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    2008-10-25

    Probabilistic trader

    All investment books will tell you some methods to make you a millionaire. But everybody knows this is not the truth. Logically, this is for sure in terms of real money. But this may also been explained by adaptive market hypothesis.

    A trader will create self-autocorrelation by taking his past trading record into consideration. A loss will turn him into hesitation at another several trades. This implicitly creates the resonance, which can be described as some emerging order as in Strogatz's "SYNC".

    Such resonance has a tendency to eliminate any profitable short term trading patterns. That's why trending following is so popular. Finally we need some external stimulus to support our speculation.

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