Random walk?

Discussion in 'Technical Analysis' started by Sergio77, Sep 24, 2013.

  1. Sergio77


    If markets are random walks with a drift are we safe to assume that only trade-following methods can make money?
  2. emg




    less than 5% of small traders make money

    More than 90% of small traders lose! They just lose!




    what is not random among small traders is reloading accounts. Practice, practice, practice on mastering the reloading technique.

  3. emg : you came on the wrong thread! LOL.
    Look for the one about an 18 years drop out looking to get into trading. :D
  4. Simple non-linear functions of returns exhibit significant autocorrelation (“persistence”), E.g. volatility clustering. Different measures of volatility display a positive autocorrelation over several days; high-volatility events tend to cluster in time. That is, large price variations are more likely to be followed by large price variations; ===> so log prices can not be random walks. Empirical studies using returns from indices and stocks indicate that autocorrelation remains positive and decays slowly over days/weeks.

    [Campbell, Lo, McKinlay, 1999 "A Non-Random Walk Down Wall Street", PrincetonUniversity Press]

    [Cont, Potters, Bouchaud, 1997 "Scale Invariance and Beyond", Proceedings CNRS Workshop on Scale Invariance, Les Houches, 1997]
  5. "trade-following"???
    or "trend-following"???
    murray t turtle likes this.
  6. expiated


    I read somewhere recently that when it comes to trading, it’s said that everything is 50/50, and where you change this is risk management, first by looking to the left to see if you should even take a position, then being knowledgeable to read charts when in the trade to tighten stops sooner or take profit sooner as you might be expecting reversals, studying what happens, tops/bottoms.

    I concur 100% with all of that except for the initial contention that everything is 50/50. I honestly believe this can be changed even before a trader begins looking left to see if s/he should even take a position, etc.

    An earlier post said that some interesting academic studies in recent years have called into question the idea that stock prices move only in a pure random walk (i.e., they’re as likely to go up as go down at any one moment). But the walk is effectively random, in the sense that patterns are incredibly hard to discern and basically impossible to take advantage of with any regularity.

    I don't have much problem going along with this either, except for the "impossible" part, so I have therefore initiated an effort to take advantage of the patterns I believe to be discernible using a particular set of moving averages and moving average envelopes.

    I will admit that I find this easier to do in the Forex market than in the stock market, so foreign currency pairs will be my area of focus for now, and I’m likely to use this thread every once in a while as a convenient place to pop in and record things I might find useful to refer back to at some point in the future.

    My progress thus far has been pretty spotty, but I hope to improve on this as time goes on…

    ScreenHunter_3154 Jan. 18 06.59.jpg
  7. %%
    Sounds like he meant trend following;
    but i'm not a mind reader. NOt random +not a mind reader.:cool::cool:, :cool::cool::cool::cool::cool::cool: