Hello All, I do not know if price movement is random. It does not even matter, I still have to click the buy and sell button and produce income. It is best to keep the life simple.
I am not here to argue or debate and this is my last response to your post. The law of large number do dictate that in the majority of cases, if you play a statistically significant number of times, you are correct. But trading in general is far from large numbers so an occasional "genius" trader will appear or an occasional "method" will work even if the market is a Markov. Look at this stock price chart, generated by GBM, very "tradable": I personally believe the market is mostly random with a small non random component. The holy grail is to find that small non random component and killing it. In day trading I am not there yet. Peace.
Of course there's always a reason why price moves. Do you think even the academics believe otherwise? Now, predicting price moves is a completely different matter. Just because a transaction takes place that causes price to move a certain way does not mean it's predictable.
It's also important not to confuse prediction with reaction. Most of the time, prices you see on the chart are reflecting traders reacting to the ongoing price moves, eg. FOMO, short squeeze, etc. Hence, can there be a predictive value in deciphering how others react?
Hello my buddy Volpri, Best post I read on ET website in a VERY long time. Al Brooks teachings on trading ranges is simply magnificent.
Agreed.It would be like a couple of kids flipping a coin betting pennies on heads or tails. What would be the point in playing such a game? There is none.
If the markets are not random, how do you explain why more than 90 percent of traders end up going belly up? That figure has always been consistent. Go figure. So this leads me to believe that the market is random only because 90% of those who ultimately blow up are trading randomly (and their trades are showing up as random on the chart).
What they cannot explain or trade successfully they call “noise”. There is no noise. There is only movement. Inertia is the element that helps to predict with reasonable odds the likely direction of subsequent moves. And “how” that move was made indicates something of the inertia. However, even that cannot be perfect because of unknowable variables such as a sidelined institution that suddenly decides to enter the market. But inertia can be used to help predict movement more often than not. If a trader can get direction right 60% of the time or at least above 50% even if they are wrong 40+% of the time they can still make money if they manage their losses and position size correctly. If a variable (such as a sidelined institution enters the market) they can mess with inertia but whatever they do will show up in the chart. They cannot hide. Many of us will remember “the chart is the only truth” and “the chart shows everything”
If random walk was true,10 percent of the traders would be consistently profitable,the other 90 percent would be liars..