Use random walk to make $$$

Discussion in 'Strategy Building' started by Thumama, Aug 5, 2008.

  1. Brandonf

    Brandonf Sponsor

    No, I dont mean a sideways market. The market can be just as random in a trend as it can be unrandom when its moving sideways.
     
    #21     Aug 5, 2008
  2. Jerry030

    Jerry030

    A much simpler test would be to see if there are any outliers in the net profitability of all traders in the market. Those with a profitability of more than 3 to 5 STDEV from the mean would indicate that somebody knows something most people don't.
    Anyone know some programmers in charge of account management at some large brokerage companies?
     
    #22     Aug 5, 2008
  3. eagle

    eagle

    In my view, by omitting daily fluctuations, a trend is a one single direction and in that case it shouldn't be considered as random since we only have one outcome.

     
    #23     Aug 5, 2008
  4. MAESTRO

    MAESTRO

    If I tossed a coin and it landed 12 times on a row showing heads does that mean I am in a"head trend" ? :D
     
    #24     Aug 5, 2008
    beginner66 likes this.
  5. Brandonf

    Brandonf Sponsor

    Obviously :) Another good example is that if you take 1000 coins and flip them, each time removing every coin that comes up tails, eventually you might have a coin that turned heards 10 or 11 or more times in a row. That fact does not change the odds of the next toss, although it seems like a lot of people in the market seem to think it does.
     
    #25     Aug 5, 2008
  6. MAESTRO

    MAESTRO

    Another very clear and elegant comment! I concur! :cool:
     
    #26     Aug 5, 2008
  7. eagle

    eagle

    You tossed with a trick double heads coin. :D

     
    #27     Aug 5, 2008
  8. It's not often you find someone coming on ET and opening their mind to the idea that the market is random. The answer is actually pretty simple, both technicals and randomness are at play. The march to and from major support and resistance levels is mostly random. The greater the distance the market travels to get to such point - without taking a break - the more significant that support or resistance level becomes. The exact location the market stops on that support or resistance level is somewhat random but I've seen the price stop on a tick and I trade it accordingly.

    A trader who believes the only explaination for the movement of the market is technical analysis and randomness doesn't exist will have a very short trading career. Good luck with your pursuit.

     
    #28     Aug 5, 2008
  9. And likewise, many traders tend to think a sequence of alternating heads and tails that converts to a squence of 8 consecutive heads will continue to come up largely heads. I'll be damned if it actually does sometimes but I wouldn't put any money on it.

     
    #29     Aug 5, 2008
  10. Thumama

    Thumama

    1. Market behavior is mathematically not random but economically random.. and you cannot consistently achieve abnormal returns from the mathematically predicted market

    2. We perceive market behavior as being unpredictable. The cause of this perception is that we always have a limited set of the information base. The freaky part is that even if we ALL have the complete information set (everyone is GOD and knows everything up to this moment), we CAN NOT predict the market.
     
    #30     Aug 5, 2008