Can I still trade successfully with that perception of the markets. What I do know is that stocks trade in certain ranges (obviously GE wont go from 35 to 60 in one tick) and the movements are relatively stable from one price point to the next on an intra-day basis but the combination of buyers and sellers and all of the many reasons for making a trade as well as all the different strategies that traders employ, make for totally random price action. Sure somebody can point out s/r on a chart after the fact but if you backtest it your stops will equal your gains and you will be down commissions. So having said that, are there strategies that will make you a winner if you believe markets are totally random? PS. I do believe tape reading will give you an edge because one specialist controls orders and 1 human can become predictable in how they handle orders.
I think even some of the market academics like Ken French have come around to the idea that markets are not completely efficient. And to the degree that they are efficient, over what time period is that efficiency expressed in? Successful day traders and swing traders aren't "random walking" their way through the trading day.
What appears as total randomness to the untrained eye, to the trained eye, there is a predictable pattern in place. It just takes countless hours of screen time to train those eyes to see these patterns.
If markets are efficient why is it possible to create a losing or winning system that has returns more than several standard deviations away from the market return as a whole? The answer : Because markets are not efficient
I think you're speaking from a tape reading perspective in which I agree but I am not including that in my statement because I dont think I will ever become a tape reader..
Would it make sense if I said I agree that markets are not efficient but they are random. Meaning yes an equity may be mispriced but you have no way to know when price will get back in line and you have no way of knowing how far price will continue into inefficient territory.
William Simon, head of a treasury desk at Sollie i think (i read this from a book) said to his traders at the trading desk: "look you guys, do not get intellectual in these markets, JUST TRADE THEM...........IF you guys were not bond traders you would be driving a truck" .............I am amazed still today how new guys (and i was one once also. LOL) can get this easy thing so complicated. Do yourself a favor and try to remember simons advice to his overpaid bond traders from those top notch Ivy league schools. ...