lilsummer / sparksummit2020

Sample Databricks notebook for the 2020 Databricks / Spark Summit

SparkSummit2020

Nothing in this repo contains investment advice. We propose a metaphor for regarding the market as a conversation between 2 participants. Always check with your registered financial advisor before making personal investment decisions.

The best opportunities that exist for investors are the misperceptions of others. This is the fundamental assumption of the Efficient Market Hypothesis. When investors, as a group, lose thir way and accidentally mis-price an instrument a new group of speculators rush in to correct that misperception. They “beat the market”.

The market consists broadly of 2 groups:

• bulls who insist prices will continue to rise, and
• bears who insist prices will continue to fall.

From their perspectives, and for the moment, they are both right. There’s only 1 thing that obscures their vision: the hard right edge. The hard right edge could be the limit of historical fundamental data about a company, its supply chain, its ability to acquire talent, etc.

There’s another way to discover misperceptions: by listening to, and interpreting, the conversations of the market participants. This conversation and its lexicon has been existed as long the markets themselves. Japanese candlestick charts go back to the 17th century, the same century of the Dutch tulip crisis. Today we call that language technical analysis, ("TA").

Just as machine learning has given us the ability to predict how to finish our sentence when we type an email so can we look ahead to see how the bulls and bears will finish their sentence.

A beginner’s mistake is to think of prices as a physics problem like leverage or water pressure: if you push hard in one direction the water is bound to move in the other. That assumption fails frequently because prices are build on perceptions, not physics. Those perceptions are better understood by considering the abilities and motivations of the participants in that conversation, the investors, the bulls and bears.

In 1996 I began trading with this methodology and along with my partner Doug Fairclough we created a website called ClearStation. We called it 3-point investing where TA was only 1 points. The other 2 were fundamental and communinity analysis. I'll cover those as this repo evolves.