Rats trained to play the forex market

http://www.artmarcovici.com/rat-traders

by mjtokelly • 16 years ago

56 21 16 years ago

keyle• 16 years ago

That is ratsome.

Perhaps there is an elaborate rat society running around mazes and pressing switches somewhere in the bowels of Goldman Sachs?

patio11• 16 years ago

Much like the monkey throwing darts at the stock market chart who clocks professional money managers on average, this result proves nothing about rats or markets. It provides further experimental proof for the worst kept secret in history: professional money manager systematically destroy value.

yummyfajitas• 16 years ago

While it is certainly true that professional money managers don't beat the market on average, this does not imply that they destroy value.

Professional money managers and speculators in general, at least in principle, more efficiently allocate capital as a result of their speculative activities. This causes overall returns to increase. In a world without money managers/other speculators, market returns would be lower overall.

The simple model: in a world without money managers/speculators, overall returns might be 2%. In a world with 1 speculator, returns might be 2.1% and that speculator might achieve returns of 4%. In a world with many speculators, they might all achieve returns of 4%, and none of them would be beating the market. They are creating value, however.

(Another reason they don't beat the market is that many of them are not trying to. The manager of my Vanguard Target Retirement 2050 fund is currently trying to beat the market. In 2040 his goal will be to minimize risk.)

Retric2• 16 years ago

The stock market has little to do with allocating capital. The bond market does, but the stock market is mostly about valuing short term and long term risk with associated rewards.

cjg• 16 years ago

Survivorship bias explains his results.

nerfhammer2• 16 years ago

He claims after selectively allowing the best performing rats to breed the second generation of rats performed better than the first generation. If it were survivorship bias the second generation should be no better than the first.

PaulJoslin2• 16 years ago

If you take 80 people and tell them to randomly play the stock market, buying or selling - you will always have some that succeed and some that fail over the short term.

The question is, if the same people who 'succeeded' are put back to the start again and play randomly with a new batch of 80 people - would they still rise to the top, or perhaps this time have worse luck.

Comparing this to the rats, the long term testing / new rounds with a new set of 80 rats (including the elite) would help determine whether these rats are the best, or if it was chance.

If I understand this correctly, the decision the rat makes is based solely on hearing a certain frequency (pattern of trading emerge), unfortunately even if this is the case - trading by patterns could be extremely risky without the common sense / experience of a real trader to see what is really happening to the market.

olefoo2• 16 years ago

What the rats are doing (if this is not a well done prank) is exactly equivalent to what 'technical' traders and chartists do. As to why these techniques work; they are reacting to the intentions of other traders signaled in data. This may be a case where knowledge of the "underlying reality" that the market is reacting too (supposedly) is a disadvantage because it prevents noticing and reacting to the actual data.

That said, this whole thing reads like an elaborate practical joke.

PaulJoslin2• 16 years ago

You mean, like they're noticing a 'bearish gartley' pattern (in audio) and acting appropriately?

My point was, that although these can be 'indicators', you still require a human mind to determine whether the trade should be made. If it was as simple as matching patterns and trading, anyone would be able to do it.

megamark16• 16 years ago

This is the first thing I thought of when I read this:

http://dilbert.com/strips/comic/2010-07-03/?CmtOrder=Rating&...

ig1• 16 years ago

Dupe: http://news.ycombinator.com/item?id=514798

motters• 16 years ago

These rats clearly deserve $1000,000 bonuses. They are the indispensable financial innovators which drive our economy. These rats are too big to fail.

asdf333• 16 years ago

They are providing valuable liquidity to our financial markets. Is it too much to ask that they be rewarded for their contribution to society.

Seriously, this is the most ingenious thing I have seen in a while.

nerfhammer2• 16 years ago

How is this different than training a neural net on historical data?

mustpax• 16 years ago

Marcovici is a conceptual artist and this is satire. Wasn't sure if some comments here thought this was for real.

Take a look at his satirical illustrations about BP here:

http://sites.google.com/site/artmarcovici/

bobf• 16 years ago

I wish he had compared the rats' performance to the current publicly available "best of breed" programmatic approach that uses technical indicators. Other than that, the interesting part of the experiment seems to be how it may relate to training human traders more efficiently. Starting a fund based on trading with rats seems a bit satirical indeed..

Rats trained to play the forex market

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