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Comment by jokoon | Hacker News Reader

An online friend just got into currency trading and went into some tutorials about reading curves. Apparently there are recurring curve patterns, which allows one to predict where a rate is going. If you can code up some pattern recognition algorithm, there might be a way to make money.

Although I'm very skeptical about those patterns, because there could be someone trading back and forth to create those trends, and screw you when they want.

Anyway analyzing data and gaining money with it makes really no sense at all. Surely you can make money to live, but there is no point to it until you really are able to win big, and nobody does. Investing money where real business create economic activities that are in effective demand, maybe. But trading numbers, that's really an awful thing.

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If those patterns existed and were detectable, the moment people started trading on those patterns (or wrote bots to do so), the pattern would disappear.

This is one of the services the market provides. It creates uniform price conditions across time and space. If there is a discrepancy that doesn't make sense (like a recurring profitable pattern in stock prices), you can make money by fixing it.

"Trading numbers", as you call it, is (through a layer or two of indirection) helping to establish true prices, transmit market information, provide liquidity, etc. All of these things are critical for "real business" to operate efficiently in a large economy. The abstract markets create huge value for "real business" and its users charge a small percentage of the value created.

I've tried trading on patterns for a short while.

Problem is, those patterns do exist, but they are chaotic behaviors, and transition probabilities are already priced in. So that, for a non-causal analyst looking at past data they look very reliable, but for somebody with no forward knowledge, they are useless.

How else beyond being a precog and insider trading could one have forward knowledge?

By getting your data with days after the fact, and looking at the patterns with all the data graphed.

Or, in other words, the way those market analysis courses and gurus teach people to read the market. The patterns are very reliable if you ignore causality.

I might be misreading what you are saying, but how is getting data days after the fact forward knowledge?

Past performance is no guarantee of future results.

I am a technical analyst. Patterns do occur but ultimately prices are driven by fundamental events. Interest rate decisions, market data releases and similar. When that occurs no pattern can survive on the smaller timeframe. Technical analysis works but it is not written in stone.

What are your thoughts on A Random Walk Down Wallstreet? He pretty thoroughly picks apart the efficacy of technical analysis vs buying some indexes with supporting data.

> Technical analysis works but it is not written in stone.

Works 60% of the time 100% of the time.

Haha, kinda. My daily audit shows that I am on average 63% right. It comes up to cutting your loses early and riding out the profits.

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