You're absolutely right, and this is why long term [overnight] lower leverage holders of positions (whether long or short) based on a successful evaluation of fundamental *trends* [ie upward inflationary bias, fallout from a speculative bubbles, nonsensical misvalutions evaluation of successful corporate execution [apple, google?], familiarility with secular trends [energy demand going up, relatively fixed oil/NG resources] ] are those who do best in the markets. Citadel buying subprime assets at 27c on the dollar that may be worth double in the end, on leveraged capital with no margin call under a corporate shield, is an amazing high probability trade with almost certain profitable payout as a member of likely a balanced investment book. [i'd be almost certain they are long some very attractively priced default credit default swaps in somewhat event correlated positions as insurance against this overweight position. And an etrade 12% yield [6% over their cost of $$$] is probably paying for the maintenance of those.] I'd imagine the duration on those subprime assets isn't more than 10 yrs at those prices... And who knows, after payoff, they may still yield 12-15% The rest is a statistical and behavioral crapshoot.
it looks like you were testing "returns" (which are stationary btw) and found that they follow a normal curve.
PTF, you are a CFI. Markets are totally deterministic. But that determinism is so complex that it sometimes appears to be random. If you had the brains and eyes to watch an index intraday, you would recognize that it is anything but random. Deep pockets limit order traders who MAKE the markets, should they deign to hang around here and read your crap, would laugh so hard they'd shit like geese.
Why is it that those who are forever starting these threads about randomness don't understand the difference between randomness and unpredictability? LC
Because that distinction would require thought and intelligence... You'd think that with all the wonderful online resources available we'd see a higher aptitude from the masses... but, fortunately, people just won't do their homework.
----------------------------------------- Dear Sir or Madam I am a professional engineer, with an advanced degree in applied math. There are many things beyond me, many things that I do not know, and so I try put every comment in that context. As far as your suggestion that I "have never studied randomness", well that does make me smile just a bit. Until my retirement a while back I taught a University level statistics and probability class. Each element of your comment is false. Simply put, your "understanding" such as it is, is ass backwards.....News is random, certainly true, however the impact of a news event on the markets is not..... Futures traders do hold overnight, depending on their skill set and risk management rules. The same can be said for equity and bond traders, and anyone for that matter who wishes to maintain a portfolio. Those of us who have professional standing have a variety of risk management tools at our disposal. Some traders do "go flat" before FOMC meetings. I like to participate in the event because for me, it is almost free money. Like many good professionals, I know how to manage this non-random event to my benefit. In fact, I have posted a couple of FOMC trading days live, showing how it is done. If you were right, I shouldn't be able to do that. Frankly I don't post this for YOUR benefit because you seem to have it all figured out...Instead I take some comfort knowing that eventually the market teaches each of us its lessons. In a kind of "economic Darwinism, we either learn, or live for a while on our luck, or (god forbid) we blow out and find another pursuit. It really doesn't mean that much to me to be right in your eyes, instead I hope to give some thinking newbie a few ideas to pursue in today's markets. You go right ahead with what you are doing. Please
not if you understand how people will likely react to the news under certain situations. sorry buddy but you still have a lot to learn if you think this simply explains the market being random. you do understand that bidders and sellers move prices, right? they aren't just random numbers.
I am not going to be doing this again, because what the hell do I need this for? But here is a chart of today's trade on the report at 10:00am EST Notice (any of you who want to learn how to manage a report day trade) how the 9:55 candle moved just prior to the report. If you were watching this, and taking note of the volume, you would have seen the size go by on the Time&Sales. These two data streams were the "tell" that somebody knew the report, or had an idea of what it would be ahead of time. A short trade entry at 77 half would have resulted in nice profit of 10 ES points. Again, this is for folks who want to look at some alternative to the bullshit idea that markets are random.... I think this might be a nice trend day down. We will see Good luck newbies. Steve