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Re: [Behavioral-Finance] Restatement of ( Will a computer program ever be superior to humans in trading?)

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  • Dick March
    Gord and others, Regarding my earlier post of computerized trading systems as a variant of the Prisoner s Dilemma, I came across a couple of interesting
    Message 1 of 4 , Jul 5, 2000
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      Gord and others, Regarding my earlier post of computerized trading systems as a variant of the Prisoner's Dilemma, I came across a couple of interesting web-sites, with a multitude of links, on the Prisoner's Dilemma (or in the context of Computer Trading Systems, follow the system or try to beat the system assuming everyone else will follow the system, a variant of the Perfect Market Approach) are provided below:
      http://plato.stanford.edu/entries/prisoner-dilemma/
      http://www.lifl.fr/IPD/ipd.frame.html
      Dick March

      Gord Cruikshank wrote:

      You pose an interesting question, and the reason I replied with such a curt
      answer is this:
      Computerised trading systems are simply automated extensions of an
      individual's (or group's) trading philosophy.  Once the system is employed,
      it trades within the boundaries of the programmer's master plan.  Certainly
      there are "smart" systems such as neural networks and genetic algorithms,
      but they are very prone to overlearning.  This means they need "mothering"
      (human influence) to keep them pointed in the proper direction.

      Now, imagine for an instant that tomorrow every trader on earth turned over
      their trading style to a computer.  For a very short time (maybe measured in
      hours or perhaps days) the market would become efficient.  However, as soon
      as one of those traders changed their algorithms, an adjustment would take
      place.  Still efficient?  Not likely, since most traders are looking for
      some sort of edge.  Perhaps someone implements an automated news reader or
      email reader service into their automated trading system.  See where this is
      heading?  Eventually there is a return to the market model we use today.

      Furthermore, an interesting postulate is: once all traders are "automated",
      wouldn't many of the patterns (i.e. head and shoulders) become overtraded
      and perhaps insignificant?  Maybe even destructive?

      You pose a question which I have had to answer many times.  The interesting
      thing is that there is no specific answer...just theories.  ...very
      interesting theories.  I shall watch this thread closely.

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    • jk_stratton@stratton.org
      I once suggested that one strategy responding to the literal PD would be organised crime (both members of a syndicate having trust and win- win incentive to
      Message 2 of 4 , Jul 5, 2000
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        I once suggested that one strategy responding to the literal PD would
        be organised crime (both members of a syndicate having trust and win-
        win incentive to say nothing).

        Jan

        --- In Behavioral-Finance@egroups.com, "Dick March" <rmarch@s...>
        wrote:
        > Gord and others, Sounds an awful lot like a variant of the
        Prisoner's Dilemma.
        > And we know how many strategies have been suggested in response to
        the
        > Prisoner's Dilemma.
        > Dick March
        >
        > Gord Cruikshank wrote:
        >
        > > You pose an interesting question, and the reason I replied with
        such a curt
        > > answer is this:
        > > Computerised trading systems are simply automated extensions of an
        > > individual's (or group's) trading philosophy. Once the system is
        employed,
        > > it trades within the boundaries of the programmer's master plan.
        Certainly
        > > there are "smart" systems such as neural networks and genetic
        algorithms,
        > > but they are very prone to overlearning. This means they
        need "mothering"
        > > (human influence) to keep them pointed in the proper direction.
        > >
        > > Now, imagine for an instant that tomorrow every trader on earth
        turned over
        > > their trading style to a computer. For a very short time (maybe
        measured in
        > > hours or perhaps days) the market would become efficient.
        However, as soon
        > > as one of those traders changed their algorithms, an adjustment
        would take
        > > place. Still efficient? Not likely, since most traders are
        looking for
        > > some sort of edge. Perhaps someone implements an automated news
        reader or
        > > email reader service into their automated trading system. See
        where this is
        > > heading? Eventually there is a return to the market model we use
        today.
        > >
        > > Furthermore, an interesting postulate is: once all traders
        are "automated",
        > > wouldn't many of the patterns (i.e. head and shoulders) become
        overtraded
        > > and perhaps insignificant? Maybe even destructive?
        > >
        > > You pose a question which I have had to answer many times. The
        interesting
        > > thing is that there is no specific answer...just
        theories. ...very
        > > interesting theories. I shall watch this thread closely.
        > >
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        > > Instant Approval and 0% intro APR with Aria!
        > > http://click.egroups.com/1/6034/5/_/_/_/962723185/
        > > ------------------------------------------------------------------
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        > >
        > > To unsubscribe from this group, send an email to:
        > > Behavioral-Finance-unsubscribe@egroups.com
      • jk_stratton@stratton.org
        The systems trading situation looks to me also like a Red Queen scenario, perhaps combined with over-exploitation of the environment. Jan ... systems as a ...
        Message 3 of 4 , Jul 5, 2000
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          The systems trading situation looks to me also like a Red Queen
          scenario, perhaps combined with over-exploitation of the environment.

          Jan

          --- In Behavioral-Finance@egroups.com, "Dick March" <rmarch@s...>
          wrote:
          > Gord and others, Regarding my earlier post of computerized trading
          systems as a
          > variant of the Prisoner's Dilemma, I came across a couple of
          interesting
          > web-sites, with a multitude of links, on the Prisoner's Dilemma (or
          in the
          > context of Computer Trading Systems, follow the system or try to
          beat the system
          > assuming everyone else will follow the system, a variant of the
          Perfect Market
          > Approach) are provided below:
          > http://plato.stanford.edu/entries/prisoner-dilemma/
          > http://www.lifl.fr/IPD/ipd.frame.html
          > Dick March
          >
          > Gord Cruikshank wrote:
          >
          > > You pose an interesting question, and the reason I replied with
          such a curt
          > > answer is this:
          > > Computerised trading systems are simply automated extensions of an
          > > individual's (or group's) trading philosophy. Once the system is
          employed,
          > > it trades within the boundaries of the programmer's master plan.
          Certainly
          > > there are "smart" systems such as neural networks and genetic
          algorithms,
          > > but they are very prone to overlearning. This means they
          need "mothering"
          > > (human influence) to keep them pointed in the proper direction.
          > >
          > > Now, imagine for an instant that tomorrow every trader on earth
          turned over
          > > their trading style to a computer. For a very short time (maybe
          measured in
          > > hours or perhaps days) the market would become efficient.
          However, as soon
          > > as one of those traders changed their algorithms, an adjustment
          would take
          > > place. Still efficient? Not likely, since most traders are
          looking for
          > > some sort of edge. Perhaps someone implements an automated news
          reader or
          > > email reader service into their automated trading system. See
          where this is
          > > heading? Eventually there is a return to the market model we use
          today.
          > >
          > > Furthermore, an interesting postulate is: once all traders
          are "automated",
          > > wouldn't many of the patterns (i.e. head and shoulders) become
          overtraded
          > > and perhaps insignificant? Maybe even destructive?
          > >
          > > You pose a question which I have had to answer many times. The
          interesting
          > > thing is that there is no specific answer...just
          theories. ...very
          > > interesting theories. I shall watch this thread closely.
          > >
          > > ------------------------------------------------------------------
          ------
          > > Need a credit card?
          > > Instant Approval and 0% intro APR with Aria!
          > > http://click.egroups.com/1/6034/5/_/_/_/962723185/
          > > ------------------------------------------------------------------
          ------
          > >
          > > To unsubscribe from this group, send an email to:
          > > Behavioral-Finance-unsubscribe@egroups.com
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