Re: Proof that neural nets work


John Moody <john.atwell.moody@xxxxxxxxx> wrote in message
news:1148892061.207380.95780@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Basically, I have to start at the beginning learning about investing,

Why bother? Why not just get a job, put your money in a 401(k),
and let the "professionals" lose--er--make it for you?

Exactly WHAT are you trying to accomplish?

and
I of course understand your comments about interest rates easily, not
yet
your comments about money flow,

Probably because money flow is soooo simple to understand, it
defeats the mind looking for "complexity" with a paradoxical desire
for a simple, yet "mysterious" outcome.

2+x=4, solve for x. Too "simple", most would rather rely on a
"magic number" that derives from some hidden "complex" force
of the universe, like a Fibonacci sequence...

though they remind me of macroeconomic
ideas (had never seen them applied to investing before).

BWHAHAHAHAHAHAHAHAHA!!!!!

The funny thing is, of course, you're basically right!!! Hell, why
use concepts like "supply and demand" when you GOT THOSE
MAGICAL FIBONACCI NUMBERS!?!!??!!!

This is why the market can easily be beaten as long as you wake
up just a little from the collective dream state of most of the market
participants, and get to work doing a LOT of "simple math". And
use a little common sense, which ain't so common...

Why don't you (instead of retyping) reference me to the best (maybe
longest)
post here which you've already written and I'll read it carefully and
get up to speed.

Nah, it's pointless, I don't even know how to find the "best" or even
the "longest" post I ever made. You can read my book when it never
comes out. If you're looking for a treatise, a discussion group is the
wrong place to search...

And remember, this is all just my "opinion", and my "opinion"
is WORTHLESS, and you know it's worthless, because, well,
BECAUSE SOMEBODY ELSE HERE WILL TELL YOU IT'S
WORTHLESS, AND THEY'LL SAY IT REALLY LOUD
AND WITH A LOT OF PROFANITY AND VULGARITY,
SO THEY MUST BE RIGHT, and THAT'S just another reason
why it's pointless to "discuss" things in a "discussion group"...

So ask "them" how the market works, "they" know everything,
except little details like the year that the 1987 market crash
occurred...

You also mention a 15 point system using indicators that you've come up
with, but maybe you don't want to get into so much detail and that is
fine.

You might even be able to Google(TM) that one, from around
1990(?) in the old misc.invest group, before it was split into multiple
groups. I haven't used it since about that time, it's archaic, it's
not disimilar to Elaine Garzarelli's 12-indicator system that
PREDICTED THE CRASH OF 1987 and then unfortunately
kept predicting the crash after the market started moving up
again.

Basically, what I've done since then is sit back, statistically
analyze the true effectiveness of those indicators, ponder why
they weren't MORE effective, and ultimately started trying harder
to get away from any type of simple "indicators" to a more
complete model of the market to improve my "edge"...

Also, you might have a problem with those indicators because
they're all things like interest rates, money supply, etc., stuff
that you've already thrown out as irrelevant for the only reason
that your "hammer" is a neural net with stock/index price and
volume inputs only. This is how MOST market participants "analyze"
the market; they choose a particular set of easily accessible
data, ignore everything else, say everything else is "irrelevant"
and "I found fundamental/technical analysis doesn't work".

Basically, we're talking about belief systems here, human
psychology, not market analysis. People believe the market
"works" the way they choose to believe it "works", and ignore
contrary evidence as much as possible, and go absolutely
beserk if the evidence is forcibly presented to them.

Can I ask, now, a favor, which I already asked Luke on the other
thread.

"Back in my home town there was a quaint little cafe that had
an amusing sign on the wall. It said, "Do not be afraid to ask
for better service, because our way of refusing is very polite."
- "Paths of Glory", then they shot the dude

Namely, I'd like to really try, now that I feel this neural network
is set up a different way....and really does such an excellent job on
predicting related math functions --- I'd like to try it in all its
limited form, to actually make a prediction.

Nah, you're just not "getting it". This is why giving you a "better
post" is a waste of time. Your mind is made up, and the only thing
that I can say that will make sense to you is what you have already
decided.

You're NOT on a search for the truth, you're on a search for
WHAT YOU WANT TO HEAR. I am on search for the truth,
and therefore am in constant conflict with the "average" person
here who just WANTS TO HEAR WHAT THEY WANT
TO HEAR.

In other words, welcome to misc.invest.stocks, and, for that
matter, the human race!

To keep me honest, it will be a public prediction.

I constantly try to remind people here that if you are not honest
with yourself in matters of investing, you are only hurting yourself.
This is one of the fundamental ways in which investing is 100%
different from most activities in human life. Lying and cheating
are actually rewarded behaviors much of the time in academia
and the job market, as are bullying, stealing, etc.

None of those things work when you are trading your own
money, except maybe some "cheating", like insider trading.
That's why most people are so completely ill-equipped to trade,
not just intellectually but psychologically.

Read the posts here, and note that most "people" actually
believe they can bully, lie, and cheat their way to profitability.
They can't, and when informed of this simple fact, they get
even crazier, because it conflicts with most of their prior
experiences (the psychologists call this "cognitive dissonance").

BUT, it is a limited program. All it will be able to do is to look
at 5 share prices and volumes, and i need someone with enough expertise
to tell me 5 which are likely to predict a sixth price. I do not know
for what reason, ie because they are more volatile and react quicker,
or bigger and affect the sixth.

Again, the hammer is in desperate search for a nail...you're looking
for someone with enough "expertise" to tell you something you want to
hear about five presumably non-existant somehow inter-related
stocks...

It could look at more than 5, but will likely get a good fit
because some random connection exists for all the time up to now.

Individual stocks tend to be reasonably correlated with each
other...you might want to ponder why this is, and then when you
come to the inevitable conclusion, I'll be in a better position
to tell you what you want to hear...

Also I can use indices if you think that's better.

How about ETFs? Then you might be able to cover a lot of
"sectors", get something closer to a model of the whole market...

So, yes, I will go back to the drawing board entirely about how to
think about investing........but, well, maybe it's understandable.....I
don't want to give up until I give it one chance to look at a
relationship that some experts think might really be there.

The other "experts" you are talking to believe there is a simple
connection between the price and maybe volume patterns of a
SINGLE stock and future prices. If you can't find THAT connection,
then there is either something wrong with what THEY think, something
wrong with neural nets in general (probably related to a "precision"
factor"), something wrong with what you are doing, or all of the
above!

Now I think I know exactly how THEY are wrong, and have some
inkling as to what is wrong with neural nets in this application, so I'm
not suprised that something this simple and easy to demonstrate has
apparently failed. Again, my first pass is statistical in nature: have
their
trading strategies actually "worked" over the course of history?
Can your neural net pass the SIMPLE EXPLICIT TEST I ASKED
FOR (that you IGNORED) of high correlation of predicted vs. actual
daily data for 15 years for a single stock (and not a single stock that
you pick out of dozens of failed attempts, you keep rigorous
track of ALL your successes AND failures and average the
results).

Of course, if cold hard back-testing proves any particular strategy
doesn't "work", people who "believe" in those strategies will never
admit it, and will constantly be suggesting changes to the testing
methodology, and finally attack the tester personally: "YOU'RE
NOT A TRADER, IF YOU WERE A TRADER YOU'D KNOW
IT WORKS!!!"

Strangely, you've preemptively aligned yourself with this type of
non-critical thinking for no other apparent reason than you yourself
have a "system" to "beat the market", called a "neural net". If
you just tinker with it enough, using "help" from the "experts",
you'll get it to work, you just know it, you just know it...you
just know it, HOW?!!???!!

Um........one other thing I was thinking. Is it ever not rude to
ask a person, how much money do you actually have as a result of your
insight.

I'M FRICKIN' RICHER THAN GOD, PUNK!!!!

Warren Buffet hands me towels in restrooms!!!

Bill Gates tries to "spare change" me!!!

Donald Trump laughs at my jokes, even though they're not funny!!!

Are you, like me, with
credit card balances (ie negative resources), or are you hanging around
zero,
or maybe doing better than that?

I'm a working person who has consistently saved a VERY large portion of
my income by "living frugally". If I had never invested a dime, I would
still have what would generally be considered to be decent savings.

Is it actually possible to make a
living from investing over time?

No, not really. Get a job.

That's another piece of standard advice I give people here that
makes them nutz, because most of them have been "discarded" by
the workplace. They're here because of some fantasy about making
gigantic sums of money out of nowhere in the market using simple
"systems" .

Look, you can only RELIABLY make a certain percentage a year ON
AVERAGE "investing" in anything in any way you can imagine. My
only goal is to RELIABLY raise that percentage as high as possible.

In the stock market, it is often said that the market moves up
some amount per year on average, 8% or something like that, over
the long run of history. The only rational goal is to beat
that, or really, to beat inflation when growing your overall net
wealth.

I think that I can, with all the great effort I have alluded
to, beat the stock market by at least about three-fold over time.
In other words, twenty years from now, I think I can make about 24%
per year on average.

That's not exactly getting rich "quickly", though most sober
observers would say it ain't bad. If you have $100,000 to invest,
guess what, you make $24,000 in a year using my "system", but guess
what, that's an AVERAGE amount, some years you make NOTHING
(which is about what I made last year), SOME YEARS YOU
ACTUALLY LOSE MONEY, some years your $100,000
goes to $700,000 in one year. But first, you gotta have the
$100grand!

In other words, GET A JOB. I can't even really predict any
particular rate of return because I can't predict what the
market is going to do five years, ten years, twenty years
from now. I am at the mercy of what the market "gives" me,
as I think everybody else is in the market, whether they want
to admit it or not. I only try to gain a little predictability
and extra gain on what the market is going to "give" me,
because God helps those who help themselves.

---
William Ernest Reid
Post count: 375



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