[hft_throwaway]

I think you are right on the money and most traders do use techniques analogous to the ones you describe when designing models:

http://www.decal.org/file/2945

"Alpha is often nothing more than taking commonly available data and mathematically encoding it in a signal correctly. Correct often means something as simple as using an rate of change instead of a difference, normalizing a value, smoothing a chaotic signal with an EMA, using a heteroscedastic weighted linear regression instead of a simple regression, or handling all numerical errors or edge cases."

It's not always easy to get this completely correct in every situation and traders face a reward function that doesn't necessarily reward correctness so much as avoiding Type II errors.

[anigbrowl]

I feel like I'm in the wrong job - clearly I should be routing ticker prices into my mixing desk and playing the market like a cheap violin instead of being an underpaid sound engineer.