Random Market PROOF

Discussion in 'Technical Analysis' started by ProfitTakgFool, Jan 1, 2008.

  1. There is a lot of debate as to whether the market is random or not. I started this on a new thread so it doesn't get buried in the old one. The following few posts will offer you a proof. Whether you accept it or not is up to you.

    I used the =randbetween(-1,1) in excel to generate a random number that could either be -1, 0, or +1 and added that number to the previous quote, starting with an arbitrary number of 1500. The next tick of the market is slightly more complicated than a flip of a coin because you can have a flat tick so there is a 1/3 chance of any one output. The attached chart is what the output looks like. If you don't think that looks like the stock market then you are just blind.
  2. Now, for the sake of simplicity I ran that exercise again but this time with 200 quotes. The attached chart is what the output looks like. Again, it looks like the market.
  3. Now comes the fun part. I divided the data into deciles and counted the frequency per attached. The conclusion to this is pretty simple, and something I have stated before. Overall, it forms a skewed distribution; in this case, skewed right (skewed left is also possible). The market IS random but here’s the problem…..within, or attached to that skewed curve could be the beginning of the next skewed or normal curve. The market is actually double random because you don’t know what kind of curve will form and when. A skewed curve could be followed by the next skewed curve or a bell curve, or a bell curve can be found within the skewed curve. You never know the answer to this because the market is non-stationary.

    Here’s the trick….what do you think is happening when the frequency is either accelerating or declining? Is there something you can do with that information? Big Hint Here! The answer is right here in front of your eyes and many of you will simply reject it and watch your account blow up instead.

    The market is random, period. If you believe in technical analysis you are simply fooling yourself and your account will suffer as a result. Randomness can be traded. It’s actually quite simple.
  4. Uhhh, the only thing you proved was that you can create something that looks like a stock chart on excel.

    try again.
  5. Lol... whatever makes you feel better about not being able to trade the market off of charts. If your random number generator proves the market is random and no one can trade the markets with technical analysis then one person trading using technical analysis should be proof that it is possible.

    Who cares who is fooling who as long as money is being made... I do not understand why you wasted the time to do random number generators to prove something that is only relevant to your own trading experience. Plenty of people use technical analysis or reading price action to trade successfully.
  6. Well you know how to use some of the tools.

    Amazing that you come to this conclusion.

    Fortunately for those of us who "have eyes". There are earnings reports, FOMC announcements, economic reports, news events, bond auctions and so much that isn't random, to trade off of....

    While your playing with numbers, try looking at intraday volatility from beginning to end of RTH.

    Then if you still dont "get it"...we can talk about non-random intraday trades that occur in every agricultural market when weather reports come out, or about the energy market when cartel events or announcements take place.....

    Please don't take this too seriously....I am just joking with you. None of this actually takes place...Its all an illusion.

    Happy New Year

  7. This is too funny. I'm going to be blunt with you - you are lacking a lot of knowledge and are way out of your league. The proof you provide is laughing material for anyone with any education in math/stats.

    "skewed curve", bell curve... ha ha... "non-stationary" LOL ... you don't even know how to correctly mathematically analyze a discrete distribution! deciles??? LMAO!! seriously pal, you really are a fool's fool - you know, the kind of fool that doesn't know he's a fool.

    In all seriousness though - you should send your work into the Journal of Finance! I'm sure they will acknowledge your genius...

  8. This simply proves that you have never studied randomness. News is exactly the thing that makes holding overnight random. Why do so many traders want to avoid holding overnight or over the weekend? Because they don't know what the news will be because it's the random element relative to that time frame. Why won't futures traders hold overnight? Because the risk of doing so is too high, because of news. Why are margins for holding overnight higher than margins for day trading --->>> News ---->>> Randomness. Ever seen a stock fall on good news? Why do traders go flat before the FOMC? Flip of a coin how the market will react. News makes the market more random, not less.

    Congratulations to all of you for being able to trade. You're successful at trading randomness and you don't even know it.

  9. doli


    You're right, profit.
    Those pushing back are those that have a "method" that depends on the market being non-random, but we are all trading random noise. The important thing to do is to get a method that exploits the market's randomness.
  10. BSAM


    Steve, even if a person has "eyes", he must still understand high probability entries. Strong news events certainly move the markets, but no one trade is entered with a certainty that it will generate profit.
    #10     Jan 1, 2008