Discussion of article "Combinatorics and probability for trading (Part IV): Bernoulli Logic" - page 2
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"Interestingly, when considering a single state or just a step, what we get is chaos most likely ..."
- this is where we need to stop.
Chaos or turbulence in the market occurs very rarely once 5-7 years and it is expressed in a sharp flight or influx,
that affects the rapid growth, which then sharply deflates, or a panic fall in the value of the financial instrument.
Therefore, we can consider even simply and without price patterns, which are a great number, and which do not always give the direction expected from them.
Is not it true, Eugene?
Naturally, it is exactly like that. In a trader's understanding a pattern is a price picture, but a pattern is much more than a price picture. A pattern is a chain of states. States can be expressed both in visual aspects and simply in a vector of some parameters that cannot be visually determined. It is just easier for a person to see something visually, but what if the pattern is multidimensional and it can be depicted only in multidimensional space? A pattern is a chain of states, where each state can be characterised by any set of absolutely any scalar and complex values, and in this connection it is not necessary to consider just the price, you can consider the Mjving Average curve and anything else you want.... the main thing is to be able to process these data and make statistics, and you can consider the virtual balance of the virtual backtest with the same success, and you can consider the line of its equitability and so on and so forth.... variations plus infinity and on any of them it is possible to get statistics and make an enhanced squeeze.
To be more precise, the falling out of the edge is the falling out on the edge connecting the plane of the eagle and the plane of the tails. So, there is another variant - a real falling on the edge, when the coin stands slightly tilted.
Of course, the edges can be different too, tilted left or right, tilted one range of degrees or the other. Each state can be fractured until you are blue in the face, then you will find more accurate patterns, or even patterns that do not exist in the classical trader's view, but they will be much more effective than the classical ones. The only thing is that when compiling such states, one should require the completeness of the group. That is, these states must be incompatible events of one event space and form a complete group, i.e. their total probability must be equal to one. These events must be incompatible. If these conditions are met, then it is possible to construct combinations of chains of these states, which are patterns.
Of course, the edges can also be different, with a slope to the left or to the right, with a slope to one range of degrees or to another. Each state can be fractured until you are blue in the face, then you can find more accurate patterns, or even patterns that do not exist in the classical trader's view, but they will be much more effective than the classical ones. The only thing is that when compiling such states, one should require the completeness of the group. That is, these states must be incompatible events of one event space and form a complete group, i.e. their total probability must be equal to one. These events must be incompatible. If these conditions are met, then it is possible to construct combinations of chains of these states, which are patterns.
With tilt there is only one variant, when the centre of mass is projected exactly at the fulcrum. In other cases there is no stability.
Only 3 dimensions are available to the human eye, so more complex systems would be impossible to represent graphically. But it should be realised that multidimensional functions are just as functional as other functions.
But for this there are methods of dimensionality reduction - PCA, t-sne. umap, etc..
here's the first article I came across