I want to believe that it is not random, but this argues against me

I don't want to get in the the small details, but my broker has data for eur/usd back until April of 1989 that's roughly two decades, ok it might not have been euro but ECU back then, right? But anyway thx for your reply Splitlink and Mr10% correction as well.

I think a simple momentum is calculated based on the difference between the close now and close n periods ago. So when trend is strong momentum increases, but this same momentum can also be applied to random series with the sames results and the trend often ends in a heart beat and more often than not without any reason (I'm not looking for reasons, I don't have the need to understand everything). So I don't see it useful in the long run.

One of the thinks that really is strange is how the common chart patterns, trendlines, etc... can easily be found in any random series too, and as in forex sometimes those work and other times not. So I believe they won't beat a random entry in the long run either.

Thanks for your suggestion about stocks Mr10%, but I'd rather keep it strictly in fx because that is what I've been trading for sometime now. I really want to get this random walk out of my head. So far I've got some evidence from the replies here and from my few calculation that it is not, which is really what I want. Thanks everybody for taking part.
 
Paul71 said:
Do markets cause recessions/depressions, or do markets know that recessions/depressions are on the way? Or both?
Click to expand...

Indeed aren't markets supposed to reflect the financial situation and fundies. But Mr. George Soros in his latest book actually argues that it might just be the other way around. Who knows...
 
Just did another test this time with Hurst exponent. In short Hurst exponent tells if there is a trend or a random walk on the way. values close to 0,5 indicate random, values between 0,5 and 1 indicate trend and values between 0 and 0,5 should mean that markets tend to correct most of the previous swing on the next swing.

I did a short test consisting of the last 200 periods on the 5m eurusd chart and 200 periods of random data. Here are the results.

eurusd: H=0,89480
random: H=0,9502

Well it seems there is pretty much no difference whatsoever. The random seems to be trending even a little stronger than the real market :/ I don't like this result. Gotta do more testing with more data. This indicates that in randomness persistent movements that don't look random at all do exist. This adds to the fallacy that claims that there is logic and predictability in the markets. This result is a setback. But lets see what it shows with some more data and perhaps on a longer time frame where there is supposed to be less chance to be fooled by randomness.
 
The problem with what you have there Kateeus is that you are trying to resolve the 'trading problem' with only a very limited set of information - i.e price information on a chart.

You, like many before you (including myself) are starting out trying to avoid the one thing that will make you a good trader, namely discretion.

You can model those charts all you like, the chances of you finding a winning mathematical solution to what you see as a mathematical problem are very small. It is not math that drives the markets.

As an example. Yesterday on Bloomberg TV prior to the market open, there was a lot of news about the price of Gold. Mr Charts on his "How to make money" thread actually put up some of his favorite Gold stocks pre-market and indeed they went up as everybody piled in.

I know the thought of learning how the markets work is daunting but it's not as bad as you think. In fact, yesterdays little Gold Rush was hardly rocket science was it ?

You are seeing randomness because you are not looking at all of the factors that will affect the price.
 
pedro01 said:
The problem with what you have there Kateeus is that you are trying to resolve the 'trading problem' with only a very limited set of information - i.e price information on a chart.

You, like many before you (including myself) are starting out trying to avoid the one thing that will make you a good trader, namely discretion.

You can model those charts all you like, the chances of you finding a winning mathematical solution to what you see as a mathematical problem are very small. It is not math that drives the markets.

As an example. Yesterday on Bloomberg TV prior to the market open, there was a lot of news about the price of Gold. Mr Charts on his "How to make money" thread actually put up some of his favorite Gold stocks pre-market and indeed they went up as everybody piled in.

I know the thought of learning how the markets work is daunting but it's not as bad as you think. In fact, yesterdays little Gold Rush was hardly rocket science was it ?

You are seeing randomness because you are not looking at all of the factors that will affect the price.
Click to expand...
This single post should be stickied somehow.
 
kateeus said:
Indeed aren't markets supposed to reflect the financial situation and fundies. But Mr. George Soros in his latest book actually argues that it might just be the other way around. Who knows...
Click to expand...



All i can say to the random market theory is that the Market Wizards, Livermore and even Soros himself must all be really lucky. I'm going to write a book about successful traders and call it...


'The Jammiest B*stards In Town', by Paul71 (T2W).
 
Paul71 said:
All i can say to the random market theory is that the Market Wizards, Livermore and even Soros himself must all be really lucky. I'm going to write a book about successful traders and call it...


'The Jammiest B*stards In Town', by Paul71 (T2W).
Click to expand...



Take Peter Lynch for instance, very much a guy who used his gut in looking for opportunities and someone that was extremely successful. His books are very insightful in my opinion.

On the other hand, there is a train of thought about people like that...

The consider 1000 fund managers. 500 lose money in year 1 and 500 win.
From the winners, 250 win again the next year.
From the winners, 125 win again again the next year.
From the winners, 62 win again again the next year.
From the winners, 31 win again again the next year.
From the winners, 15 win again again the next year.
From the winners, 8 win again again the next year.
From the winners, 4 win again again the next year.
From the winners, 2 win again again the next year.
Meet Peter Lynch :whistling

After all - who'd buy a book written by one of the other 999 ?
 
kateeus said:
I don't want to get in the the small details, but my broker has data for eur/usd back until April of 1989 that's roughly two decades, ok it might not have been euro but ECU back then, right? But anyway thx for your reply Splitlink and Mr10% correction as well..
Click to expand...

Actually if we're splitting hairs I'd say it's more likely it's synthetic euro rather than ecu, extrapolated back (whatever the proper term for that is) using the legacy conversion rates. But that's not so relevant. It was a dumbass point to make by whoever made it (Mr 10%?) as if you'd just taken a cable chart rather than euro it would have been totally moot.

As for randomness or otherwise, in ANY timeframe, I would ask you what you make of structural factors such as regula month end fixing trades, flows such as oil related trading by Norges Bank, CB reserve diversification trading in eurusd by the CBR, intervention by the Jap MoF or currently by the SNB and their partners in crime the BIS. All these things are known, predictable (to an extent), assymetric and decidedly, imho, NON random.

So I think the key here s timeframe. Because if you take a long enough term worldview they could justifiably be called noise. But try telling that to some numpty who has no clue about anything but basic TA and thinks it's safe to sell eurchf on some retarded moving average crossover strategy on a 5 nanosecond chart right before the BIS start hoovering up usd/chf, eur/chf, kitchensink/chf, pushing eurchf 300 points through his 10 point stop. Random spike? I think not.

GJ
 
pedro01 said:
Take Peter Lynch for instance, very much a guy who used his gut in looking for opportunities and someone that was extremely successful. His books are very insightful in my opinion.

On the other hand, there is a train of thought about people like that...

The consider 1000 fund managers. 500 lose money in year 1 and 500 win.
From the winners, 250 win again the next year.
From the winners, 125 win again again the next year.
From the winners, 62 win again again the next year.
From the winners, 31 win again again the next year.
From the winners, 15 win again again the next year.
From the winners, 8 win again again the next year.
From the winners, 4 win again again the next year.
From the winners, 2 win again again the next year.
Meet Peter Lynch :whistling

After all - who'd buy a book written by one of the other 999 ?
Click to expand...
You've been reading too much Nassim Taleb!
 
As a trader whose edge is based on Tech analysis, I have observed sufficient and repeating evbidence to suggest that there is a degree of order in market movements in amongst the random chaos. Actually, the truth is for a tech edge it doesn't matter what market theory/dynamics drive the market, just that repeating patterns develop...Dr.Alex Elder (Come into my Trading Room etc..) calls a set-up; '..an island of order in an otherwise random price action..' and in saying this I take him to mean not that markets are wholly random per say but that until your edge presents itself it doesn't actually matter what they are doing.

G/L
 
pedro01 said:
Take Peter Lynch for instance, very much a guy who used his gut in looking for opportunities and someone that was extremely successful. His books are very insightful in my opinion.

On the other hand, there is a train of thought about people like that...

The consider 1000 fund managers. 500 lose money in year 1 and 500 win.
From the winners, 250 win again the next year.
From the winners, 125 win again again the next year.
From the winners, 62 win again again the next year.
From the winners, 31 win again again the next year.
From the winners, 15 win again again the next year.
From the winners, 8 win again again the next year.
From the winners, 4 win again again the next year.
From the winners, 2 win again again the next year.
Meet Peter Lynch :whistling

After all - who'd buy a book written by one of the other 999 ?
Click to expand...



I'm actually starting to think i have been fooled by randomness, honestly. Here's the reason, very few of my trades are exactly the same, i differ stops and size and i have different techniques for entry and exit. So has randomness moulded my trading, or am i subconsciously trying to outwit randomness? Who knows?
 
Is it only me that looks at this guys 2 charts and thinks; "so what, that's kinda what I expect"? Chances are the sun will set this evening and every now and again the moon will be full...might rain today too...as fooking pointless a thread as I've read on 'ere tbh...:rolleyes:
 
Black Swan said:
Is it only me that looks at this guys 2 charts and thinks; "so what, that's kinda what I expect"? Chances are the sun will set this evening and every now and again the moon will be full...might rain today too...as fooking pointless a thread as I've read on 'ere tbh...:rolleyes:
Click to expand...



:LOL:I just want in on the action...give me the money!
 
I doubt that Peter Lynch would reveal the secrets of his success in any book.
 
Nothing random/chaotic about supply and demand. Now the complicated part is deciding which is driving the market and why. There is the chaos. The random part, IMO, comes from the millions of people/institutions worldwide who may have different interests vested in the instrument. If you think of it like a motorway. Thousands of people with different lives, different ideas, different destinations, different directions etc but you know that on match day that sh*t is gonna be packed. You know on christmas day it might be empty. You know that rush hour is gonna give you a nightmare if you're trying to get somewhere in a rush. You know that bad weather can affect traffic patterns. I'll stop now.
 
The, 'Potential Set-Ups', thread needs a new title...

1) Roll the dice and let's see.

2) I'm feeling lucky baby!

3) It's only money.

4) Random slamdunkin'.


Maybe something else.
 
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