Random?

[arabianights]

I suspect they would.

They'd almost certainly do a RTTM "strategy" as well

 

[DionysusToast]

Index futures are 100% money back guaranteed, manipulated. No question, no ifs or buts.

They are not manipulated all of the time. No-one can control an index (to my knowledge) for an entire day. Do people build up multi-thousand lot long positions at areas of percieved resistance whilst showing a picture of weakness to draw in shorts ? They sure do.

These activities take minutes, not hours. I don't think it's possible to control the things I look at for hours but I could be wrong about that. For 10-15 minutes - absolutely - any stock or index future can be manipulated for this amount of time.

 

[meanreversion]

Didn't someone in the thread earlier suggest that market manipulation in itself creates non-randomness and therefore money making opportunities, i.e. you WANT to trade a manipulated market?

Everyone seems to agree that human emotion is good, i.e. it's what keeps the markets from behaving rationally all the time.. does anyone worry that algos are making the markets incrementally more rational, i.e. it will get progressively more difficult to make money?

 

[StephenMcCreedy]

i guess everyone here is talking at cross purposes. markets are not random over long enough time scales but might be as good as random, ie beyond our understanding on shorter time scales.

real events move markets.

if the UK defaults on it's obligations the gilts are going south. that isn't random.

if rio tinto is taken over at a 20% premium to it's current share price the shares are going up circa 20%, that isn't random.

what is going to happen to the djia this afternoon may well be a lot closer to random. or at least beyond our levels of understanding.

that said since inception the ftse has a 52/48 up/down day ratio due to it's in built evolution bias (shedding losers adding winning companies) so i would say over the longer term this bias to rise will continue.

 

[DionysusToast]

i guess everyone here is talking at cross purposes. markets are not random over long enough time scales but might be as good as random, ie beyond our understanding on shorter time scales.

Nope - the markets are not random in the shorter time scales. Please see above.

 

[StephenMcCreedy]

DionysusToast

thanks for clearing that up for me.

 

[barjon]

i guess everyone here is talking at cross purposes. markets are not random over long enough time scales but might be as good as random, ie beyond our understanding on shorter time scales.

real events move markets.

if the UK defaults on it's obligations the gilts are going south. that isn't random.

if rio tinto is taken over at a 20% premium to it's current share price the shares are going up circa 20%, that isn't random.

what is going to happen to the djia this afternoon may well be a lot closer to random. or at least beyond our levels of understanding.

that said since inception the ftse has a 52/48 up/down day ratio due to it's in built evolution bias (shedding losers adding winning companies) so i would say over the longer term this bias to rise will continue.

Yes, but isn't the premise of random walk that such events do move the market and because those events are mostly unpredictable it is they that are "random" and thus so is the market.

jon

 

[meanreversion]

This thread is exhibiting strong signs of randomness.

 

[StephenMcCreedy]

i know the theory, i have the book, i just don't accept it.

 

[4xpipcounter]

I have a random thought, and that is I randomly agree with your randomness. Now, I feel like I am randoming on (Or, is that "rambling"?). LOL

This thread is exhibiting strong signs of randomness.

 

[Shakone]

It all depends on what you mean by random. If you estimate it has an 80% chance of closing up on the next bar, rather than down, that's still random. If BP has an oil spill, it might be neglect on their part, or others, it is people selling or buying (or not), but as far as you're concerned trading, it is a random event which moved the price. If there is someone or something that can move the market, then whatever they do is random to you, unless you know 100% exactly what they'll all do.

There are no governing equations for market movement, no formula that gets it always right, you can't predict it exactly, so that's something you call random.

 

[neil]

It all depends on what you mean by random. If you estimate it has an 80% chance of closing up on the next bar, rather than down, that's still random. If BP has an oil spill, it might be neglect on their part, or others, it is people selling or buying (or not), but as far as you're concerned trading, it is a random event which moved the price. If there is someone or something that can move the market, then whatever they do is random to you, unless you know 100% exactly what they'll all do.

There are no governing equations for market movement, no formula that gets it always right, you can't predict it exactly, so that's something you call random.

Well, maybe some things are more random than others:cheesy:

 

[DionysusToast]

DionysusToast

thanks for clearing that up for me.

OK - here goes, one more time...

It looks weak, it looks weak, sell, sell, sell, sell

Sh1t, it's going higher, cover, cover, cover, cover

Congratulations, you've just been enticed into a losing trade by someone who was buying whilst maintaining the illusion of weakness.

It's a tough nut to crack but in the short term, there are a lot of games played. This should not be confused with randomness.

Of course, a lot of people don't even know/believe the markets are pushed around this way. A lot of people don't use the supplementary information required to sniff them out.

So - the markets appear random in the short term because they missing the full picture. I would say that in the short term, the markets are at their most predictable.

 

[wallstreetwarrior87]

Or another example.

Someone who has no understanding of music or how its written, would look at pieces constucted by Mozart and just see notes flying about every where in no apparent order (randomness in this case).

For those who do know music and how to read it, his work is all in sync and incredibly in order and sounds beautiful when put together.

Every note, every instrument has its place in the concert, just like every participant has their place in the market.

You can choose to listen just to the pianist, or you can choose to listen to all the musicians together. Its exactly the same in the markets, whatever the instrument

 

[scose-no-doubt]

Yes, but isn't the premise of random walk that such events do move the market and because those events are mostly unpredictable it is they that are "random" and thus so is the market.

jon

As an accountant I can tell you that there is absolutely nothing random about a company - and so on the premise I'm assuming the same is true of a government - going under.

You know that BJ

Is this not why financial institutions have sector analysts/single stock specialists etc.

IMO the fact that randomness is used as a substitute for an unknown quantity in risk management i.e. unknown information, does not mean that the markets are themselves random.

 

[Shakone]

As an accountant I can tell you that there is absolutely nothing random about a company

I have a local takeaway, run by a very nice family who live on premises. Now if a plane crashed into this takeaway (insert other disaster you prefer), then the business is finished. Would you say that was random, or would it show up in accounts :cheesy:

 

[DionysusToast]

Shak...

They'd be fine. They'd need to re-locate but they'd have enough 'chicken' to last a decade...

 

[wallstreetwarrior87]

I have a local takeaway, run by a very nice family who live on premises. Now if a plane crashed into this takeaway (insert other disaster you prefer), then the business is finished. Would you say that was random, or would it show up in accounts :cheesy:

This is an interesting point. And I suppose is one of the ways people differently define random. What you have above is an example of an unforseen event that has got in the way of the family take away's business objective. Providing they have insurance (as any business should) they will be able to dust off and start again, and ultimately reach their business goals, whatever they may be.

In terms of the market, we cant discuss random with news announcements, because a news announcement/economic report may temporarily cause the same affect as the plane crashing into the take away. That being one of which requires the market to dust its self down and start again.

When the Dow fell of 1000 points back on 6th May it was an unforseen sell off. Not the fact that we sold off, but the amount we did. This caused certain things to happen over the next few days but ultimately the market met its business objective.

It is important not to confuse news with random events. News will cause a temporary affect on the market, once this information has been digested the market will go back to its business plan. All that happens is certain players have to move out of position to get things back on track.

Again this is only a benefit if you know how to make the most the displacements in a non random environment.

 

[Shakone]

You guys are not reading properly they live on the premises. The family business won't be doing so well, since err....they won't be there. But anyway, you get the point. And Dionysus, lol, that's just disgusting

Personally I consider it random. But the probabilities are not always 50-50 up down. There is just no way, once you enter a trade, that you can guarantee Soros (or someone big enough) won't have a mental meltdown, and decide to alter things dramatically. Of course, he probably won't.

 

[scose-no-doubt]

I have a local takeaway, run by a very nice family who live on premises. Now if a plane crashed into this takeaway (insert other disaster you prefer), then the business is finished. Would you say that was random, or would it show up in accounts :cheesy:

No it wouldn't but as someone else said later on they should legally have insurance to cover them against this type of extremely unlikely and unforeseeable event and most of the people I know who have been this unfortunate make a profit on the claim. Lulz @ one client I had whose listed pub almost fell down around him when he was in bed.
Deepwater would have shown up though reduction in safety related expenditure.