KP, If one cut out a shape out of a cardboard and only looked at say randomly generated price through it, would trading improve if one traded only when price fit that shape? Cutting out the cardboard hasn't changed the 'randomness' of the randomly generated price, hence the future even if the cardboard hole matches that shape of price is still random. The underlying question is whether markets are random. If that generated data isn't random then perhaps that cardboard box hole might provide an advantage. For a purely random system it isn't likely to help much. Gringo
Ok, what prevents you or anyone from making millions or even cornering the market? I will provide my answer-- the market morphs patterns and anything that apoears to repeats into ramdomness to survive. If it didnt constantly change it couldnt exist. This constant changing is why any fixed system is doomed to fail
What prevents me thus far is that my trades have been random. What I say works, and what I know works, isn't what I have done up till now. In short, I am the reason why it hasn't worked for me yet. As for cornering the market, this isn't the idea. We are only trying to follow what the big money is doing. I have read before that if you start trading so much size that you are now the market, this isn't what you want. I am looking to get into a move, not make the move. I don't know where price is going to go, I am simply looking to figure out what the big guys intend to do and ride along.
Gringo... you absolutely lost me with your example. But I think what you're saying is that if the market is random, then a framework doesn't make it any less random, and hence I'm wrong. But since we both believe that the market isn't random, then a framework will absolutely lead to an edge that can be exploited. I think I should have stayed out of this. LOL
You are on the right track following the big money--- I am certainly not trying to discourage anyone-- if you can follow big money by looking at charts, keep doing it!! surf
My dear @marketsurfer: If you don't believe that [what you said above], then you should not be trading period -- does not matter if its is System Trading or Price Action. What you said you find difficult to believe is the premise for speculation -- be it Quant based pair trading based on Ornstein–Uhlenbeck process or the lowly Price Action. (1) Evidence does not indicate that the market is a random walk. Markets exhibit power law distribution. It is NOT random. Physicists keep pounding this point, economists 'conveniently' ignore it although they know what the Physicists are saying is true! You haven't been in academia; you don't understand the politics. (2) EMH, in its strong form, says no profits based on market timing is possible. Does not matter if you use a System Trading approach or any other approach. Ok, I have spent way too much time here ...... I am not trading today due to prior commitments, but even then this is way too much time to be monkeying here. All the best. Regards, Monoid.
Ok--- i am very familiar with academics -- my wife is a finance PhD-- and i have some graduate studies completed. I disagree about not trading. There are many ways to profit from markets wothout needing repeatable price patterns that dont even exist before they form. Peace
There are a select few who regularly profit from their involvement in organized markets, and there is the great ma jor ity of people who do not. Among the points which distinguish successf ul traders and investors on one hand from the vast ma jority of market participants and most of the academic community on the other, are the acceptance by the latter group of the notion of organized markets as a random walk, and the ability to distinguish organized from unorgan ized markets because of the so-called "efficient market" theory. The most important - yet simplistic - implication of market logic is that anyone can now locate value in an organized (or in fa ct any) market. Thus, one can determine when price is below value, at value or above it. Armed with this inf ormation, so long as one has the other requi site characteristics, one can join the ranks of the few who make money consistently in the organized markets. A secondary implication of market logic must ther efore be that it ref utes both the random walk and efficient market theories currently in vogue among the ma jority of the academic community. Consider each of these long-accepted theo ries regar ding market activity. The theory of price fluctuation as a random walk (and the term itself) has been used for centuries. There are numerous definitions of ra ndom walk, and each definition varies in shades depending on who is doing the defining. According to Robert Hagin 's Dow Jones-Irwin Guide to Modern Portfolio Theory, random walk is a term used in mathematics and statistics to describe a process in which successive changes are statistically independent. A random walk implies (that the market's price displays) no discernible pattern of tra vel. The size and dir ection of the next step cannot be predicted from the size and direction of the last or even fr om all previous steps. The serial correlation is (f unc tionally) zero. In other words, the random walk theory holds that it is impossible to predict tomorr ow's price changes based on what has occurred today. One of the central points developed throughout this book is that all markets operate similarly and are motivated by the same principles, and that anyone who can understand these principles - plus observe and record the individual characteristics of the specific market - and can employ a sound trading strategy and discipline himself, can profit handsomely from any market. Thus, a central thesis of market logic is that there is little distinction between organized or exchange-traded markets such as stocks, futures, options, etc. , and all other so-called "unorganized" markets where no federally regulated exchange floor exists. (Certainly the exchange-traded markets often of fer a narrower bid-ask spread, thus creating a higher degr ee of liq uidity and hence lowering transaction costs as compared to those of unorganized mar kets .) Every market is an auction market, either passive or active. In a passive auction, the individual does not take part in an active negoti ating process but selects from products offered at dif ferent prices which make up the range. In an active auction, participants negotiate the range . Whether the auction is passive or active, all markets •• auction" or trend up and down in order to fulf ill their purpose, to facilitate trade. In an auction, prices do not develop ra ndomly, but rather to fulfill the purpose of the auction. The purpose of any market is to facilitate trade. Lack of trade fa cilitation inevitably causes price to move. This price movement behavior is as true in the organized markets as it is in a grocery store or any other everyday market. Thus, price changes to sati sfy the condition of the market and every price is a result of the condition of the market. The fact that price moves for a specific reason further precludes price from developing in a random manner. Furthermore, prices are not stati stically independent of each other. Price, in moving to satisfy the condition of the market, provides an inf ormational flow. In other words, markets must generate trade, and in doing so, prices fluctuate, generating inf orm ation about where trade is being conducted and where it is not. This inf ormation is valuable to the market participant, as we shall soon demonstrate. But true randomness does not generate valuable information. In other words, in statistically random situations, knowledge of the present is not impor tant, for it conveys no advantage. If knowledge of the present structure of a market is important and does convey an advantage - as we shall see in later chapters - a market cannot be a random walk. --Steidlmayer
Have you not an original thought? But that's ok--- answer how many upmoves or series of moves or whatever kind of move increase the odds that the next move or series will be in the same or opposite direction. You can not--- therefore all your rhetoric is nonsensicial. surf
One could ask the same of you, as you continue to spout the same old tired "random market theory" baloney.