Random Walk Theory

BSD · Feb 12, 2008, 4:31am

Quote:

Originally Posted by BSD

Public track records say one thing which clearly debunks the notion that it is possible to significantly outwit markets:

Kenneth Grant, in "Trading Risk: Enhanced Profitability through Risk Control", depicts his experience as risk manager for some of the best and most successful hedge funds, amongst others Paul Tudor Jones funds and Steve Cohens SAC Capital, that:

"ACROSS ALL TRADING STYLES, TIME FRAMES AND TRADERS, ONE RULE HOLDS TRUE:

10% OF ALL TRADES INEVITABLY ACCOUNT FOR 90% OF PROFITS !"

QED.

LOL, for the tenth time.

firewalker99 · Feb 12, 2008, 4:51am

Quote:

Originally Posted by BSD

People just waste a lot of time and energy erroneously believing that if they just keep investing more sweat and midnight oil on studying markets they'll eventually discover the secret.

They won't, because there is no secret.

Are you sure? If you looked at the best selling books (oh wait, there's also the DVD!) of 2007, one might think there is.

BSD · Feb 12, 2008, 5:00am

Quote:

Originally Posted by firewalker99

Are you sure? If you looked at the best selling books (oh wait, there's also the DVD!) of 2007, one might think there is.

LOL !

firewalker99 · Feb 12, 2008, 5:18am

Quote:

Originally Posted by BSD

I've explained more than clearly why there cannot be any secret to a market that is composed not of an inner logic or system that would be seperate from it's constituting participants, no, a market is nothing but the sum of it's constituting participants, each of whom has his own agenda, doing his own thing.

There are those who believe that 'external factors' which have an impact on us all influence the decisions we make as individuals. Hence we might think we are making decisions for ourself, but basically we are governed by another force of which only the effects are visible (like gravity). I'd even go so far as saying it comes down to performing an exploratory factor analysis to identify if such variables exists. We are thus looking for yet unidentified unobserved causal factors. Unfortunately on the scale we are talking about, this isn't a very realistic task to perform.

Of the above there seems to be a subgroup, who believe the lunar cycles is one of those external factors. Incidentally, this thread might interest you guys as well:

http://www.trade2win.com/boards/gene...ar+moon+cycles

Splitlink · Feb 12, 2008, 6:08am

Quote:

Originally Posted by firewalker99

There are those who believe that 'external factors' which have an impact on us all influence the decisions we make as individuals. Hence we might think we are making decisions for ourself, but basically we are governed by another force of which only the effects are visible (like gravity). I'd even go so far as saying it comes down to performing an exploratory factor analysis to identify if such variables exists. We are thus looking for yet unidentified unobserved causal factors. Unfortunately on the scale we are talking about, this isn't a very realistic task to perform.

Of the above there seems to be a subgroup, who believe the lunar cycles is one of those external factors. Incidentally, this thread might interest you guys as well:

http://www.trade2win.com/boards/gene...ar+moon+cycles

Are these what the Spanish call "lunatic cycles" because, if they are, its quite a big sub-group you're talking about.

black bear · Feb 12, 2008, 6:19am

Quote:

Originally Posted by Splitlink

Are these what the Spanish call "lunatic cycles" because, if they are, its quite a big sub-group you're talking about.

Hi Split

your on form today

Is this the group we make our living off Split

have a good week if not already, off out in a moment

as per usual, but ftse is holding my attention at the minute....................again

FXSCALPER2 · Feb 12, 2008, 7:41am

A chart generated from random phenomena doesn't itself has to be random. A true randomwalk like a toss of a coin will produce a chart that will look like a stock chart because the principles gooverning the two are similar. This is, by the way, knowable a priori. A truly random event is serial and you have to look at each event to see the randomness. If you bunch the events in larger chunks, which is what charts do, then due to large diviations which take time to disappear, you will get recginisable and tradable patterns. This is the reason why trading is not gambling: the data are not (under normal circumstances) rigged.

It is misleading to look at random charts and compare it to a random walk chart like a coin toss because you really do not trade the random walk itself but the chart of the random walk which needn't be itself random.

firewalker99 · Feb 12, 2008, 8:54am

Quote:

Originally Posted by FXSCALPER2

A chart generated from random phenomena doesn't itself has to be random. A true randomwalk like a toss of a coin will produce a chart that will look like a stock chart because the principles gooverning the two are similar. This is, by the way, knowable a priori. A truly random event is serial and you have to look at each event to see the randomness. If you bunch the events in larger chunks, which is what charts do, then due to large diviations which take time to disappear, you will get recginisable and tradable patterns. This is the reason why trading is not gambling: the data are not (under normal circumstances) rigged.

It is misleading to look at random charts and compare it to a random walk chart like a coin toss because you really do not trade the random walk itself but the chart of the random walk which needn't be itself random.

So are you saying that although coin tosses themselves are random, the chart of a coin toss experiment is not?

Have a look at the attached XLS file (you need to enable macro's for this to work). You can generate a chart based on flip coins.

Feb 12, 2008, 7:41am	#31
FXSCALPER2 Veteran Member Member Since Jan 2006 968 Posts	Re: Random Walk Theory A chart generated from random phenomena doesn't itself has to be random. A true randomwalk like a toss of a coin will produce a chart that will look like a stock chart because the principles gooverning the two are similar. This is, by the way, knowable a priori. A truly random event is serial and you have to look at each event to see the randomness. If you bunch the events in larger chunks, which is what charts do, then due to large diviations which take time to disappear, you will get recginisable and tradable patterns. This is the reason why trading is not gambling: the data are not (under normal circumstances) rigged. It is misleading to look at random charts and compare it to a random walk chart like a coin toss because you really do not trade the random walk itself but the chart of the random walk which needn't be itself random. __________________ Is life so dear that we should blame men for dying in adventure? Is there a better way to die?

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