Automation

Modern “finance” is famous for piling up abstractions on to of each other to the point that no one understands the actual dynamics and this, unironically, keeps the whole thing “safe” since at some point no one touches it anymore - it becomes a solidified cathedral of abstract bullshit, until it crashes down, like that Celsius or FTX .

The finanical theory is general relies haavily on a fundamentally wrong assumption, which underlies the abstract probability theory too, that obverved events (values of a so-called “random variable”) are independent from each other, and therefore some inferred properties, like the “law” of large numbers hold.

Once the independence assumption (and the abstract concept of mathematical randomness) are removed, everything collapses back to uncertainty, which is exactly right, provided that the factors which will create further events are not there yet or did not have enough weight.

This is why event the less wrong, frequency-based probabilities does not apply, because the system under observation are not “closed” and fully observable in principle. Past performance does not imply anything certain, only reinforces common beliefs.

What then about all these PhD-level books? Just abstract sectarian bullshit.

Don’t you remember books about Freudian “psychology” with an ego, super-ego and shieeet? Well, just like the whole field went from Freudian abstract bullshit, via Milgram, to Evolutionary Psychology, finance went from its own abstract bullshit (assumptions of rationality, independence, efficiency) to what we call “behavioral finance” where huge crowds of idiots are swayed by greed, fear, mass hysteria and clever memes in an environment full of “bad actors” of any imaginable kind.

What we need, however, are simplest but correct mathematical modes which formally define what we are talking about. Every single word we use, at least in theory, should have precise mathematical meaning, and this is not that hard as long as we remain grounded into reality and did not invent abstract bullshit.

Where the “real stuff” may come from? From the “wire” which links transacting (in-wire representations of values) entities and from transactions themselves (what goes where).

Thus we do not start from the abstract theories of modern finance, but from reverse-engineering of how particular trading platforms. Binance did excellent job of making its API and underlying basic math publicly available, which was one of the reasons of its enormous success - they made the basic things clear and transparent.

So, unless we are market-makers we have to focus on on-the-wire transactions and how they affect our accounts. From this we could infer precise definitions of vague concepts.