Random?

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I just read the basic premise of "A Random Walk Down Wall Street". Does this book apply to day traders as well?

If the markets fluctuate randomly, then why even bother with chart analysis or trying to "time" the market? Is it really ALL luck?
 
If the books is based on random walk theory, the predictions of the model are inconsistent with empirical data.
 
I just read the basic premise of "A Random Walk Down Wall Street". Does this book apply to day traders as well?

If the markets fluctuate randomly, then why even bother with chart analysis or trying to "time" the market? Is it really ALL luck?

As a general rule, both chart analysis and market timing are indeed stupid :)
 
Well the markets are random most of the time. However its those occasions when it is not random that offer the chances to make money. Thank goodness for good old human emotion in the markets otherwise we may as well all pack up and go home.
 
Giantsbran, don't take anyone else's word for it. Open up a chart and look for yourself. Where does price turn? Where does it go? Do those points have anything to do with past price? Trendlines? Big round numbers? Pivots? Highs and lows? Etc etc.

Also have a think about what the market is. Why would it (or would it not) be a random walk?
 
Well the markets are random most of the time. However its those occasions when it is not random that offer the chances to make money. Thank goodness for good old human emotion in the markets otherwise we may as well all pack up and go home.



The question to really ask yourself is do YOU believe that in a trillion dollar industry the environment would be random?

No one knows who are the biggest players in each market, but they all understand the game.

You must decide which side of the fence you will be on, as this will determine how you approach your trading. That being one of either technical/fundamental or the dark side.

This applies mostly to the retail traders as the institutions have their edge, (http://www.trade2win.com/boards/first-steps/102730-trader-training-learning-2.html#post1244122 post 16) which is not available to most. Thus they couldnt care less either way, as they know how to profit from their edge.

Markets are either random or not, they cant be less random at times, this is a contradiction. What you mean is; there are times when you understand what is going on and there are times when you dont. Just because you dont, does NOT make it random.

At the end of the day, each to their own. We all believe what we want to believe, this is what makes the markets.

Like you said; thank goodness for human emotion:clap:
 
There are ways to make money in both random and non-random markers. The difference is irrelevant to skilled traders. It is relevant only to professors.
 
What is a non-random market? Please point me to that market, because I'd like to trade it :)
 
Look at price action relative to my S&R's. It doesn't look too random to me. This is a chart for cable. I could have posted any pair.
I entered a short today on Aussie, because at the beginning of the week .9291 was looking like high end comtainment. .9276 ended up being the peak.
I do have a hard time believing the markets are random.
 

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Look at price action relative to my S&R's. It doesn't look too random to me. This is a chart for cable. I could have posted any pair.
I entered a short today on Aussie, because at the beginning of the week .9291 was looking like high end comtainment. .9276 ended up being the peak.
I do have a hard time believing the markets are random.

Hi - I see about 12 (almost) evenly spaced lines on your chart - if I wipe all the candles, except (say) the first few, I would find it extremely difficult to deduce anything from those S/R lines about the actual path subsequently taken. There are a lot of lines - as time passes, some are crossed, some are rejected.

I might hypothesise that the longer price rises/falls, the more likely it is to reverse, but to me that is just one very basic economic argument.

So, whether or not it is technically a random walk, the path still appears random to me.

I am genuinely interested in what you would deduce (in advance) from the S/R lines on this chart - and let me stress that I absolutely do not want to initiate a TA v FA discussion!
 
As far as TA v FA is concerned, if you never bring it up, then I won't either. FA's are not even a part of my consideration in trading. I never talk about them even in my thread.
Eventusally, I'm going to do a series on my S&R's in my thread, just to show the tradeability of them. (I guess I am not impugning on the originator of this thread by saying that seeing he hasn't showed up since his original post.) I did a 5-part series on them in my blog-- 4xpipcounter.blogspot.com in circa Nov 2007. for now , let me cut to the chase.
My S&R's are proprietary, adn highly effective. The blue lines are the dailies, red--weeklies, and the yellow-- monthlies. I also have the yearlies and decade's, but that is a story for another day. The S&R's are figured before the TF begins. In other words, The S&R's for the weeklies are done on Sunday, therefore, it is not hindsight, nor is it ever possible for them to repaint.
A cursory view of the chart I attached, will show there were bounces off the lines and continuation processes. The simplicity of my S&R's is this. Using the weeklies as my example, use the hourly chart in viewing them. The rule is that when the hourly candle approaches the red line (weekly), a correction within that process takes palce. Measure the point it hit and the previous reference point, adn then take 38.2% of that, and that will be the minimum correction. In the rare event there is a minimum bounce, then look for a move on the other side of the line. Once there is a pullback, to the red line, that is the time to enter the position for a move to the next one. I took a small but quick short on cable last night based on that principle, but it was on the daily.
The difference is with the weeklies, the 4-hour candles would be plotted to monitor price action in that same regard. With the dailies, it would be the 15-min chandles, but there is one additional aspectr involved with them that I could explain, but that is the meat and potatoes of my S&R's. I make the levels, not the formula available for anyone who wants them for a partiuclar pair, just so they can see them in action.
One of the things that authenticates what I do is that I show things as in forward looking, not in the rearview mirror, like many technical discussions revolve. You know how it is, People will exclaim as they are looking at a set of charts, "Wow! Nice trade!" Then, after questioning, you find no one actaully executed the trade. It's all rearview mirror stuff. It's necessary to see what is happening in the future in order to execute a trade in order to make the pips. Not taking my bows or trying to act smug, but that's what I'm all about.
BTW, you made a good point. All the lines, within their TF's are evenly spaced, except the extremities. The labels I have are are D,W,M; R, S; 1,2,3. WR3 would be the 3rd weekly resistance. The 3's are always the extremities.
I like this comment, "what you would deduce (in advance)". Name 3 pairs, and I'll give you my weekly levels for them, and I will post them about 2:00am GMT on Monday. Afterward, plot them on your demo chart, and then enjoy watching the action.


Hi - I see about 12 (almost) evenly spaced lines on your chart - if I wipe all the candles, except (say) the first few, I would find it extremely difficult to deduce anything from those S/R lines about the actual path subsequently taken. There are a lot of lines - as time passes, some are crossed, some are rejected.

I might hypothesise that the longer price rises/falls, the more likely it is to reverse, but to me that is just one very basic economic argument.

So, whether or not it is technically a random walk, the path still appears random to me.

I am genuinely interested in what you would deduce (in advance) from the S/R lines on this chart - and let me stress that I absolutely do not want to initiate a TA v FA discussion!
 
Thanks - I appreciate the explanation. Have you ever automated/backtested?

I suggest cable, USDJPY and USDCAD and will watch your predictions with interest.
 
Cable, loonie, and the yen, You got it!
I never automate anything. A computer does not have the same shrewd mind nor can make the same judgments a human can. After all, it was created by a human.
Backtested ?That was how my S&R's were born. I do love mathematics. The thing I took note of a few years ago when I contructed them was the composition and ranges of trends within certain TF's. Backtesting has to be done in order to observe that. As an example, the median range for cable on a daily basis is about 145. It's a little less of late, because cable has gone sideways. My S&R's are a measurement of that range, as well as a measurement of prospective bounces, retracements, and continuation patterns.
My S&R's can always be backtested, because they will never lag, as they have been pre-determined before the action begins. In other words, after I send them to you, you can plot them on your demo chart, then go away for a week, then come back and check how they did from the previous week. They are more fun to watch live.


Thanks - I appreciate the explanation. Have you ever automated/backtested?

I suggest cable, USDJPY and USDCAD and will watch your predictions with interest.
 
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I just read the basic premise of "A Random Walk Down Wall Street". Does this book apply to day traders as well? If the markets fluctuate randomly, then why even bother with chart analysis or trying to "time" the market? Is it really ALL luck?
It is very easy to demonstrate that market movements are NOT random, so I am mystified as to why that book title carries so much credibility. Does anybody know what tests for randomness are used in that book, please?
 
Weeklies for the yen, cable, and loonie

Dommo, as I posted this, cable has been struggling at the WR1 at 1.5419. We will get a correction from this point, or we will have a continuation that will go to the WR2 at 1.5484.
BTW left-right is R 3,2,1, S 1,2,3



USD/JPY: 85.33, 84.80, 84.49, 83.86, 83.55, 83.02
GBP/USD: 1.5592, 1.5484, 1.5419, 1.5289, 1.5224, 1.5118
USD/CAD: 1.0561, 1.0461, 1.0400, 1.0278, 1.0217, 1.0117


Thanks - I appreciate the explanation. Have you ever automated/backtested?

I suggest cable, USDJPY and USDCAD and will watch your predictions with interest.
 
The originator of this thread was posing the question if he thought the markets were random. It would not do him any good to make a good trading strategy if in his heart-of-hearts he really feels that way.
The opposite of that is I wonder (Not knocking anyone.) what someone would be doing on a site like this one if they really believe the markets are random.


I think you should have a good trading strategy before make trade so that you have no loss and bankrupt
 
I don't believe that the markets are random in the long term but I do believe that the marketmakers try to make it look random, which means that short term traders should be very careful. Spikes and the like are always present in intraday trading, so stops are always in danger of getting triggered. This gives an impression of randomness but it is deliberate manipulation of the market.
 
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