mql5

Fallacies, Part 2. Statistics Is a Pseudo-Science, or a Chronicle of Nosediving Bread And Butter

The first part of the article heading is a quotation from the post by SergNF dated April 17, 2008 14:04, https://www.mql5.com/ru/forum/108164. Well, even the most strict mathematics turns into a pseudo-science when used by a "researcher" that decides to play with attractive formulas without any practical application.

The skepticism of the quotation author, even moderated with three "smiles", is obvious. The reasons for this are quite clear: the numerous attempts to apply statistical methods to the objective reality, i.e. to financial series, crash when met with the nonstationarity of processes, "fat tails" of accompanying probability distributions, and insufficient volume of financial data. None of the existing market models can be recognized as sufficiently adequate to reality. And even if we manage to find some statistical regularities, the results of their utilization appear to be disproportionate to the efforts invested into their eduction.

In this publication I will try to refer not to the financial series as such, but to their subjective presentation - in this case, to the way a trader tries to halter the series, i.e. to the trading system. The eduction of statistical regularities of the trading results process is a rather enthralling task. In some cases quite true conclusions about the model of this process can be made, and these can be applied to the trading system.