Random Walk Theory

This is a discussion on Random Walk Theory within the General Trading Chat forums, part of the Reception category; Originally Posted by new_trader FW, I wasn't pressing a point. I didn't think that by saying you agree is the ...

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Old Feb 13, 2008, 10:36am   #51
 
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Originally Posted by new_trader View Post
FW, I wasn't pressing a point. I didn't think that by saying you agree is the same as saying I was right.
Well, not that it matters, I would've thought that was pretty obvious...

As for your rather rhetoric question... If I can only pick one number, then you already know what it would be. So why press me into saying 166? We all know there are only probabilities, not certainties.
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Old Feb 13, 2008, 10:37am   #52
 
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Originally Posted by firewalker99 View Post
Well, not that it matters, I would've thought that was pretty obvious...

As for your rather rhetoric question... If I can only pick one number, then you already know what it would be. So why press me into saying 166? We all know there are only probabilities, not certainties.

How can it be obvious? I wasn't sure I was right
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Old Feb 13, 2008, 10:45am   #53
 
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Originally Posted by FXSCALPER2 View Post
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.
I've had to give this some thought, but you're right: randomness of a phenomenon does not imply it is in itself random. You seem to have a good knowledge on the matter, perhaps we should bring the proposition of determinism into this... one thing's for sure, this has got my braincells working
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Old Feb 13, 2008, 11:02am   #54
 
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Originally Posted by new_trader View Post
Anyway, there is an obvious absence of moderators in this thread even though there are now more than when I first joined. This thread is starting to get ugly and chances are I'LL be the one who is banned...
Apart from all this stuff - I've been wondering what your style of trading is. Please don't request that I wade through a million posts to find out cos life is kinda short. If you don't want to reply that's fine. It's just that I would genuinely like to know what your bag actually is. And no, I'm not after details. Just a general area. Mine is regular Wyckoff style price and volume.
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Old Feb 13, 2008, 11:15am   #55
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This intellectual stuff that FXScalper2 and FW are on go a bit beyond the ability of the normal Ladbroke punter, like me, to follow so I'll pass!

My previous ramblings about randomness were not meant to be more than a suggestion that randomness, in itself, had to be included in the general scheme of TA. It, certainly, should not be ignored.

Someone mentioned, earlier, that followers of the Random Walk Theory refuted the theory by becoming trendline followers after a price direction had been decided randomly.

Why not? When, after a period of congestion, the random behaviour has decided on a certain direction that the price is to follow, the traders, who are not, in themselves random but are trend followers, jump on the band waggon and this new course could last for several hours or thirty minutes---no one knows, though, for sure.

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Old Feb 13, 2008, 12:11pm   #56
 
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sorry not to have been paying proper attention - done some severe housekeeping (not had to do that in a while!!).

as far as the topic is concerned isn't it about money flow. ie: If there's a net increase in money in the market then prices will rise and if there's a net decrease they will fall. You could say that there's some randomness about money flow round the edges, of course.

cheers

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Old Feb 14, 2008, 9:27pm   #57
 
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There is a subtle, but significant difference, between randomness and predictability. Very few events are truly random, but that doesn't mean all non-random events are predictable.

As far as markets go, if future prices were predictable, there wouldn't be a market. It is the constant disagreement by individuals over price, that causes the price itself to fluctuate. This shouldn't be too difficult to grasp.
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Old Feb 17, 2008, 9:28am   #58
 
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Originally Posted by Profitaker View Post
There is a subtle, but significant difference, between randomness and predictability. Very few events are truly random, but that doesn't mean all non-random events are predictable.

As far as markets go, if future prices were predictable, there wouldn't be a market. It is the constant disagreement by individuals over price, that causes the price itself to fluctuate. This shouldn't be too difficult to grasp.
Strange, I thought a transaction can only occur when individuals AGREE on a price to exchange. If the market is as unpredictable as you imply, why should there be any disagreement on price? Both are making an exchange at a price they agree is fair. The difference is that one thinks it is cheap at the current price and the other thinks it is expensive.
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Old Feb 17, 2008, 10:52am   #59
 
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Originally Posted by darktone View Post
Nah!
Its an auction. How can an auction be random!?

well any trader will tell you that the random walk theory is a load of rubbish of course and always raises a few eyebrows.. !!
" prediction " - and the markets leaving " signposts " everywhere are two completely different things of course... !!
Even stocks maintain an upward trend over time -
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Old Feb 17, 2008, 11:21am   #60
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Most traders base their trading policies on a particular price action that works over a period of time. I am no exception. Statistical evidence is difficult to refute, but I still think that randomness is a fact of life in short term trading, particularly in trend turning spots. Once the trend is established. more traders come in, making the trend more predictable as time passes.

Why is it that we wait for breakouts? Because we don't know, that's why!

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