- Jesse Livermore is known for both colossal gains and losses. He made $million in 1929, and by 1934 he had lost all of it (an example that confirms the huge risk involved in stock trading).
- George Soros is one of history’s most successful stock and forex traders. He gained the nickname “the man who broke the bank of England” when he made $1 billion profit from selling $10 billion worth of pounds. He is the chairman of Soros Fund Management.
- Richard Dennis is a successful commodity trader based in Chicago. He made an estimated $200 million over a period of ten years from market speculating.
- Paul Tudor Jones became famous after the market crash of 1987 to make a whopping $100 million from shorting stocks. He is the founder of Tudor Investment Corporation.
- William Delbert Gann is known for developing technical indicators like Gann Angles and the Square of 9. He was a trader who used market forecasting techniques based on astrology, geometry, and mathematics.
- Bill Lipschutz turned $12000 investment in the stock market to $25000 in a few months but lost all of it. He then moved to forex trading, where he has made over $300 million.
- John R. Taylor Jr started as a political analyst for a chemical bank before becoming their forex analyst. He is the owner of FX Concepts, which is a currency managing firm.
- Stanley Druckenmiller is a successful trader who started as an oil analyst for the Pittsburgh National Bank. He was a part of a deal while working at George Soros that raked in $1 billion.
- Andrew Krieger is one of the best trader in the world. He sold kiwi, a New Zealand currency, a trade valued more than the total currency supply. He got revenue of $300 million from the trade.
- Michael Marcus is one of the best and most successful forex traders in the world. Legend Ed Seykota trained him. During the presidency of Ronald Reagan, Marcus held positions of almost $300 million in German marks.
Archives of “mathematics” tag
rssObservation, Experience, Memory and Mathematics
“Observation, experience, memory and mathematics – these are what the successful trader must depend on. He must not only observe but remember at all times what he has observed. He cannot bet on the unreasonable or the unexpected, however strong his personal convictions may be about man’s unreasonableness or however certain he may feel that the unexpected happens very frequently. He must bet always on probabilities – that is, try to anticipate them. Years of practice at the game, of constant study, of always remembering, enable the trader to act on the instant when the unexpected happens as well as when the expected comes to pass. “A man can have great mathematical ability and an unusual power of accurate observation and yet fail in speculation unless he also possesses the experience and the memory. And then, like the physician who keeps up with the advances of science, the wise trader never ceases to study general conditions, to keep track of developments everywhere that are likely to affect or influence the course of the various markets. After years of the game it becomes a habit to keep posted. He acts almost automatically. He acquires the invaluable professional attitude that enables him to beat the game – at times! This difference between the professional and the amateur or occasional trader cannot be overemphasized. I find, for instance, that memory and mathematics help me very much. Wall Street makes its money on a mathematical basis. I mean, it makes its money by dealing with facts and figures.” |
Once Kissed, Twice Shy
The markets have a plethora of different structures and associations with numbers. Some examples are:
1. Round numbers
2. Opening & closing times
3. Limits
4. Constantly changing magnitudes and significance placed thereupon (for example there were extended periods last summer when the SPU futures had daily ranges in the mid single digits and now it’s a score (20) per day).
Much work is done splicing and dicing numbers and looking for statistically significant positive expectations based on various past conditionality.
As another part of that, I wonder whether or not the first, or second or third instance of some stimuli is more or less predictive than the other or others.
This has been brought up in my mind by the recent dance of the seven veils of many markets with many round numbers.
As a start, how about this:
1. Is the first break of a round more or less predictive than the second (assuming the market has reversed intermediately)?
2. Are moves of the same magnitude in the same or opposite directions of interest within a given timeframe?
3. More qualitatively, when a market breaks some predefined barrier (a round, a magnitude, a correlation coefficient et al) and subsequently does so again later, is this last move more likely to have the same sign/ opposite sign and will the magnitude be greater or lesser?
Permutations & Trading
I am reading a math book now and came across a section regarding permutations. I thought it relevant in looking at various markets and the possible combinations like a ranking. If you had 10 markets for example, I was curious how many possibilities there are of those 10 when the order is noted. Turns out there are 3.6 million combinations for just those 10 markets. The formula is P(n,r) = n! / (n – r)! where N is a set of items and R a sub set of selected items. In my example both N and R are 10. Intuitively I would have guessed much lower and shows how my brain at least is not very good estimated very large numbers. Math experts please educate me if I have erred.
Albert Einstein: Haters Gonna Hate
The Equation That Explains It All
If you were just woken from some form of suspended animation from let’s say 2010 (ancient economic history in today’s terms) then informed of the current state of global political affairs and upheavals, U.S. employment (95+million not,) global currency gyrations, interest rates at not only 0% but some -0%, threats of escalating wars, threats of major confrontational war, GDP of the major global economies not only contracting, but below statistical stagnant, governments, as well as central banks with balance sheets of debt calculated in $TRILLIONS, some in the 10’s of, all financed at near or below 0%, and the Fed is only about a week away from raising rates into the teeth of what can only be called “uncertainty,” and much, much more. (There isn’t enough time, or digital ink to list them all.)
Nobody would be surprised if your first reaction based on your prior acumen (the ancient history of 7 years ago whether it be in stocks, business, or both) would to become immediately concerned that whatever portfolio, or wealth you may have had in the markets, may be worth far less today than when you were first put to sleep. And probably becoming ever smaller as you thought about what you might need to do next in order to preserve any that may be left.
That is, till someone explained to you the markets you went to sleep knowing of – are no longer – and the reality of the markets today you could never have dreamed up. Even if they let you sleep another decade or longer.
Today, the markets you once knew of are better described as the “markets.”
To clear up any confusion as to how, or why, the “markets” can now be at “never before seen in the history of mankind highs” once again after the resounding “NO” vote in Italy, where the entire E.U. experiment is now seriously undermined, and falling apart in real-time (Brexit first, Italy will surely now vote next, etc., etc,) below is the calculation that explains it all.
For under the rules of: If A = B and B = C, then A = C, you now have the magical formula to understand with Einstein like surety today’s ‘markets.”
If you have any doubt to the soundness of this expression, consider the following:
If a financial crisis appears (A) The central banks will intervene (B)
If the central banks intervene (B) The “markets” go up (C)
Thus, we need more financial chaos (A) To make even more all time “market” highs (C)
Are You Being Educated Out of Creativity?
Ken Robinson outlines how school systems appear to universally idealize mathematics while shying away from the arts, leaving those who are more creative to flounder. An interesting perspective to consider:
Must Watch it ,Instead of Watching Movie ,Cricket Match or TV Serials
Lessons From John Templeton
1. “I never ask if the market is going to go up or down, because I don’t know, and besides it doesn’t matter. I search nation after nation for stocks, asking: Where is the one that is lowest priced in relation to what I believe its worth?” Like every other great investor in this series of blog posts John did do not make bets based on macroeconomic predictions. What some talking head may say about markets as a whole going up or down was simply not relevant in his investing. John focused on companies and not macro markets. He was a staunch value investor who once said: “The best book ever written [was Security Analysis by Benjamin Graham].
2. “If you want to have a better performance than the crowd, you must do things differently from the crowd. I’ve found my results for investment clients were far better here [in the Bahamas] than when I had my office in 30 Rockefeller Plaza. When you’re in Manhattan, it’s much more difficult to go opposite the crowd.” The mathematics of investing dictate that investing with the crowd means you will earn zero alpha, because the crowd is the market. You must sometimes be willing to take a position that is different from the crowd and be right about that position, to earn alpha. John put it this way: “If you buy the same securities everyone else is buying, you will have the same results as everyone else.”
3. “The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell. Bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria. People are always asking me: where is the outlook good, but that’s the wrong question…. The right question is: Where is the outlook the most miserable? For those properly prepared in advance, a bear market in stocks is not a calamity but an opportunity.” To be able to sell when people are most pessimistic requires courage. Being courageous is easier if you are making bets with “house money.” Making bets with the rent money is always unwise. Templeton believed problems create opportunity. For example, it was on the day that Germany invaded Poland that he saw one of his best buying opportunities since prices were so low and values so high. Simply telling his broker that day to buy every stock selling under $1 yielded a 4X return for John. (more…)
Jeff Greenblatt, Breakthrough Strategies for Predicting Any Market-Book Review
The first edition of Jeff Greenblatt’s Breakthrough Strategies for Predicting Any Market: Charting Elliott Wave, Lucas, Fibonacci, Gann, and Time for Profit appeared in 2007. Since that time Greenblatt came to embrace the work of W. D. Gann. He also found that Alan Andrews’ median lines served as “an excellent GPS system in order to understand how trends evolve.” The second edition (Wiley, 2013) thus includes new chapters on Gann, Andrews, and median channels. It also addresses market sentiment/psychology.
Greenblatt is the director of Lucas Wave International and editor ofThe Fibonacci Forecaster. And who was Lucas, you might ask. (Well, at least I did.) Edouard Lucas (1842-1891) was a French mathematician who invented the famous (some might say infamous) Tower of Hanoi puzzle. He also studied number sequences, most notably the Fibonacci sequence. The closely related number sequence (2, 1, 3, 4, 7, 11, 18, 29, …) is named after Lucas.
But back to the book. (more…)
Video Ted Talk: Benoit Mandelbrot- Fractals and the art of roughness
At TED2010, mathematics legend Benoit Mandelbrot develops a theme he first discussed at TED in 1984 — the extreme complexity of roughness, and the way that fractal math can find order within patterns that seem unknowably complicated.