Trading Black Swans in Forex - page 6
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Hahahaha - how clever. Can't stop laughing every time I look at it. But it's a duck, not a swan.
Brilliant. Best thing I've seen on the forum in ages. Perhaps it's an unusual swan rather than a duck - which ties in nicely with the black swan, Taleb, and the problem of induction.
You are right, it's an unusual swan with a dog's face hahahahaha
If I get a heart attach laughing, I make BlueSkyThinking responsible.
You're not an astrologer by any chance are you?
CB
I attached my interpretaion of regularity in market moves (chart patterns)
Cheers !
engcomp
Many thanks for sharing!
BlueSkyThinking
If you insist you can see anything anywhere
from Russia with love .....it seems they have perfected the 'art' long before we do... :))
engcomp
Many thanks for sharing!
You're not an astrologer by any chance are you?
CB
I suppose this comment is adressed to me as I am the one who started the topic.
Astrologer? No, cloudbreaker:
You're not an astrologer by any chance are you?
CB
I suppose this comment is adressed to me as I am the one who started the topic.
Astrologer? No, not even close.
Actually I was brought to think about this Black Swan trading system by the fact that Nassim Taleb is a trader himself. He is a doer, not just some author that sits behind a desk and writes about what he can't do...
If Taleb who knows nothing about the future (he is aware of that by the way), if he is still trading and claiming profits than it is worth the shot. If blind people who are enable to see the world in front of them are still capable of having a life, than the unknown is not a barrier before success. I know nothing about the future, I acknowledge that, but I must approach it in a profitable way.
If you were blind would you just stay in a corner and cry over your miserable life ? At the opposite, would you run fast to reach a given point while you can't see at all ? That sounds foolish doesn't it?
I'll clarify the picture furthermore...
Let's say you are in a city and you want to reach a given point, being a trader I suppose your target is maximizing profits and minimizing losses. Let's see the following situations :
Situation 1 : Blind walk
Those who can't see at all tend to walk slower than most of people (taking small risks).
Situation 2 : Fast run
Some people who can see want to reach the target by running fast in the middle of the city, they over estimate their sight, they may think they can see the speeding vehicles hiding behind buildings (Black Swans), or being more reasonable they may think they can act fast enough when they are in the way of a speeding vehicle. If you reach one of your targets without being hit by a car, it doesn't mean you're immune to speeding cars, it doesn't mean you can see through buildings, it doesn't mean you are faster than a speeding car, it just means you got lucky ! If you repeat the run so many times, trust me, you'll end up hit very hard...
In trading these are those who believe they can predict the unpredictable (that's the future), those who believe too much in backward knowledge, those who think they can exit the market fast enough when a disaster happens. They are the ones who if they get lucky and make profits end up calling themselves "good trader". If they are not yet hit by a Black Swan and still trading, this means they are just waiting for it to happen...
I dare to say that blind people walking slowly are less likely to be hit by a car than those who can see and run fast in a crowded city. The faster they run (taking high risks), the more likely they are to be hit.
In addition to these two situations there is a third situation, obviously better, at least for me it is !
Situation 3 : Careful walk
In this situation people are aware they can't see what is behind buildings, they are aware they can't act faster than a car.
In this situation are the traders who take small risks without over estimating statistics or mathematical models. But what kind of knowledge may they count on ? I am at the early stages of thinking about this question... For the moment I will borrow an example from Taleb's book, an example about the distribution of wealth : the Gaussian bell curve simply doesn't work ! Fractals do better at that... Please understand that I am not criticizing : the limits knowledge, the bell curve, fractals... I may do that some time in the future. My work for now is simply finding practical approaches to uncertainty, based mainly on Taleb's book, the Black Swan.
How is Taleb trading ?
I'm sure that many people who heard about the concept of black swans said something similar to this "Okay, I know what a Black Swan is, that's great. NOW WHAT ?" . Some people asked the common, but wrong question : "How to predict a Black Swan ?", they clearly missed the point. Practicality is what Taleb doesn't talk much about... He says he short sells the most foolish investment banks, in his book he gives certain directions on what stocks to buy (sorry I don't recall the page), it is very brief, but it was enough for me to begin with...
I don't know how close or far I am from Taleb's trading system, what matters is that I am developing an approach, that may eventually result in more effective approaches.
I started by developing thoughts about the stock market (not technicals), I launched a blog to publish them ( https://www.mql5.com/go?link=http://stock-swans.blogspot.com// ), so far I only published an introductory article, I may need some time to bring my thoughts down to the keyboard...
Being more familiar with forex, I didn't stop thinking about a way to trade it with Black Swans, bigger questions kept on hunting me for long months : "If the market is random, than is it possible to make an automatic system to trade it ?". Computers do nothing but applying the instructions you give them, so how can a fully automatic system act in the ever-changing market ?.
Now that I've made the system, people have the right to ask : "Is it just one of those systems who got lucky in backtesting ? Will it actually work in the future".
The answer can only be philosophical...
Best regards