Fooled: The Role of Randomness

[Mr.J-Arthur]

Lol Wasp- When I made this thread I wan't implying retail traders are random - but rather the collective market moves in any direction despite fundamentals/technicals. There can be no new news and a market will pick a direction-for no reason-and move!

I think when you accept the market can be random to some extent, you open yourself up to more possible profitable scenarios.

Wow, this is a great thread...Keep posting replies, it is very interesting to hear the opinions of others. Keep em coming

In this case, we are debating a more philosophical thing which nobody can be 100% correct.
We could sit in a bar all day, drinking till we stumble, and we still would not come to a conclusion
It would help us learn more about our own perception of the market...which in the end will help us trade.

market is composed of humans---> humans are composed of brain and body---> humans are emotional---> humans can be irrational--->thus the market contains these traits ----> making our markets irrational at times (think fear, greed, elation, etc)

 

[Mr.J-Arthur]

Uh Wasp-the 15 min charts you posted...those are good.

I consider 15 min charts to be mostly non-random. It's the 1 min "heart monitor" charts that contain the most noise. 10 min seems to be a little random, 15 better, 30 very good and 60 min excellent for big swing trades.

 

[Rossini]

Lol Wasp- When I made this thread I wan't implying retail traders are random - but rather the collective market moves in any direction despite fundamentals/technicals. There can be no new news and a market will pick a direction-for no reason-and move!

If a market picks a direction and moves then that's not a random move for no reason, markets move based on the collective participants view on what the future value is expected to be. Markets are operating in the future not the present. And just because the information is not available to you/us now does not mean it is a random move.

I think when you accept the market can be random to some extent, you open yourself up to more possible profitable scenarios.

I do not accept this and am profitable, thanks

Wow, this is a great thread...Keep posting replies, it is very interesting to hear the opinions of others. Keep em coming

It is a good thread.

In this case, we are debating a more philosophical thing which nobody can be 100% correct.
We could sit in a bar all day, drinking till we stumble, and we still would not come to a conclusion
It would help us learn more about our own perception of the market...which in the end will help us trade.

market is composed of humans---> humans are composed of brain and body---> humans are emotional---> humans can be irrational--->thus the market contains these traits ----> making our markets irrational at times (think fear, greed, elation, etc)

If markets where rational there would be no money to be made, so I for one am glad they are not.

 

[wasp]

Lol Wasp- When I made this thread I wan't implying retail traders are random - but rather the collective market moves in any direction despite fundamentals/technicals. There can be no new news and a market will pick a direction-for no reason-and move!

I actually said retailers are random, but then we have no effect on the market. I posted a 5min chart too but for smaller TF's, I'm not really one to talk, I don't use them, but firewalker99 and others keep giving examples.

I still stand by one of many trading epitaphs which is, ''EVERYTHING happens for a reason''.

 

[Mr.J-Arthur]

The collective can be random Why not? Especially when some of the posiitions are greatly leveraged over the other small fish...It's possible for large players to take the opposite side of a trade and move the market...for any reason (if they so choose). I remember watching an interview with a hedge fund saying, on quiet days they will move the price around JUST enough to get the bids going....which means, price can/does start a snowballing action...moved up->stops hit-> more buyers-> pretty soon you see a 200pt spike up...Reason? Nothing...except the dynamics of trading will do that.

Yes, retail traders really have almost no effect. We just hop on for the ride and the Bigs are creating the market.

Yes we can all be glad the markets are irrational, as long as WE stay rational, it's a money in our pockets

 

[GCC]

Scalpers are gambling on a very short time frame.

Is scalping gambling? Is short term price random? My opinion is, yes and no.

J-Arthur makes the point the short term price (tick, M1, M5) is random, or at least, much more unpredictable than longer TFs. I think I can't argue with that. I also agree that beginners should keep their *** away from scalping.

But does it mean you can't make profit from that? I don't think so.

Think about the casino. The outcome of those gambling machines and games are random, even more than the M1 chart of the DOW. Yet the casino not only gain money from it, but also use this gain to subsidise huge expense like the buffet and grand hotel service.

Why? Because the casino (and pro gamblers) understand probability. Even though the individual outcome of a blackjack game or a trade IS random, but if there are enough people playing, and if there is enough number of trials, then the long-term probability tends to favour one side, like: the casinos, the market makers, and the very rare successful traders, like your 800%-return scalper friend.

So although individually the outcome is random, on a macro level, the chance of winning tends to be predicted by probability.

The only problem is how to make the %'s swing in your favour, as if you are the casino. And I don't think it's impossible.

The first thing is to avoid betting everything in one trade and perform money management, since the probability will favour you only if you have a large enough number of trades. If you risk too much you will be wiped out by an unexpected outcome.

The second thing, more importantly, is to recognize profitable setups, and STICK TO THEM no matter what. Never let your judgement being clouded by emotions, like fear (to timid to enter a trade) or greed (entering at the end of the trend). Trade only according to probability.

Mark Douglas puts this very well: random outcomes, consistent results.

I believe if you can do this, scalping can be profitable too.

 

[chump]

Of course the market is not random.It's driven by moneyflow and that reflects at any given time the balance of views that the moneyholders have for the wide variety of asset groups out there. In that this is collective human behaviour it's certainly not random in the broadest sense. The fact that one can't exactly specify with precision a scale of human response quite often ,or even at all times ,doesn't mean it is driven by randomness, it isn't. Is it truly random that in the face of panic money will flow to safety and assets associated with that ? Obviously not.What is "random" is you can't be sure or precise about the timing and scale ,that is extent to the action. You can predict the action ,quantifying it is the fuzzy part.

Randomness is nothing of the kind.It's a failure to understand relationships sufficiently to be able to quantify risk ,or quantify it with enough precision that it has a bearing on the planned amount of risk taken. In other words the risk taken is thought to be understood and known ,but is neither.Hence ,an unexpected outcome of sufficient diversion from the expected as to be ruinous and to bring about the accusation that randomness was the cause.
Not understanding ,and none realisation of that is the cause. Perhaps that's random