New article Mathematics in Trading: How to Estimate Trade Results has been published:
Author: MetaQuotes Software Corp.
"The creation of the theory (discovery of mathematical nature) of financial markets itself would mean death of these markets which is an undecidable paradox, in terms of philosophy." - to think this way is pretty naive and unfounded. It also goes to the bottom of why all the mathematics presented in the article is very suspect. Of course the writer does not deny that the analyses on offer rely on a mathematically false premise all. He in fact admits that straight up - when he acknowledges that the market and the results it throws up do not follow the normal curve. Professor Mandelbrot - the man who invented fractal geometry shows very clearly in his book "The [Mis] Behaviour of Markets" how hopelessly inadequate normal curve based mathematics is insofar as estimating market behavior goes. Just because the alternative is a lot more difficult and mathematically involved does not justify the false rigor employed in using these meaningless [in terms of real prospect assessments] normal curve based metrics. But the preceding is not my main point and be that as it may - while it is correct that an equation describing the exact nature of the market is yet to be found and may never be found I think that the basis of that truth should lead us away from the normal curve not to it since no matter how much we massage it the normal curve does not describe the market? Therefore, anyone not explaining why this is so and then immediately offering the normal curve as a substitute does no trader [serious trader that is] any favors.
Of course the reason is pretty simple and indeed has everything to do with the fact that in fact the mathematical nature of the market is exactly known to mathematics via the science of complex dynamical systems which retains chaos theory and fractal geometry within that body of knowledge as its exact explanators of market behavior [and clearly the market is destroyed as the author supposed with the discovery forty two years ago of the mathematical nature of markets which is my point]. What is more, Mandelbrot then shows that given the distributions that describe the market it is false knowledge to bury your head in the sand and claim that the normal curve will suffice. It is absolutely vital to understand the nature of the distributions that describe the market and whether or not we have a prescriptive equation is not the issue - but the realization by traders that these distributions are very different from the normal or Gaussian curve and that therefore - much of the testing measures here are as useless really as throwing up a coin heads or tails in terms of telling the tester anything about the robustness of their strategies, and for the simple reason that the normal curve is a misfit and a huge one at that in describing market fluctuations and therefore outcomes.