Random Walk Theory

This is a discussion on Random Walk Theory within the General Trading Chat forums, part of the Reception category; who " really " believes this...?...

Reply
 
LinkBack Thread Tools Search this Thread
Old Feb 6, 2008, 12:38am   #1
 
theroguetrader's Avatar
Joined Jan 2008
Random Walk Theory

who " really " believes this...?
theroguetrader is offline   Reply With Quote
Old Feb 6, 2008, 12:59am   #2
Joined Dec 2004
Quite a few people actually. I'm not in that camp myself, mind you, but they're out there to be sure. It's a heavily academically influenced theory, so you can guess where a lot of its supporters come from.
__________________
John Forman
Author - Trading FAQs, The Essentials of Trading
Rhody Trader is offline Training literature vendor (e.g courses / spreadbetting guides / eBooks)   Reply With Quote
Old Feb 6, 2008, 1:08am   #3
 
dbphoenix's Avatar
Joined Aug 2003
Randomness is an objective property. Nevertheless, what appears random to one observer may not appear random to another observer who has the key needed to turn the sequence of bits into a readable message.
dbphoenix is offline   Reply With Quote
Old Feb 6, 2008, 1:40am   #4
Joined May 2006
Jan 27 - Random
rainman2 is offline   Reply With Quote
Old Feb 6, 2008, 9:06am   #5
 
arabianights's Avatar
Joined Jan 2007
I think it's a pretty good model most of the time, but there are three major flaws:

1) "Noise" traders do not necessarily cancel each other out
2) Markets are not continuous. Any continuous model is necessarily an approximation
3) Use of the bell curve to model price movement is a misunderstanding of the central limit theorem

I could list others but these are the most important imo

Recommended, related book: Misbehaviour of Markets by Mandelbrot.

Last edited by arabianights; Feb 6, 2008 at 9:09am. Reason: hungover, making words make sense
arabianights is offline   Reply With Quote
Thanks! The following members like this post: Bagehot
Old Feb 6, 2008, 9:18am   #6
Joined Dec 2004
markets are chaotic imo, behaviour of chaotic system appears to be random, but they are not
jm99 is offline   Reply With Quote
Old Feb 6, 2008, 9:21am   #7
Joined Dec 2006
Random walk theory definitely might confuse some people, but is good food for thought. Two books I'd recommend:
"A Random Walk Down Wall Street" Malkiel
"A Non-Random Walk Down Wall Street" Lo & MacKinlay

Here is a webpage, the whole website is absolutely TOP-NOTCH, deals with the efficient markets hypothesis. They have many papers for free which are not available elsewhere.

Random Walk Hypothesis
Tadragh1 is offline   Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Similar Threads
Thread Thread Starter Forum Replies Last Post
Random! JTrader The Foyer 429 Jul 31, 2011 9:50pm
Random Entry damianoakley Psychology, Risk & Money Management 50 Oct 6, 2008 5:05pm
Article: A Random Rant on the Random Walk Theory T2W Bot Educational Resources 2 Nov 7, 2007 1:51pm
Random Reboots RogerM Techies Corner 6 Jun 25, 2003 1:56pm
Random walk breakout.... titus-uk Technical Analysis 3 Apr 4, 2001 10:46am

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)