My journey into forecasting started in 2005 when I came across an article in AI in Finance magazine called “Tahiti or Bust”. It outlined the experiences of an AI Expert who worked with an S&P trader to forecast the market. By combining neural nets and the trader’s expert knowledge, they were able to retire to Tahiti.
After about 2 years of trying to recreate their success, with little success, I discovered a little thing about the S&P and error measures, I found quite a few articles about people who were able to do very wellt rading in the short term. People like Larry Williams, who reportedly made $1 million trading futures in a year, starting with a $10,000 account.
http://www.amazon.ca/Made-Trading-Commodities-Last-Year/dp/0930233107
It was then that I noticed something about the S&P. Which is, if you look at the log of the S&P, which is that if you look at the long-term log value of the S&P, and draw a regression line, that it is 90% accurate. How many of these trading successes and strategies were based upon the long-term rise of the S&P, and how many were based upon other strategies?
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