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Trading Robots: From An Instinct To Algorithm Part 2

Trading Robots: From An Instinct To Algorithm Part 2 :

Possibility of market forecasts.

Predicting the price for financial assets it is impossible and this thesis causes weight of disputes. The majority of traders trade with arguments from the theory that the likelihood (statistical) forecast of the prices is possible and necessary.

Stop! In the initial thesis discrepancy is pledged. It is impossible to predict the exact price or simply price? Nobody object that precisely to predict the price it is impossible. What means to predict precisely? It means that the probability of occurrence of this event is equal to 1 that is why specialists on probability theory treat necessity only the likelihood (statistical) forecast and affirms that any forecast for financial market is the forecast likelihood (statistical).

If the forecast has justified completely its probability is equal to 1 and if partially its probability is less than 1. However facts of life that the likelihood forecast of the prices of very few people interests, especially investors. Only the investor-kamikaze is capable to invest means with probability. Such investments, more likely, are similar to a totalizator where transactions consist on the basis of this or that probability of event or result. From here the simple conclusion is that the likelihood (statistical) forecast of the prices for financial market is necessary to nobody.

The instinct of the hunter and predictions in the market can contrast today only one – trading robots. Robots for this purpose also are necessary that there wasn’t adrenaline in blood. Robots are careful from a birth. The trading system, pledged to the robot in the form of algorithm, it is rigid and without emotions counts a profit-factor and maximum to a deposit procorf. Such algorithm works reasonablly from the financial point of view. Financial expediency is here the criterion distinguishing results of work of the trading robot and the nonprofessional investor.

Changing the market

The person can’t change the market during long time. With this statement it was difficult to argue. There were no yet trading robots. Work of the person on financial market can’t be compared to work of the trading robot for the several reasons.

First is that the person in a condition to trace dynamics only several financial assets in the market. The trading robot traces dynamics of assets on two-three order more; it is limited only by capacity of the computer.

Secondly, the person is capable to work with the limited kit of trading strategy. The trading robot is capable to work with an unlimited kit of strategy. As the terminator computer possibilities act only besides.

Thirdly, trading robots are capable to lead operations at several stock exchanges within 24 hours. And that means that for the person such work physically is not under force to make.

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October 6, 2010 | In: Investment

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