Don't Be Fooled By Randomness

Raleigh Lee

Junior member
22 0
:-0 Some studies have shown that a high percentage of chart patterns may be simply random, squiggly lines on a piece of paper. Burton Malkiel in A Random Walk Down Wall Street described an experiment his students participated in, using a hypothetical stock trading at $50 a share. Each day they flipped a coin, plotting heads as a 1/2-point daily gain and tails as a 1/2-point daily decline. The resulting stock chart from these random coin flips displayed all the classical chart patterns such as head-and-shoulder formations, flags, pennants, triangles, tops, and bottoms. There were even indications of cycles in the random tosses.
 

BeginnerJoe

Senior member
3,329 350
The market isn't random, the asset inventory owner always wins. In the case of forex, that would be the big banks. Prices are moved to generate profit from the random orders placed by student joes. It isn't the market that is random, but the joes are. If a bunch of joes start to believe a flag or penant is forming, they will form it.
 

the hare

Senior member
2,949 1,283
Try trading randomly generated time series, and then try trading market data. There are quite significant differences. It's quite educational
 

Raleigh Lee

Junior member
22 0
Try trading randomly generated time series, and then try trading market data. There are quite significant differences. It's quite educational

Do you, by any chance, have some results data from such an experiment? I would be very interested in seeing that.
 

BeginnerJoe

Senior member
3,329 350
Try trading randomly generated time series, and then try trading market data.

Both are equally useless. Real markets react to real trades. Dummy markets are incapable of this reaction.
 

random12345

Established member
793 280
The market isn't random, the asset inventory owner always wins. In the case of forex, that would be the big banks. Prices are moved to generate profit from the random orders placed by student joes. It isn't the market that is random, but the joes are. If a bunch of joes start to believe a flag or penant is forming, they will form it.

Just to clarify - you're saying that the money retail traders SELF MANAGE in the market is where the banks get their trading profits from?

Not from the likes of failing managed funds such as the recent significant trend following hedge fund index downturn etc, but from you and me? Look at JPMorgan's quarterlies and explain to me how that adds up?

If you think the mathematics work out in favour of your argument, why don't you just close out your accounts and leave this poisoned world? Why fight against such a tide and depress yourself over and over?
 

Splitlink

Legendary member
10,850 1,233
Just to clarify - you're saying that the money retail traders SELF MANAGE in the market is where the banks get their trading profits from?

Not from the likes of failing managed funds such as the recent significant trend following hedge fund index downturn etc, but from you and me? Look at JPMorgan's quarterlies and explain to me how that adds up?

If you think the mathematics work out in favour of your argument, why don't you just close out your accounts and leave this poisoned world? Why fight against such a tide and depress yourself over and over?

Yes, I go along with you, with this argument, but a lot of posters like to post more than trade otherwise I don't know where they find the time.
 

BeginnerJoe

Senior member
3,329 350
Just to clarify - you're saying that the money retail traders SELF MANAGE in the market is where the banks get their trading profits from?

I am saying whoever is the original owner of the 'assets' always wins on aggregate at any single moment. If that is the case, the markets cannot be random because it can be predicted to make a profit for those people. I think currencies are owned by banks. So they are behind the games in forex. Yes, you are part of the gang who fund their win.


Not from the likes of failing managed funds such as the recent significant trend following hedge fund index downturn etc, but from you and me?

It's from everyone who are not big enough to hold inventory of the assets. It's safe to say all small players are fodder. Need I point to that PhD in the other thread saying 95% are loosers ? Having been explained to you by me, now you should understand why they are loosers, and you should also understand why it isn't entirely their fault because the game is a set up.


If you think the mathematics work out in favour of your argument, why don't you just close out your accounts and leave this poisoned world? Why fight against such a tide and depress yourself over and over?

I did not say there is no solution to the problem. It's not yet conclusive to me there is no solution. I have never been depressed by this problem. I see it more as a challenge, and a close to impossible puzzle (close does not mean 100%). I like puzzles. Since you react strongly to the idea, perhaps you are depressed by the possibility of getting into something you are not going to win. For me, the outcome is not yet known.
 
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BeginnerJoe

Senior member
3,329 350
I don't know where they find the time.

What are you trading ? I like the sound of that. I find my trading is comparable to watching and waiting for paint to dry. So it gives me plenty of time to post and play computer games. Without these distractions, I don't think I can handle it.
 

Splitlink

Legendary member
10,850 1,233
What are you trading ? I like the sound of that. I find my trading is comparable to watching and waiting for paint to dry. So it gives me plenty of time to post and play computer games. Without these distractions, I don't think I can handle it.

You are right. One might as well be posting and playing video games instead of doing something useful, like me---like doing the ironing, washing up, dusting around.:D
 

kimo'sabby

Experienced member
1,623 287
:-0 Some studies have shown that a high percentage of chart patterns may be simply random, squiggly lines on a piece of paper. Burton Malkiel in A Random Walk Down Wall Street described an experiment his students participated in, using a hypothetical stock trading at $50 a share. Each day they flipped a coin, plotting heads as a 1/2-point daily gain and tails as a 1/2-point daily decline. The resulting stock chart from these random coin flips displayed all the classical chart patterns such as head-and-shoulder formations, flags, pennants, triangles, tops, and bottoms. There were even indications of cycles in the random tosses.


I was just reading a thread about randomness on Elite Trader. One member suggested that we only see what we want to see, but i beg to differ. There is no choice in the matter, u r programmed to see exactly what u see. Members of Mensa are a good example of this.
 

Pat494

Legendary member
14,625 1,576
I have been conducting a personal experiment in randomness for some weeks now.
I can't tell on here where, in case they chuck me off, but I have a demo account of a forex nature. The entries are all done with a coin toss. The exits are made when they are 50+ pips up or stopped out on their stops ( about 300) pips .

Erm yes it is currently showing a loss.
 
 
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