Random Walk Theory

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.

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 -

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!

Split

Perhaps I should have used the word value as opposed to price, so I will concede your point on semantics.

Let me try another angle. If everybody in the world agreed that Vodaphone shares were worth £ 1.71, do you think the price would change on Monday ?

Yes.

Fascinating.