Topic: Who or what is causing resistance in the $120's (Read 2836 times)

this is definitely a respectable model, but i don't think it fits the bill. it may not even work well in practice, as long as more than one market participant is privy.

from a game theory perspective, briefly,

it's not just about what the players know, it's also about what the players know about what the other players know.

in a market with a regularity that is known only to a small few, it will still be self-correcting (i.e. the regularity will dissapear) as there will be regressive attempts to undercut each other's profits, as long as each of them knows that the other knows about the regularity.

The intermediate-range model I am sharing perhaps addresses your question ...

• Its basis: that the rapid 4-5x annual underlying growth rate of the bitcoin economy will cause bubbles as speculators get ahead of the trend
• Speculative financial bubble theory predicts a certain price pattern, e.g. double exponential price growth that enables recognition of the start of the bubble, and a subsequent decline to the underlying trend post-bubble, where the decline has approximately the same duration as the run-up
• This pattern is stable because of the relatively large proportion of new, not-fully informed speculators who join the rally
• It is advantageous to proclaim the start of a bubble because not-fully informed speculators may be greedily motivated to jump on board assuming that they can exit before the top with big gains
• It is advantageous to proclaim the decline of a bubble, because that notion, when widely disseminated, facilitates the decline
• In a bubble, the majority of the participants are not knowledgeable traders, and thus ignore the published model

No. The whole idea is to beat the market.

that's an incredible question, and i certainly need to think about it more, but i suspect it may not be possible because of the anti-inductive nature of the market. this is an additional property of the game that adds complexity outside of the cooperative model.

in the cooperative model, the general idea is to copy the actions of others. this is a simplistic model, but is sufficient to explain the first effect i mentioned above: 1) conflict of interest ensues because practitioner wants others to follow his actions.

but the game is more complex than that. say, for instance, i post a target price -- that is, i announce what price is my exit point in a bull run. regardless of how much i hold compared to the market cap, it is in everyone's best interest to sell immediately before me, because each of them would get a better price than otherwise. this, however, would yield a negative externality to all the other players -- everyone who did not strategically undercut my price target, and myself. this explains the second issue 2) information loss to the practitioner.

IN FACT, this occurs every single time there is an 'imbalance of information' among players in the market. if some subset of market participants recognizes a regularity, their "best response", or profit-maximizing strategy, is to anticipate price movements in this way. the amazing thing is that the actions of these 'privileged' participants works to minimize the regularity!

this is the so-called 'anti-inductive' principle, basically that known regularities in markets are not stable.

On a related note, in the strong efficient market hypothesis, it's impossible to speculate with better chances than 50/50. disproving this hypothesis is equivalent to proving the TA-hypothesis, basically that some (profitable) information imbalances can exist for a significant period of time.

By now you've probably realized how this ties together. Any algorithm that 'predicts price' must be able to identify a known regularity, and known regularities are not stable.

Bringing back the game-theoretic example, imagine if the practitioner wanted to 'outsmart' a player by posting misleading but profitable analysis. if this information was known to all players, then they would correct for it -- but then the practitioner would as well -- and so on an so forth in infinite regress.

Can you see any way around this problem?

Sorry for hijacking the thread, but that was an excellent question

--arepo

Only an unbiased algorithm (i.e. betting on no change or betting on random change) lacks self-competition, and only because it also lacks profit opportunity. Any biased algorithm will see effectiveness trend towards zero (from either positive or negative) as the algorithm perpetrates, thanks to the splitting of profits/losses for the particular algorithm.

What would be necessary for someone be able to honestly describe their model publicly, without that reveal influencing the validity of the model, and with that person, and anyone else using that model, being able to profit at least as much as they would without the model being made public? In other words, is a profitable algorithm that takes into account not only it's own existence, but other people's knowledge about it's existence, possible at all? And what would such algorithm be like?

thank you, sir!

having just recently taken an interest in game theory, and exercising my knowledge by trying to model emergent, real-time strategy games like "StarCraft", i've found it an interesting approach to apply it to speculation.

i'm currently working on a model that assumes that the structure is a general "game of cooperation" (game-theoretic for 'buy when others buy, sell when others sell'), and that traders cooperate with each other by coding information into the price: "buy-" or "sell- signals". incidentally, this would strengthen the robustness of the so-called "TA-Hypothesis", something which i tend to take for granted

thought you would find that interesting, given your interest in the above game theory.

+1

Of course telling folks that this bubble is collapsing like any other speculative financial bubble, even with detailed technical analysis, will very likely not prevent the collapse from completely playing out.

By the way, watching both Bitcoinity and Clark Moody's realtime bitcoin charts over the course of this bubble has given me a deeper appreciation for the various patterns. They make more sense now that I see the outstanding limit orders, how resistance forms, how candle patterns form tick by tick, and so forth.

this is an interesting effect from a game theory perspective that is, unfortunately, unavoidable. i have often agonized at how posting technical analysis injects such chaos (literally) into this 'game'.

on the one hand, the practitioner obviously believes his own work, as it is his own analysis. naturally, if he's going to 'play', his actions would be to buy if he is a bullor sell if he is a bear. if he is to share his work, it more often than not 'shows his hand'. the reason this is problematic is because there is a conflict of interest between being genuinely willing to objectively share one's work, and knowing that if one's work is convincing enough, and sways enough people, that it will become self-fulfilling.

contrarily,

the practitioner also suffers an 'information loss' compared to his opponents, because the game itself (like many) consists of predicting the actions of large numbers of other players, and it is a game of limited information. by 'showing his hand', the practitioner, more likely than not, has simply informed a large number of people what action the practitioner has taken*.

what i mean to say is, even verifying one's position in the market wouldn't help; it's an emergent property of a very complex game.

*unless the practitioner is 'bluffing' (i.e. posting intentionally misleading analysis), in which case a player may correct for that, but this regresses infinitely, and is one manifestation of the possible 'chaos'.

I dunno about anybody else, but I'm not placing any BTC buy orders since I'm waiting for LTC to hit MtGox.

good quip 

TA isn't all such stuff

+1

If this bubble is indeed similar to the June 8, 2011 bubble, then fierce resistance is to be expected all the way down to the full collapse of the bubble. Over the three months of decline back in the summer and fall of 2011 there were a number of memorable price points that I commented about at the time, e.g. one post was "15 is the new 17" and so forth.

while the data may be skewed, even severely, as you suggest, it would be difficult to break this fundamental 'law' of market behavior. i think this explanation is more likely than any other, at least by occam's principle.

i hear what you are saying, but the bounces and the resistance levels are "fake" seeing there was an intervention by mt gox. so i think charts mean nothing when they dont show actual information imo.

it's funny because like in the religious of old, lack of understanding of a regularity in nature yields an immediate suspicion of a larger, manipulative agent

it was the major support that the first leg down bounced off of (within reasonable error), and marked the bottom of the resulting "bearish pennant" (triangle consolidation) pattern.

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major supports on the way down become major resistances on the way up.

Prediction quoted.

it just seems like it has an artificial feel to it. Just seems like a trap. But seeing that you cant technically short it,anything that is being set up has to be something to the upside imo. I think the whales are accumulating coins now and will sell them right into any kind of rally. There needs to be some kind of stimulus now to get the volitility going. the ddos excuse isnt going to work anymore.

Probably, yes. We just came out of a surprisingly severe crash. Short-term, I wouldn't have the courage to bet either way on sizable movement from here, up or down. We could be going anywhere - or nowhere.

There are SMA's Bollinger Bands, RSI hitting 50, the zero line of MACD... That is just the Hourly chart

it's meeeeeeeeeeeeeeeeee

Should there be resistance?