too many (key word) UNKNOWN variables.  These unknown variables are what make you think the market is due to chance, but in reality they are simply that -- unknown.
 
Edit 2:  You do realize that the chances of trading at 90% profit become less likely the more times I trade...right?  I hope you weren't implying that my chances of doing this across 40 trials were good, were you? 

Nah I wanted to see if you considered after-the-fact to be the same as before-the-fact, which you did. Even if we go by "approx" and "about" being at the top of your own estimation - your numbers show that if there are 11 million traders in the world one will indeed be so lucky by chance alone.

That's what the whole "traders don't outperform chance" means. We talk about the successful ones, not the ones that don't beat the market.

So, I propose the following: For 40 days you'll post if you believe the price of BTC will be higher or lower than the day before, MtGox GMT timezone. Now if we're indeed on a steady downward slope due to inflation there should be a slight skew, but I'm quite sure you won't hit 36/40.

(The point being that after-the-fact is a lot easier, all you have to do is to be selective as to which trades you count)

I've never so far had anyone doing TA take me up on such a wager anyway.

The problem is that you are assuming that market movement is independent of the individual trades.

Suppose I guess "the market will move up 40 consecutive days"

I then make 40 consecutive trades, 1 on each day, buying enough coins such that the market goes up for 40 consecutive days.

At this point, my prediction was correct.  The market moved up 40 consecutive days in a row.  But, I did not profit 40 consecutive days in a row.

"Outperform" implies the action of the traders.  This can either mean "outperform" in terms of profiting, or "outperform" in terms of guessing market movement.  But the 2 are not always mutually exclusive.

When a large seller dumps coins, his action impacts the market.  Suppose the price has been relatively steady for a few days at $9, bouncing between $8.80 and $9.20.  Hard to guess which way it's gonna go in an hour, right?

Now, suppose one such seller dumps 5000 BTC dropping the price from $9 to $8.  Care to make a new guess of where the price is going to go?

It seems you are suggesting that market movement is independent of the prior trades.  So, for example, if I were to guess what the market price would be 1 month from now, I would obviously not have the data available to me between now and those 30 days.  During the passing of those 30 days, I would accumulate more data with which I could adjust my guess.  It would be hard to guess the value in 30 days because I do not know what the choices of other traders will be between now and then.  However, the trades that occur between now and then are NOT random.

The trades that occur between now and then will be made by traders who ARE considering previous trades, and the trades they make continuously refine the guesses made by others.  I cannot guess what the next trade that is made is going to be.  But, when you confound the 'guess' with my desire (and the desire of everyone else) for profit, things get more interesting.  You are, in effect, placing a new constraint on the 'guess.'  The guess no longer is a pure guess...the parameters become more refined because you know everyone wants to make a profit.

Suppose I knew where every individual's buy-in price was.  This is a factor that contributes to the current market price (after all, the current market price is only the current market price due to the trades made to date).  Add to this the total sum of $ available to each individual to purchase additional BTC.  This piece of information means there is a known limit to value of BTC.  The minimum value is 0, the maximum value is the total amount of $ in the economy divided by the total number of BTC.  This places another limitation on the possibility of the value.  If there is only (for exmaple) $1,000,000 that can possibly be put into the BTC market, and only 1000 BTC available, you know that the value of BTC can never exceed $1000.  So, no 'guess' can be made that the value would be over $1000.  It is an absolute certainty that the value will be below $1,000.  It is impossible that the value will be over $1,000. 

The point is, with every additional piece of information available AT THE GIVEN MOMENT (before the fact) you can make a more educated guess.  Can I guess whether or not the next trade will be a buy or sell?  Not without knowing who the next seller will be or what their intention is.  If I know trader x will buy 100 BTC at y time, then I know the market will go up then.  Suppose I also know that the most BTC that any single person has is 10,000.  While I don't know the exact value of the next trade, I do know that it will be impossible for that trade to exceed 10,000 BTC and I can be absolutely certain it will be less than 10,000 BTC.  It is certain that the next trade will be a trade of amount x BTC.  The more factors I can take into account, the more I will be aware of the constraints leading to this certainty.

So, back to what you're getting at.  If I make guesses on up/down movement for the next 40 days, will I hit 90% again?  Probably not.
BUT, saying this is a lack of outperforming 'chance' is an inappropriate statement.

You are, in effect, correlating chance with "unknown" factors that have nothing to do with chance at all.  They are, in fact, variables that are available and can be known, but simply aren't to you.
There are, however, factors which are known and available at the present moment.  These include current price, market depth, your own intentions, the current number of BTC in the economy, etc.

In particular, the market depth is the best indicator for predicting future movement.  This is because from this you can infer the general 'intention' of the market.  It's like an emotion - you can get a gist for how the market 'feels' at a given moment.  This is why, as you say, if I were to predict that the market would go down tomorrow, I may have a better chance of being right since, as you acknowledged, it seems as if we are on a slight downward slope.

In conclusion, the problem I see with your argument is that you are assuming a cross-sectional piece of data is strictly that...cross-sectional, and that a singular cross-sectional event cannot be used to predict a future event.  But, in reality, the cross-sectional event is not truly cross-sectional - it speaks of after-the-fact conditions.  That is, the event itself indicates constraint of potential future movement.  This makes the 'chance' analogy an invalid one.

Edit:  Here's food for thought.
Only 1 of 3 things can happen.  Event A (market goes up) Event B (market goes down) or Event C (market stays the same).
If event A happens, events B and C are impossible.
If event B happens, events A and C are impossible.
If event C happens, events A and B are impossible.
There is no possibility.  There is only impossibility since only A B or C will happen.
In other words, there is only certainty (no chance) that one of these will happen, so there is only certainty (no chance) that 2 will not.  
Chance is impossible because chance implies that A B or C could happen when in actuality only 1 WILL happen.

Could I have gone to the market today at noon instead of sleeping in?  Nope.  Never could have happened.  Why?  It didn't happen.  Could I go to the market in 1 hour from now?  Not if I don't go 1 hour from now.  One of these options (going or not going) is impossible and there is absolutely zero chance that it will happen.  The other isn't possible...it is certain to be.

There aren't 11 million people trading bitcoins.  And if there were, do you think it's really that likely that we happen to be talking to him/her?

Of course there aren't. Neither are we talking to someone whose "approx" and "about" really means 36/40 ;) But you should expect that the most vocal about how good traders they are indeed are the ones on the far (profitable) end of the distribution - the ones who lose money don't usually go around claiming that they can beat the market.


Are you prepared to put your claims to the test or not? After-the-fact all traders beat the market. Before-the-fact no one wants to step up to the challenge.

Im still selling my coins on ebay for 13 to 16 a coin by selling .5 of a bitcoin for 6.50 on up, that has been working really well for the past 3 weeks.  I stopped selling anything over 2 bitcoins to help avoid scams.  So far only had to deal with one chargeback over the past 6 months.  Thats the only way I see making money with bitcoins or beating the market.  Its definitely chance with bitcoins no doubt about it.  Now down in the 7s, scary, could drop to 2 bux tomorrow, who the hell knows.

Trading in isolation is a zero sum game.  For every loser there is a winner.

With bitcoins currently having a negative revenue stream (power to run the network is an ongoing cost -- IIRC it's around 10 megawatts at 10c/kwhr(?)) anyone breaking even has already beaten the odds.

Shit anyone who has made money has beat the odds.  Who would have thought this would have made it as long as it has, and still going.  The exchanges are whos making the big bucks and the very early investors, or lucky guys that hit that 30 dollar each bitcoin spike and sold everything, but beyond that its tough to make real money with bitcoins.

No.  This is wrong.  First, you are assuming there are calculable odds and this not the case.  You can't calculate or assume there are odds if you aren't aware of all factors involved.  If you are aware of all factors involved, then there arguably aren't any odds anyway.

2nd, it only takes 1 loser.  It's quite possible that 90% of all Bitcoiners have profited and that 10% have simply lost and lost big.  And, it's possible for all to profit except for 1.

Its way more probable that 75 percent have lost money or broke even and 25 percent have made some cash, some won big time getting lucky, others got really unlucky and lost big, but its probably more like 60/40

Yeah and possible for it to be the other way around... 10% won and won big and the other 90% have lost money.

The people who have won big are the early miners (assuming they didn't sell early).  By definition it's a very small number of people, as the number of miners didn't boom until the price started to rise exponentially.

also assuming they didn't sell too late.

If you mined before say... April of this year, today's exchange rate is ridiculous profit.

If you mined and held on to your coins and got 200 coins then yeah would be pretty good, like a 1000 bux, but I wouldnt consider that a ridiculous profit.  Most people were buying graphics cards that cost from 500 to 800 bux each.  I built about 10 mining rigs using the ATI 6990, and a couple with multiple nvidia 580s, so the cost of the builds were still pretty high, so you needed to recoup the 1000 to 2000 you paid for the rig first, then everything else was profit.  Now if you start, your screwed, you will never get your build payed off.