A little experiment...

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blubbb
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A little experiment...

Postby blubbb » Wed Oct 01, 2008 8:57 pm

Hi,

I got an interesting idea for a quiz...

Which of the following charts is/are the real ones? Which of them is/are fake (pseudo random generated)? And why? What makes you sure about it?

*links down*

I guess it's not only me who is very curious about your (both newbie's and expert's) answers.
Last edited by blubbb on Tue Feb 17, 2009 12:45 pm, edited 1 time in total.

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Postby danbarn3 » Thu Oct 02, 2008 1:04 am

Okay, I'll bite...and just take a guess without any reason other than my first impression:

Charts A & B = FAKE

The rest are real.

I'm more curious about what you have to share with those who respond to your post than which charts are real/fake.

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Postby blubbb » Thu Oct 02, 2008 9:09 am

Well, I'm a newbie myself. My point is, with all the experts saying that you have to develop "an eye" to see the patterns / the trend and stuff I thought- they might tell the fake/real ones apart just easily. However, I'll find it most intriguing should someone spot a trend where there is none- in a randomly generated "chart". ;-)
Of course I'll eventually post the correct answers.

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Postby Tresor » Fri Jan 09, 2009 1:02 pm

charts A, B and H are placed upside down (horizonatly swaped). Maybe other charts (F) are vertically swaped (the charts shows uptrend but the original chart was showing downtrend)

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Postby Htarlov » Sat Jan 17, 2009 11:14 pm

A,B,C,H looks like Forex chart. Long-tail distribution, some patterns visible.
D has a long-tail distribution, it might be real, but there is something different about it.
E might be random generated, looks like normal distribution generated, but it's not sure.
About F I'm very unsure.
G might be forex or something generated with distribution other than normal.

If I had to sort them from the most probably real to least probably real it would be:
A,B,C,H,G,D,F,E

But those are only my "feelings" about it - based on my look on those charts and my memory of past charts that I looked on.

And I'm not a real trader. I'm a programmer specializing in two areas: web application development (PHP, J2EE) and trading support systems (automated trading, risk management).

Probably there is no way to exacly tell which one is real - looking on visual charts (especially chart without open,close,high and low, candles, scale etc.).
One can generate chart that will be very similar to forex chart - basing on the similar probability distribution of returns.
It would be a little bit easier to distinct real one from random one when there would be exact data present (for example in CSV file to download).
You can look on distribution of returns, periodogram, autocorrelation and fractal dimension of timeseries and maybe tell that someone is different from few "typical" markets.
But you will never be 100% sure.
For example forex is pretty noisy - looks much more like random-walk than stocks (but with distribution other than normal - it's long tail distribution).
There can be chosen such frames of time when it is undistinguishable from random walk (if we understand "random walk" as a something that could be generated by random returns with some random distribution, not exactly Gaussian distribution).

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Postby Htarlov » Sat Jan 17, 2009 11:20 pm

I also have some quiz.
Just three charts, only one real.
Which one and why?

http://rath.pl/EU1.png
http://rath.pl/EU2.png
http://rath.pl/EU3.png

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Postby blubbb » Sat Jan 17, 2009 11:37 pm

I'd say no. 2 because it is the "jumpy" one. When I generated the "charts" I noticed that simple random walk (adding/substracting some random number) wouldn't look real enough.

Edit: It's from Summer 1996. And that's why I didn't want to add time/price labels... Well... maybe not.

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Postby Htarlov » Sun Jan 18, 2009 7:48 pm

You are right. :)

First one was generated with normal distribution (but with the same standard deviation as EURUSD) and third one was generated with distribution of returns that EURUSD has (but distribution taken from longer period of time - 50k bars).

Markets have at least four things that make them differ from normal random walk:
1) Long tail distribution.
2) Fractal dimension a litter bit lower (random-walk has 1.5, markets have lower)
3) Standard deviation changes in time more than in just random manner (moving standard deviation varies more than in random-walk series)
4) There are some patterns that appear more frequently than in random generated series (for example retracements after big move)

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Postby pineapples » Sun Jan 18, 2009 10:23 pm

Even the fake charts are tradeable. If the price moves, even if the numbers are thought up by a baby, you can profit.

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Postby Htarlov » Mon Jan 19, 2009 9:28 am

Yeah, but I believe that there are four types of markets (and many markets sometimes change their "type" for some period of time):

1) Trend market. It is more probable that any longer move of price will not stop, at least for some time. Trend following strategies will earn there. Portfolios made of many markets sometimes are like that. Stocks sometimes are like that. Extreme example would be market that always move in one direction on long time scope (day chart or H4 chart etc.).

2) Noise market. It is more probable that any bigger/longer move of price will break and change direction than it will follow direction of trend. Counter-trend strategies will win here. Extreme example would be the market with price that fluctuates arround one level (looks like noise). Arbitrage trading is often a trying to make "synthetic" market that looks like noise market - by taking advantage of relationships between markets (some of them partially price same products).

3) Quasi-random-walk market. There is nearly the same or the same probability that trend will follow or that will end. Both strategies - counter-trend and trend-follow - will fail in longer period of time. They can be turned into martingale strategies with money management but after some finite time they will fail. Extreme example is marked made by random returns. But here some percent of traders will win - just by chance.

4) Markets that change between 1 (trend market) and 2 (noise market) in time on non-random basis. One can say that any random-walk market will change between 1 and 2, but it's change on random basis - it's not predictable. But hypothetically there can be markets that change between 1 and 2 and those changes can be predicted (and then strategy would be follow trend sometimes and counter-trend in other times - based on prediction). Extreme example would be a market that changes between 1 and 2 in regular cycles.

And I think that before you trade on some market (or some combination of markets) it's good to look what kind of market it is (if you choose between trend-follow or counter-trend strategies - because there are also strategies that are neither one nor another).

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