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A Mathematician Plays the Stock Market by John Allen Paulos
Benoit Mandelbrot, Black-Scholes formula, Brownian motion, business climate, business cycle, butter production in bangladesh, butterfly effect, capital asset pricing model, correlation coefficient, correlation does not imply causation, Daniel Kahneman / Amos Tversky, diversified portfolio, dogs of the Dow, Donald Trump, double entry bookkeeping, Elliott wave, endowment effect, Erdős number, Eugene Fama: efficient market hypothesis, four colour theorem, George Gilder, global village, greed is good, index fund, intangible asset, invisible hand, Isaac Newton, John Nash: game theory, Long Term Capital Management, loss aversion, Louis Bachelier, mandelbrot fractal, margin call, mental accounting, Myron Scholes, Nash equilibrium, Network effects, passive investing, Paul Erdős, Paul Samuelson, Ponzi scheme, price anchoring, Ralph Nelson Elliott, random walk, Richard Thaler, Robert Shiller, Robert Shiller, short selling, six sigma, Stephen Hawking, stocks for the long run, survivorship bias, transaction costs, ultimatum game, Vanguard fund, Yogi Berra
To the extent there is one, it most likely derives from psychology, perhaps in part from the Keynesian idea of conventionally anticipating the conventional response, or perhaps from some as yet unarticulated systemic interactions. “Unarticulated” is the key word here: The quasi-mathematical jargon of technical analysis seldom hangs together as a coherent theory. I’ll begin my discussion of it with one of its less plausible manifestations, the so-called Elliott wave theory. Ralph Nelson Elliott famously believed that the market moved in waves that enabled investors to predict the behavior of stocks. Outlining his theory in 1939, Elliott wrote that stock prices move in cycles based upon the Fibonacci numbers (1, 2, 3, 5, 8, 13, 21, 34, 55, 89, . . . , each successive number in the sequence being the sum of the two previous ones). Most commonly the market rises in five distinct waves and declines in three distinct waves for obscure psychological or systemic reasons.
The Golden Ratio: The Story of Phi, the World's Most Astonishing Number by Mario Livio
Albert Einstein, Albert Michelson, Alfred Russel Wallace, Benoit Mandelbrot, Brownian motion, Buckminster Fuller, cosmological constant, Elliott wave, Eratosthenes, Gödel, Escher, Bach, Isaac Newton, Johann Wolfgang von Goethe, Johannes Kepler, mandelbrot fractal, music of the spheres, Nash equilibrium, Ralph Nelson Elliott, Ralph Waldo Emerson, random walk, Richard Feynman, Ronald Reagan, Thales of Miletus, the scientific method
Some of the modern applications of the Golden Ratio, Fibonacci numbers, and fractals reach into areas that are much more down to earth than the inflationary model of the universe. In fact, some say that the applications can reach even all the way into our pockets. A GOLDEN TOUR OF WALL STREET One of the best-known attempts to use the Fibonacci sequence and the Golden Ratio in the analysis of stock prices is associated with the name of Ralph Nelson Elliott (1871–1948). An accountant by profession, Elliott held various executive positions with railroad companies, primarily in Central America. A serious alimentary tract illness that left him bedridden forced him into retirement in 1929. To occupy his mind, Elliott started to analyze in great detail the rallies and plunges of the Dow Jones Industrial Average. During his lifetime, Elliott witnessed the roaring bull market of the 1920s followed by the Great Depression.
Flash Crash: A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History by Liam Vaughan
algorithmic trading, backtesting, bank run, barriers to entry, Bernie Madoff, Black Swan, Bob Geldof, centre right, collapse of Lehman Brothers, Donald Trump, Elliott wave, eurozone crisis, family office, Flash crash, high net worth, High speed trading, information asymmetry, Jeff Bezos, Kickstarter, margin call, market design, market microstructure, Nick Leeson, offshore financial centre, pattern recognition, Ponzi scheme, Ralph Nelson Elliott, Ronald Reagan, sovereign wealth fund, spectrum auction, Stephen Hawking, the market place, Tobin tax, tulip mania, yield curve, zero-sum game
When Nav created his online alter ego, he was a newcomer to trading, twenty-four years old and still buying and selling individual stocks rather than the index futures that would make him rich. His idiosyncratic way of seeing the world and preternatural confidence, though, were evident from the start. Indeed, his opening gambit on the site was a repudiation of two of the godfathers of trading theory. Ralph Nelson Elliott was a Kansas-born accountant who, in 1938, published a book called The Wave Principle that posited that markets move in discernible and therefore predictable wave formations based on the ebb and flow of crowd sentiment from optimism to pessimism. According to Elliott, while markets might appear to be random, they are in fact governed by recurring patterns grounded, like much in nature, on the Fibonacci sequence.
The Misbehavior of Markets: A Fractal View of Financial Turbulence by Benoit Mandelbrot, Richard L. Hudson
Albert Einstein, asset allocation, Augustin-Louis Cauchy, Benoit Mandelbrot, Big bang: deregulation of the City of London, Black-Scholes formula, British Empire, Brownian motion, business cycle, buy and hold, buy low sell high, capital asset pricing model, carbon-based life, discounted cash flows, diversification, double helix, Edward Lorenz: Chaos theory, Elliott wave, equity premium, Eugene Fama: efficient market hypothesis, Fellow of the Royal Society, full employment, Georg Cantor, Henri Poincaré, implied volatility, index fund, informal economy, invisible hand, John Meriwether, John von Neumann, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, market bubble, market microstructure, Myron Scholes, new economy, paper trading, passive investing, Paul Lévy, Paul Samuelson, plutocrats, Plutocrats, price mechanism, quantitative trading / quantitative ﬁnance, Ralph Nelson Elliott, RAND corporation, random walk, risk tolerance, Robert Shiller, Robert Shiller, short selling, statistical arbitrage, statistical model, Steve Ballmer, stochastic volatility, transfer pricing, value at risk, Vilfredo Pareto, volatility smile
Bubbles are dramatic—but the tendency of markets to deceive and confuse is an everyday affair. Consider chartists, who try to spot patterns in the market. The sophistication of these techniques varies greatly. Some are mere eyeball hunches: A pattern in an index or price chart looks like one that has happened before, and so you bet the chart will keep moving in the same way. Others are more elaborate. The best-known example is the Elliott Wave. Ralph Nelson Elliott was a Kansas-born accountant who spent much of his working life reorganizing railroads and state finances in Central America and who, during a debilitating illness, devised a new charting methodology. Investor psychology, he felt, moves in waves of optimism and pessimism; and these waves can be seen in the stock market again and again, at different times and at different time-scales. His theories gained attention in the 1930s, when he correctly predicted a few market turns, and public interest in them revived in the 1980s.
Present Shock: When Everything Happens Now by Douglas Rushkoff
algorithmic trading, Andrew Keen, bank run, Benoit Mandelbrot, big-box store, Black Swan, British Empire, Buckminster Fuller, business cycle, cashless society, citizen journalism, clockwork universe, cognitive dissonance, Credit Default Swap, crowdsourcing, Danny Hillis, disintermediation, Donald Trump, double helix, East Village, Elliott wave, European colonialism, Extropian, facts on the ground, Flash crash, game design, global pandemic, global supply chain, global village, Howard Rheingold, hypertext link, Inbox Zero, invention of agriculture, invention of hypertext, invisible hand, iterative process, John Nash: game theory, Kevin Kelly, laissez-faire capitalism, lateral thinking, Law of Accelerating Returns, loss aversion, mandelbrot fractal, Marshall McLuhan, Merlin Mann, Milgram experiment, mutually assured destruction, negative equity, Network effects, New Urbanism, Nicholas Carr, Norbert Wiener, Occupy movement, passive investing, pattern recognition, peak oil, price mechanism, prisoner's dilemma, Ralph Nelson Elliott, RAND corporation, Ray Kurzweil, recommendation engine, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, Skype, social graph, South Sea Bubble, Steve Jobs, Steve Wozniak, Steven Pinker, Stewart Brand, supply-chain management, the medium is the message, The Wisdom of Crowds, theory of mind, Turing test, upwardly mobile, Whole Earth Catalog, WikiLeaks, Y2K, zero-sum game
Nor did the economists using fractals manage to protect their banks and brokerages from the systemic effects of bad mortgage packages, overleveraged European banks, or the impact of algorithmic trading on moment-to-moment volatility. More recently, in early 2010, the world’s leading forecaster applying fractals to markets, Robert Prechter, called for the market to enter a decline of such staggering proportions that it would dwarf anything that has happened in the past three hundred years.16 Prechter bases his methodology on the insights of a 1930s economist, Ralph Nelson Elliott, who isolated a number of the patterns that seem to recur in market price data. They didn’t always occur over the same timescale or amplitude, but they did have the same shape. And they combined to form larger and larger versions of themselves at higher levels, in a highly structured progression. Prechter calls this progression the Elliott Wave. We may as well call it fractalnoia. For not only is the pattern supposed to repeat on different scales and in progressively larger time frames; it’s also supposed to be repeating horizontally across different industries and aspects of human activity.
New Market Wizards: Conversations With America's Top Traders by Jack D. Schwager
backtesting, beat the dealer, Benoit Mandelbrot, Berlin Wall, Black-Scholes formula, butterfly effect, buy and hold, commodity trading advisor, computerized trading, Edward Thorp, Elliott wave, fixed income, full employment, implied volatility, interest rate swap, Louis Bachelier, margin call, market clearing, market fundamentalism, money market fund, paper trading, pattern recognition, placebo effect, prediction markets, Ralph Nelson Elliott, random walk, risk tolerance, risk/return, Saturday Night Live, Sharpe ratio, the map is not the territory, transaction costs, War on Poverty
The equity reduction in an account. The maximum drawdown is the largest difference between a relative equity peak and any subsequent equity low. Low drawdowns are a desirable performance feature for a trader or a trading system. Earnings per share (EPS). A company’s total after-tax profits divided by the number of common shares outstanding. Elliott Wave analysis. A method of market analysis based on the theories of Ralph Nelson Elliott. Although relatively complex, the basic theory is based on the concept that markets move in waves, forming a general pattern of five waves (or market legs) in the direction of the main trend, followed by three corrective waves in the opposite direction. One aspect of the theory is that each of these waves can be broken down into five or three smaller waves and is itself a segment of a still larger wave.
Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals by David Aronson
Albert Einstein, Andrew Wiles, asset allocation, availability heuristic, backtesting, Black Swan, butter production in bangladesh, buy and hold, capital asset pricing model, cognitive dissonance, compound rate of return, computerized trading, Daniel Kahneman / Amos Tversky, distributed generation, Elliott wave, en.wikipedia.org, feminist movement, hindsight bias, index fund, invention of the telescope, invisible hand, Long Term Capital Management, mental accounting, meta analysis, meta-analysis, p-value, pattern recognition, Paul Samuelson, Ponzi scheme, price anchoring, price stability, quantitative trading / quantitative ﬁnance, Ralph Nelson Elliott, random walk, retrograde motion, revision control, risk tolerance, risk-adjusted returns, riskless arbitrage, Robert Shiller, Robert Shiller, Sharpe ratio, short selling, source of truth, statistical model, stocks for the long run, systematic trading, the scientific method, transfer pricing, unbiased observer, yield curve, Yogi Berra
Later, the experimenters told the subjects of the deceit. Even with such clear discrediting evidence, the subjects continued to believe, to a considerable degree, that they were able to discriminate real from fake suicide notes. Other experiments conducted along similar lines have found the same effect: a belief can survive a total discrediting of its original basis.93 These ﬁndings predict how believers might react if Ralph Elliott, W.D. Gann, or Charles Dow were to return from the grave and announce that their methods had been intentional scams. It is likely that many currentday practitioners would continue to believe. Given that Elliott wave analysis, or at least one version of it, has now been reduced to an objective algorithm, it will be interesting to see the reactions of EWP believers if objective tests fail.94 Subjective Methods Most Likely to Suffer the Conﬁrmation Bias Some subjective TA methods are more likely to encourage the conﬁrmation bias than others.