That's a good point. In fact, one thing that strikes me about the coin toss chart is that, if trends can be found in random events, how much more so should they be found in events where purpose is at work. In fact, I'm coming to believe that randomness isn't so random after all.
An interesting observation regarding randomness.. can be seen on a very basic level. Ask a few people to simulate a distribution of heads and tales (50/50) off the top of their head... Most would say... H, T, H,T, H, T, H.... or something that would indicate a balanced out nature between heads and tales.. thus playing out a 50/50 distribution... Now in reality.. do a simulation of 1000 trials on your computer... and you will see many many different streaks. --MIKE
Chasinfla, That website really opened my eyes to some interesting things. After playing with it many times and looking at various distributions... Quite often I saw beautifull uptrends and downtrends and even consolidations... Here are a few observations.... As line went in uptrend the lows were successively greater (this is the hallmark of an uptrend) and vice versa for downtrend... After extended periods of consolidation... the line would explode to one direction.... Pretty amazing stuff... thanks greatly for that link... confirmed my belief in basic charting.. --MIKE
that site is very cool, and this phenomena does fascinate me. it's easy to see a coin toss chart and to conlude that, because it looks so much like a price chart, that price action is random. but people seldom conduct themselves in a random way when something that matters to them (eg. capital) is on the line. I think the fact that a price chart looks like randomness manifested is testimony to how efficiently markets do balance supply with demand... (not a fully developed thesis yet). too, there are operators in the market who try to create the illusion of one intention in order to cover up another -- in other words, to disguise the trend. this, i think, is what specialists do best. funny. what if a lot of the randomness is actually intentional? or perhaps it is the natural outcome of competing interests.
Obviuosly the markets arent 100% random.. because at times.. there is overwhelming supply or demand.. or bias in a market... Also... if there was a nuclear attack and NYC was blown up the market going down thousands of points does not represent a random distribution. I believe, markets are random to a certain degree... the more they are observed the less random they become.. however, the less random they become the more difficult they are to predict using basic TA. --MIKE