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Conflicting information

  #14 (permalink)

North Carolina
Trading Experience: Beginner
Platform: NinjaTrader, Tradestation
Favorite Futures: es
Posts: 644 since Nov 2011

Let me take a stab, imagine the market has two states "trend" and "mean reversion". All the rules, based on price, for state A will lose money in state B and vice versa. Second imagine the market randomly switches between the two modes based on a hidden secondary variable. If you can know whether A or B is more likely then you can profit. This is "predictive". On the other hand, a trading system can also profit if the mixture between A or B favors A or B over some period and the trading system is designed to favor A or B. However, the trading system's profits are the result of random factors. The trading system is seeking a type of global optimal based on the mixture.

Sometimes traders can combine price and other information to make useful trades. The information frequency of the other information will determine how often and when those traders can trade.

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