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Thank you!

You're welcome!

Thank you!!

Yes indeed there are approaches which have subsequently been developed that you can use to take into account changing volatility - topics for the future!

Thanks for that!! I'm definitely planning to make more videos on this subject - just been really busy lately! Thanks again!!

I will try!! Thank you!

I've definitely come across people who are convinced that the BSM model is fine. But I think smarter traders know that there are problems with it and have fudge factors they use to deal with this, particularly in terms of how they cope with the possibility of more extreme market movements. I think this would make a good subject for future videos!! Thanks again!!

Thank you!

Thanks - I really appreciate you taking the time to say so!! I'll try to get back to making some more videos soon.

That's a good point that it's a bit subjective and depends on an individual and what they consider these timeframes to be. My thinking in this video would be that short term is over a few days, medium is months, and long is years.

Interesting!!

Great comment - that's a really good point, and I do agree that if you find something that works for you that's a great thing. The point I'm mainly trying to make is the same one as you - it's an art and it's not guaranteed to work all the time, so be aware of when and why it might not work. Thanks again!

I think that using an equation to describe price movements is always going to be compromised in one way or another - it depends on what you are hoping to achieve by doing so.

Wow - love it!! Thanks!!

Thank you - glad you liked it!!

Thank you - absolutely right and a good point - the BSM equation is obvious a brilliant piece of work, and it still gets used despite its flaws but usually with some fudge factors applied. What surprises me is how little though Mandelbrot's work seems to get attention (maybe that's a false impression on my part?), which I think discovered something much more interesting than that markets can behave approximately like a random walk. Thanks again!!

Thank you!!

You're welcome and I'm really glad you found it interesting!! Fractal cascades are probably something that gets talked about more in a geophysical context e.g. for modelling atmospheric phenomena, because they represent a simplistic physical model of what's happening to create these distributions. But I think they are interesting to think about in terms of financial market behavior as well! And they're really useful for generating synthetic data that exhibits a Cauchy distribution.

Thanks!! Really appreciate that!

That is so true!!🤣

Really good thoughtful comment - thanks for this. I agree that most of the time markets are pretty much unpredictable, but my opinion is that I tend to think that the approach of people like Warren Buffett in looking for opportunities and value is valuable too, rather than just seeing investment as purely a probabilistic thing. Also, volatility clustering is quite common, even for boring stocks on short timeframes - it’s definitely not something you have to wait decades to see - though really big crashes/movements are indeed rare. I think there are a few “so whats”, the main one being that most returns from stock investment (which is more value focused, I agree that Forex is more speculation and a more dangerous game to play) are attributable to brief periods where the market soars or crashes (and the same is true for Forex). This is useful to understand regardless of what your investment strategy is. In this link this guy Mark Tilbury explains this quite well from a regular investor point of view (P.S. I don’t know anything about this guy or whether his advice is generally good, I just stumbled on it, but I think his observations around the 10 min mark are quite good and very common for investors who have been in the market for a long time) ruclips.net/video/wNzql5TZ-iY/видео.html. This video about Robert Kiyosaki’s ideas reflect a related theme, around the fact that the standard investment narratives don’t necessarily accurately reflect how economies/markets behave: ruclips.net/video/uF_cJF4ukTY/видео.html. Mandelbrot’s ideas capture the mathematical side of this. I’m definitely not trying to persuade you (or anyone) of anything here - just thought you might be interested :).

​​​​​@@fractalmanhattan Thanks for the response and the video suggestions. I really wanted to stress that forex movement and stock/index movement is vastly different. I agree that the efficient market hypothesis does not apply very well to good stocks and indices, but it's a completely different story for the forex market. The forex market may not be perfectly efficient, but a forex pair will try its best to remain stable and price itself in to keep stability and keep accurate data on the relative strength between two economies. When it comes to real vs fake charts, I like to describe fake price charts as "predictably unpredictable" (because the mathematical formulas used to create the random walk cannot emulate random phenomena such as flash crashes, major news release figures, etc.), and the real forex price charts as "unpredictably unpredictable", because big news, flash crashes, bubbles, etc. can cause abnormal movement, as mentioned earlier, however, nobody can predict exactly when that will happen, making it... funnily enough... random, and actually, it's a different breed of random compared to pseudorandom. Both are random. But yeah, it's fascinating. The more I think specifically of forex movement, the more complicated everything gets. The only constant you can rely on to make money is mean reversion (Using a Bollinger Band or an Envelope indicator to find abnormal stretched moves in the forex pricing). I heard that mean reversion is best for forex, and trend following is perfect for good stocks and indices. But don't expect to make money in the forex market using trend following systems. If you can trade forex profitably, you can trade anything.

Thanks a million for these great insights @@dee23gaming - really appreciate you sharing these useful ideas.

Thanks and yeah - I think that is a pretty accurate observation - in the real world there's a huge number of variables, and this adds to the chaos and complexity!! I should get around to talking about high-dimensional chaos at some point :). Thanks again.

Thanks again que bono! I'm glad you enjoyed the content, and I really appreciate you taking the time to say so!!

Thank you - that's much appreciated!!

Perfectly correct comment - theoretically - I think though real markets show temporal structure that randomness doesn't, though it would be pretty cool if you could use markets as a genuine random number generator! :) Thanks for your great comment!

Thank you!!

Hee hee - thanks!! 🤣🤣🤣

Thanks so much again Brumor - really nice to get your messages. Glad you enjoyed it!! I probably overdid some of the sound effects and edited out some of the B roll and accompanying humor as I think some viewers didn't really like this. It's great though to experiment and learn some lessons from that! All the best and thanks again!

​@@fractalmanhattan No worries! I think the sound effects and humor were a great idea. Can't please everyone, I suppose. If you decide to keep this style in future videos, I'm sure you'll improve over time. Either way, you're already doing great and are bound to do awesome in the future also! :)

Thanks again Brumor - great feedback to get!

Thanks Tobias - that's a really good point. The Fed just orchestrated the rescue of the position and I think my video is a bit unclear on this - though most references I see to this event do colloquially describe it as a bailout. I don't want to create a false impression, so I've decided to edit out reference to the Fed - and again thank you for raising this. I'm not sure that I agree that the fact that LTCM's investments eventually became profitable proves the models were correct - mainly because you can demonstrate (and Mandelbrot did a lot of work proving this) that financial market statistics are inconsistent with theories based on statistical independence and normal distributions. LTCM clearly got something wrong if it required this intervention, and the nature of the rescue created controversy. But that doesn't mean that the BSM equation is useless either, you can make adjustments to better deal with the likelihood of extreme events. Of course, these are just my opinions. Thanks again Tobias

@@fractalmanhattan thanks for your thoughtful answers. I understand that it's not always possible to discuss everything in a video.

Yeah - some of it is a bit random for sure - perhaps too much of an in-joke in some bits, and partly because I'm experimenting. Your comment is appreciated -thanks!

My personal opinion only is that day trading is very risky and is only really suitable for very sophisticated traders, probably doing this professionally for a hedge fund or something like that. I tend to think that what people like Warren Buffett and Robert Kiyosaki say make good alternatives to the standard narratives on investing, but that said the standard advice isn't that bad ... I just think it can be oversold, and sometimes (in some economic/market situations) even a little harmful. But not the lose all your money kind of harmful, which day trading can be!

​@@fractalmanhattan What's the solution 😅?

In the story in this video, the answer for me personally was to invest in a house not in a managed fund - which worked out much better. I saw on a RUclips trading advice channel that the aim is to get rich slow rather than get rich fast (which often turns into lose money fast!), which I think is a really good description of what is likely to work. The key message I hope that is in my video is that it’s not that managed funds are necessarily bad, but more that they are not so great that you should only ever consider them when investing. Warren Buffett's advice is that you should really understand well what you are investing in - even if these are just short-term trades - and that the trick is that it's better to be investing rather than not. I can't give you advice, so please don’t take this as such, but my opinion is that it is okay to trade directly in the markets rather than via managed fund, but be aware it is harder work, and that you face greater risk, which depends on exactly what it is you are doing. I think though there's no simple solution and it depends a lot on your personal situation - Robert Kiyosaki talks about investing to make your money work for you, and he mainly talks about investing in housing, but he considers any investment where your money provides you a return is worthwhile. He seems to advocate for seeking opportunity by picking market swings as well - for example, he talks about how much money he made during the COVID pandemic. But basically his theme is to develop a habit of investing, and look for opportunities. It’s the opportunities part that the standard advice ignores.

Thank you, that's very kind!

Thanks for the feedback, it's always good to get. Yeah, I can definitely see what you mean here - probably experimenting a bit much! Also, I didn't want to seem too serious in this one, as if I'm offering criticism I want to seem like I am poking fun rather than being too intense :). It's a good lesson for next time though. Thanks again - great to get your comment.

​@@fractalmanhattanyou honestly put more information into 8 minutes compared to other peoples hour long courses. The visual representation isn't too bad, but the sound effects really are a bit much

@@GHOST25938 Thanks for that feedback - really useful.