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A very humble thought on math in trading. I say humble because I risk straw-manning quant (look, I have yet to meet an IYI type quant that Taleb would caricature. I& #39;ve been blown away by the curiousity and brains of every quant I& #39;ve worked with). So with that caveat...
I look at backtests. But their useful domain feels really narrow to me. I& #39;m not a quant so maybe it& #39;s just fear of what& #39;s over my head. I& #39;ll give an example of the type of idea that diverts my eyes from backtesty work.
I& #39;m more attracted to ideas that are upstream of past moves. Understanding flows is an example of that.
How does it interact with backtests?
At the meta level. When I see a backtest and long histories etc my first meta question is about is N really N?
How does it interact with backtests?
At the meta level. When I see a backtest and long histories etc my first meta question is about is N really N?
If the same dynamic governs a long time period that dynamic is driving actions. Markets are theater. There& #39;s a meta game of beliefs and narrative that cause large accounts to hit buy and sell. If the narratives and players preside over a large period is N possibly much smaller?
I& #39;d call it statistical regime shrinkage for lack of an educated term. Stickiness may be reinforcing N but what is reinforcing the stickiness? What mandates and rules are behind the money and what makes them change.
I like learning about portfolio construction math and I like playing with simple simulations. Simple simulations are limited bc they are generated by well-behaved distributions. But they are handy for intuition.
Backtests may offer more realistic distributions but they have their own baggage in the way they can limit your view. There& #39;s a siren song of understanding in them that is easily oversold if you open yourself to it.
If I& #39;m making a type II error it& #39;s the error I prefer
If I& #39;m making a type II error it& #39;s the error I prefer
So while I certainly like to indulge looking at backtests I& #39;m almost never getting excited about them (at least any non-short term stuff).
I& #39;m much more interested in what holds the theater together and activates flow or a new behavior. Something durable. With boundaries.
I& #39;m much more interested in what holds the theater together and activates flow or a new behavior. Something durable. With boundaries.
Things that you can see change, traceable back to humans giving a directive to convert money into risk or vice versa.
Ok, done w/ my poor man& #39;s @VitruviusCurve imitation
1 of my fave things written about markets didn& #39;t know it was about markets. https://ncase.me/attractors/ ">https://ncase.me/attractor...
Ok, done w/ my poor man& #39;s @VitruviusCurve imitation
1 of my fave things written about markets didn& #39;t know it was about markets. https://ncase.me/attractors/ ">https://ncase.me/attractor...
