Beyond Right and Wrong Towards Inspiration, 09/10/05

A New Kind of Science
Beyond Right and Wrong Towards Inspiration

When NKS came out, my initial response was to take Dr. Wolfram's pattern encoding technique and automate it to search for trading anomalies.

Yesterday, prompted by a discussion on Dr. Niederhoffer's site, I wondered if I could create a New Kind of Science trading system. So I coded up the example on page 25 of NKS, the Sierpinski Triangle, entered long after a win and short after a loss, and added Larry Williams' first profitable close or after two days as the exit strategy.

And ended up with a statistically significant and really quite fascinating trading system (SP, 97 to present):

    570/865, 66%, avg 1.0 pts, sd 17 pts, z 1.8

This path is deep: there is an entire family of trading systems and an entirely new line of inquiry here with all the serendipity and creativity that implies. Which is the benefit of looking beyond whether something is right or wrong towards the inspirations all deep musings supply.

The control charts for the above system:

Henry Carstens
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