Trading the future

[peanuts]

Charts and statistics are like trying to drive by looking in the rearview mirror. Sure, you might be able to figure it all out, but you'll find it nearly impossible to actually trade something that is happening right now. And, you would have no way of anticipating what is about to come...

So, what are some ways to drive by looking over the steering wheel? This is the age of technology. What tools can we use to predict with some level of probability what events could affect our lives, and in turn, the market?

Black Swan events can only be true black swans if NOBODY saw them as a possibility. Otherwise, all events are likely foreseeable to some degree, right?

Would a tool like Google Trends help? What about this interesting firm: https://www.recordedfuture.com/ ???

What are your thoughts/ideas on predictive modeling?

[billyjoe]

Peanuts,
I wonder if this can be backtested. If so, what would we find that made Berkshire Hathaway promising in 1962, Apple in 1976, or Google in 1996?

------------billy

[Karel]

There is no way to look over the steering wheel. All prediction is by way of the rearview mirror. We may expect more sophisticated systems, but not necessarily better results. The best system is probably the system you don't hear about.

The Mechanical Investing forum (on the Fool) is a venue for discussing better mousetraps, and some look really impressive. It is not a bad way to take the emotion out of investing (and into agonizing over the best mechanical strategy). I left them for the Huge One but I am still testing some simple systems (and doing better with $$$Mr. Market$$$).

Regards,

Karel

[mrmarket]

There is no way to look over the steering wheel. All prediction is by way of the rearview mirror. We may expect more sophisticated systems, but not necessarily better results. The best system is probably the system you don't hear about.

The Mechanical Investing forum (on the Fool) is a venue for discussing better mousetraps, and some look really impressive. It is not a bad way to take the emotion out of investing (and into agonizing over the best mechanical strategy). I left them for the Huge One but I am still testing some simple systems (and doing better with $$$Mr. Market$$$).

Regards,

Karel

Over on the Fool, they all thought I was full of shit...even though I was honestly trying to tell them I was on to something.

[Deaddog]

I hear the analogy quite often that charting is like driving by looking in the rear view mirror.

I like to equate using charts not so much as driving by looking in the rear view mirror but more like anticipating what the guy in front of you is going to do next by observing what he is doing now and has done in the past.

TA is observing how the person is driving. Is he driving rationally, moving safely with the flow of traffic or is he driving aggressively, changing lanes, speeding up, slowing down and can you guess what he might do next.

After observing for a while you get an idea of how this driver operates and can anticipate what he will do in the near future. However there is no guarantee that he will do what you expect, only a high probability. If he has been passing every slow moving vehicle he catches up with, chances are he will pass the next one.

Fundamental analysis is knowing what you can about the guy in front of you and guessing what he will do using that information. What type of vehicle are you looking at, how old is the driver, any dents in the car, do you have any information that others on the road my not? Is this the old fart next door that turns the left turn signal on in the morning and leaves it on all day?

By combining technical and fundamental analysis you have a good chance of being able to see what might happen next. Fundamentally you have a young driver, in a Mustang Mach II. Technically you have been following him and see that he is in a hurry and driving aggressively. You are approaching an intersection and the light turns amber.
What do you think will happen next?

Looking at a chart only tells you what has happened in the past but it also gives you a hint of what might happen in the near future. It will also tell if the stock is deviating from past behaviour which is a warning sign that it may do something different.

[billyjoe]

Over on the Fool, they all thought I was full of shit...even though I was honestly trying to tell them I was on to something.

Mr.Market,
Didn't they also think you were full of sh#* over at IBD forums?
We found out who really was full of sh#*. You're still here while they keep changing their format.

------------billy

[Websman]

Mr.Market,
Didn't they also think you were full of sh#* over at IBD forums?
We found out who really was full of sh#*. You're still here while they keep changing their format.

------------billy

IBD banned me when I refused to quit spamming this forum on their boards. I'd spam it again, if they gave me a chance.

[peanuts]

To be a little more clear... what I am talking about is determining trading ideas from quasi-predictable world events, not specific stocks...

Peanuts,
I wonder if this can be backtested. If so, what would we find that made Berkshire Hathaway promising in 1962, Apple in 1976, or Google in 1996?

------------billy

Can't backtest something that wasn't in existence...

There is no way to look over the steering wheel. All prediction is by way of the rearview mirror. We may expect more sophisticated systems, but not necessarily better results. The best system is probably the system you don't hear about...

Couldn't we determine a chain of quasi-predictable causes and their resulting effects based on a number of scenarios? Would then the key become, "how do we generate those potential scenarios?" If we are fed a group of potential future events, and then create cause and effect chains that conclude at the effect on companies, then could we not determine how an event could become "tradeable" before it ever happens? To compound this, the likelihood of an event actually occurring would be of paramount exploration.

I hear the analogy quite often that charting is like driving by looking in the rear view mirror...

Points well expressed and taken. But, I'm talking about something different than charting. Sorry to implant the thought of charts when I meant to implant thoughts of something else.