I submit that the markets are indeed a random walk, yet tradeable. The success comes in managing the risk, and not the outcome of the trade.
Price has a reason...supply and demand. But can the engine that determines supply and demand be determined beyond a coin flip? No.
The question about trends ist if the markets have any kind of positive autoregression. The question about every kind of technical analyses is if there is any kind of autotocorrelatation positive or negative . The first poster is right ,you can not find positive autocorrelation since mid of 60s at least in the Dow. I made a lot of these analyses but "trends" are really phantasy. They only exist in your eyes watching a chart
Could not agree more, also you need to look at all the possible paths. What I mean is just because you made money on a trade does not mean that you did the right thing. By the same token because you lost money doesn't mean you did the wrong thing. The hard thing is accepting the randomness and moving on. Also knowing when you made money from luck and also knowing when you lost it from luck. And while I am on a role knowing when you made money from skill and lost money even if you had skill. Bottom line is markets are random, they move for no reason, the sooner one, frees ones mind from; but why did it move like that, the better.
markets move for no reason?? geez, I thought they moved for a reason. I thought it had something to do with supply and demand. No? why not? If a new kind of cotton pest wipes out the entire US cotton crop in a "once in a thousand lifetimes" type of event, and then the same pest is mistakenly introduced in the 3 other biggest cotton growing areas of the world and wipes out all the crops and somehow wipes out all the seedstock (it's a hypothetical), can we not predict (determine in advance) that this will have an effect on cotton prices? If a small software company develops a product that the whole world will need, can't some intelligent investors have the foresight to see the potential and invest early? M$? oddi, we agree about the second half of your statement. Managing risk is what sets successful traders apart. However, a lot of people say that successful trading is about having an edge. I assume you believe that the only edge a trader can have is in the way he manages risk? That is, if he has exceptional risk management, then he will win even if his entries are randomized? Agreed. And that doesn't mean that markets are a random walk.
1/Predicting direction accurately is possible especially on short time frames. 2/ Just looking at the pattern exclusively is not the right thing to do.
Is there a rational basis to supply and demand? The market moved about 170 points the other day because of a name. That is not rational. Attempting to predict the future is not rational. If there is no rational basis to an action, then that action is randomized. The markets, if anything, measure the irrational behavior of an aggregate of individuals.