From your post it is clear that it is you that doesn't understand random behaviour and the onus of proof on theory. Your claim that you could find a random trend that looks like BVF is total crap. You can't. Period. You are suggesting that a stock could go up 85% in a few months due to randomness in trading. Well if you truly believe that, I suggest you buy some housing in Florida and hope that the randomness of housing prices makes you 85%. To those with their feet firmly in the ground, we all know BVF went up primarily for fundamental reasons, and housing prices went down in Florida for fundamental reasons. Obviously you don't have that firm a grip. Maybe just flip a coin on that housing decision.
You didn't read my post very carefully. I'm disappointed... Many here have posted examples of random trends that look very similar to many stock market moves. There is plenty of literature out there that shows "trending" examples with simple random walks. That said I do not dismiss the catalyst theory and have several models that exploit such price moves. My suggestion was that a stock could go up 85% for any number of reasons. Most of which might as well fall into the correlation versus causation fallacy. I asked you to delve into the differences... I never stated my belief system, I'm stating a grey area that you seem to think is black and white. Be careful with having your feet "firmly on the ground", its hard to move out of the way of a steam-roller when one is convinced that it will turn due to obvious fundamental reasons...
I see very little relevance to "coin flipping" theory to trading. Please post some real time trades where "coin flipping" theory was an important consideration. I'm not interested in unproven theory or academic arguments going nowhere. The onus of proof rests with you on this. With respect to the "steam roller", I trade trends and the "steam roller" is my friend.
Hi Mike and Others, A simple comparison, BVF vs. an excel spreadsheet. 50-50 probability with +1 for win, -1 for loss. Sum them up, plot it up, guess what you get...ANYTHING YOU WANT, with enough time. The entire point of the this thread is the existence of a distribution of results based on a coin flip. The results can be good, bad, awesome, crap, or flat. Hit F9 (recalculate command in excel) enough times and you'll see results that will blow you mind or make you want to blow your mind away. That is the point, you have to see 'through' the noise and probabalistic results to have a true edge in the market. Have fun playing, Masterjaz
Random results Cannot upload spreadsheet, but here's all you need. In 1 cell (A1) use formula =rand() in next column (use B1) =if(A1>=0.5,1,-1) in next column (use C1) =B1, then C2 on use =B#+C(#-1) Much harder to write than create. I'll try reposting later. Elitetrader giving me a 'database error'
Agreed, that's the way I've been leaning as of late...due exactly to this topic and these results...we'll see if it works. Masterjaz
Why are you wasting you time with coin tossing? This has nothing to do with the market. In probability theory, the outcome of a coin toss is not depended at all on any other toss, previous or future. In the market, each price move depends to a lesser or larger extend on the previous move. This is obvious since P(i+1) = P(i) + dP(i) The change in price dp has a deterministic and a stochastic component as follows dP(i) = D(i) + S(i) S(i) depends on news, events and other random information. D(i) depends on previous moves, it is a variable that can be forecasted easily. So the answer is to trade when there is no random information coming in, or at least, when there is less expectation for any random information of great value to the market coming in. All you need is a model to forecast D(i). That is your edge. Some people trade before or during unemployment, ppi, or GDP reports and then complain about randomness. Stupidity, there is plenty.