TheRumpledOne wrote:pika wrote:Hi TRO,
I've posted the questions below in another thread (Data Mining) but since we are on this page which is more relevant perhaps I'll ask the same questions again. Hope you can advice. Thank you.
"I am not exactly sure why we can't be a green and red rat at the same time. Since the daily high and daily low will not happen at the same time, that means we can apply the same method to both ends of the daily candle right?
Is there not a time when we should change the color of our rat, such as when we see a trend reversal in the longer time frame (i.e. weekly, monthly)?"
"Look, for example, at this elegant little experiment. A rat was put in a T-shaped maze with a few morsels of food placed on either the far right or left side of the enclosure. The placement of the food is randomly determined, but the dice is rigged: over the long run, the food was placed on the left side sixty per cent of the time. How did the rat respond? It quickly realized that the left side was more rewarding. As a result, it always went to the left, which resulted in a sixty percent success rate. The rat didn't strive for perfection. It didn't search for a Unified Theory of the T-shaped maze, or try to decipher the disorder. Instead, it accepted the inherent uncertainty of the reward and learned to settle for the best possible alternative.
The experiment was then repeated with Yale undergraduates. Unlike the rat, their swollen brains stubbornly searched for the elusive pattern that determined the placement of the reward. They made predictions and then tried to learn from their prediction errors. The problem was that there was nothing to predict: the randomness was real. Because the students refused to settle for a 60 percent success rate, they ended up with a 52 percent success rate. Although most of the students were convinced they were making progress towards identifying the underlying algorithm, they were actually being outsmarted by a rat."
P64 HOW WE DECIDE (italics added)
You sound like a YALE STUDENT.
Thanks TRO, for bringing this experiment up again. Now I am not trying to predict the market like a Yale student. I recognise the importance to follow longer timeframe directional bias, but if I am a green rat, does that mean I go green on EVERY pair? e.g. ok to go green on EURUSD as the recent longer timeframe is up, but how about USDCHF where its longer timeframe is down? Won't it be right to be a red rat on USDCHF while being a green rat on EURUSD? Or do I not trade USDCHF (or any pair that has the same longer time directional bias) at all since it is more favourable to a red rat? Unless I'm wrong about following the longer time directional bias...