Markets are not random but chaotic since markets are made up of people whose behaviour is not random and as you should know there is order in chaos and that's why you can extract money out of the markets in a consistent way if you know how to spot this patterns.
Robert Rubin, said in the book; Goldman Sachs: Culture of Success. or something like that... "You think in probabilities, it is what you do all the time, it becomes a part of you". Might be paraphrased, but you get the point. Bob Rubin as many will recall was the former Sec Of Treasury for Bill Clinton. Rubin was a currency trader for Goldman, a very good one they say. Clinton is looking forward to becoming "First Man"...HA, and getting back to those STATE dinners, sure beats McDonalds.... I have said for a long time "to be a trader one must also be skeptical and possibly a cynic also.... At least a cynic about corporate ramblings and a certain side of the political aisle. Some know how to seperate the self serving BS from the gist of what is coming down.
Knowing that a market will only come back after you get pushed over the edge is pretty much as non-random as it gets; as in, yes the market is out to get you. This may be a non-issue for us individual fleas, but this happens day in and day out in the markets, albeit on a much tinier scale.
Speaking of currency trading. The CFTC is getting involved in oversight of the retail FX markets. The retail FX is a new area: it is not CURRENCY TRADING, it is NOT FUTURES TRADING. This is an area that is causing many problems for the "REAL" established exchanges. The currency mkt is in reality the INTER-BANK mkt where mostly banks do their business thing. Futures trading is what it is. The retail FX mkt i believe is a pairs trading do-dad, they keep the spread and tell you there is no commission...Well, OK, i believe in the tooth fairy, so what....
As much as I love philosophical discussions, what surprises me is that nobody has came up yet with a practical solution, with a very simple proof, namely with a prediction journal. Predicting the markets with a sufficiently high success for a longer period of time would surely put the discussion to rest. Remember, it doesn't matter how many people think that markets are random, it only takes 1 guy who is able to predict to prove them wrong. Just like having 1000 golddigger trying to find gold on a mountain rumoured to have the yellow metal, just because they haven't been able to find any, that doesn't mean one day 1 guy can not come and strike gold on it. What surprizes me further is the people who think markets are random. Unless they have a profitable strategy for random markets, if they really think they are correct and they can not be convinved otherwise, there is just simply no reason for them: 1. To have this discussion. 2. To be in the markets, after all they are unpredictable. Also I wonder what those "random walk" guys think, how other profitable traders make money? They just make lucky guesses with good money management? I happen to know a journal with daily predictions. It went for 6 months with a very high success rate. I would guess somewhere around 80%. There was a 4 weeks period when the guy who wrote it got pretty much everything right. Now he is either an incredibly lucky schmuck, or markets are predictable... But then again, if you think that markets are random, that is fine with me, I need guys who are willing to take the other side of my trades....
Look at it from another point of view: why does only success in trading prove non-randomness? Why not failure? ie, the 9 out of 10 traders who fail in this endeavor. Do you guys really think that it's just the slippage and commissions that account for that rate? Take a page from evolution: environmental forces and genetic variation may be random, but natural selection is not. Just because the market moves in response to exterior forces which cannot be foreseen does not make the market itself random.
The chances of the DOW having 5 up days in a row are the same as flipping a coin and getting heads five times in a row. 1 in 32
Why should there be? (1) It is clear that nobody seems to know what is meant by randomness and predicting - at least many recognize that 'definitions' seem to be at best hazy as applicable to markets; (2) Making money in markets could be taken as a definition of 'prediction' in our particular market discussion context. Anybody who knows how to predict, i.e. make money, will likely not wish to share his hard fought for knowledge. Giving it away would render his knowledge worthless;