I did it, but modeling an entire car in such a principled way would be a vast undertaking. It was not necessary to do this, a small part of it could be taken off and looked at. Obviously I am telling you all this for a reason.
I noted from day trading in 2008 that one approach away from technical analysis is to exploit a regularity until it disappears. But one can ask what would the problems with this approach be. Perhaps one is effectively modeling the market, with a tiny piece of the market's behavior.
The problem is maybe the fractal nature of the system being modeled. We have seen this on this blog on the 1 minute and 4 hour charts. No matter what information patterns may convey they do convey this, at very fine levels of detail (e.g. 1 minute) structure is remarkably similar at high levels of detail (e.g. 1 4 hour, 1 month). This suggests you cannot find a piece and cut it off to model at all.
Do you know the way a trading system may slide away from you and you try and add rules, if you have access to the system, to stabilize it, but to increasingly no avail. That is an attempt to impose structure on something which in a sense is alien to that kind of structure.
The market works to break structure and order. These structures do exist, hence arbitrage, but they disappear. Order and regularity is an apparent feature of naturalistic chaos but it is not a feature of market chaos, perhaps because the market is not truly chaotic.
Perhaps as a natural system, which it is to an extent (though this is an attempt to chop off bits of it for an explanation) it is more like the ocean than the endless shore beside it. It is dynamic but it is a program as well.
What this means is at a certain point of experience you do not make errors but you still do as the market functions correctly to take money from you, you have held the tide for only so long. That is why traders can die poor. But investors can live extremely long endlessly wealthy. This is because the regularity they exploit is set up to give you money.
Why - because it is money being created by a structure in society known as a company producing something for a cash transaction. The money is not coming from another trader in competition with you, but as a reward from society. If you get the right ones and if you do not day trade.
But this blog has been pointing out that right now money is not coming from creative productive action in this world but from $ itself, backstopped by the futures of the US government (low interest rates), to the benefit of Euro, but not really to the benefit of investors.
But if we assume that praxis still exists in this world and has not been eradicated by easy money, then we can assume the markets will and still do function correctly. That is what I mean by the real recovery.
(edited 7/6/14 9:38pm)
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