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I believe discretionary price action trading can't be completely coded away despite the enormous development in computing industry (take IBM Watson which won Jeopardy quiz).
but technically if a human can compute then a computers should be able to.
Given enough budget and man power is it possible to create programs that can replace human tape readers?
Why or why not?
Thanks.
Can you help answer these questions from other members on NexusFi?
If tape reading can be described with definite inputs and definite expected outputs, a computer program can be written to perform the function described.
The problem is that the description of tape reading varies from one tape reader to the next.
Besides, I think there are already programs that outperform humans when it comes to analyzing the tape in real-time. Tape reading today is very different from what it was years ago and depends upon how liquid the market is among other factors.
They said it wasn't possible to sequence a human Genome, and then when 1% had been done after 7 years, they said it was a failed project and wouldn't be completed. 6 years after that and 100% had been sequenced. It took 13 years to sequence the first human genome, now it takes less than 24 hours.
In a field where exponential growth is prevalent; it's not a question of "if", but a question of "when".
"Free markets work because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or incentives for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can"
just throwing more CPU power fails to work in certain areas, a day to day example is encryption and decryption.
(see: P vs NP problem in computing). I suspect there is one such component in discretionary trading, if there is no such component well automation is straight forward, but am not able to put my finger on our suspected component.
So i keep hearing traders complain about HFT, about how its changing everything. There's a ton of posts about it all over the web, Cramer even complains about it alot. I want to know how many people really believe that trading has become difficult …
The difficulty may not lie so much in variations in definition or changes over time as a reluctance to be specific, a reluctance that stems from the fact that specificity makes accountability unavoidable. Price moves up and down just as it has since the first seller offered the first good. And these moves can be characterized and categorized as specifically now as they were when Livermore and Wyckoff were jotting down their notes on the backs of envelopes, or when deVilliers developed point-and-figure (or when Homma was inking his candles).
But many/most traders don't want to fool with that, preferring to "feel" their way into, through, and out of their trades. Successful traders are very specific about their criteria for entry and exit and they take every trade that meets those criteria, without regard to what they feel or how they feel. There's no reason why a computer can't do the same thing. In fact, the advantage to computerization would be the program's adherence to the plan, regardless of how much sleep it got the night before or how annoying the neighbor's lawn mower is or what the electric bill amounted to this month.
Aside from the fact that so few traders have thoroughly-tested and consistently-profitable trading plans to begin with, many of those who do have such plans begin to believe that they are smarter than their own plans. This can be a reflection of the evolution of the trader into someone who has internalized his plan and no longer frets over details or it can indicate the re-introduction of ego into the process. The latter can quickly lead to a downward spiral.
Coexistence rules, but PAT dynamics change over time as simple HH/LL strategies are easy to code and counter.
Just to give 2 examples: Subsequently many markets experience(d) dramatical changes in the odds of (failed) breakouts at point 2 and of V-shaped reversals.
But surely, the basic principles of PAT persist as long as exchanges remain auction markets.
Automated vs discretionary trading is like an arms race or evolution. Advances in automated trading will always result in changes to the markets so that human discretion will maintain an edge.
It must be that way in a free auction market because if automated systems became so good as to win all the time (or a very high percentage) there would be no one taking the other side of the trade (people do not give their money away). Instead the markets will change to take the automated systems' edge away.
