markets are chaotic and wild, but definitely not random. read this: The Misbehavior of Markets by Benoit Mandelbrot (Author), Richard L. Hudson (Author)
Sometimes there are 90% probability trades available. Maybe always if one understand how to read them. But if there is a shock with for example a news then a new future is created. But maybe that news event was highly predictable as well.
Basically. Nothing is really random when you think about it. For example, the weather. Years ago (without the weather channel/technology) it seemed random. But now that we have some data we can predict the weather to a certain extent. With ALL the data, we could predict it with 100% accuracy. But with the markets (assuming that they are weak and strong form efficent...) everyone has the same set of data at the same time. And soon after something new is discovered that is not known to the general public then the market becomes more predictable to one than another. That's until everyone else graps a hold of that knowledge and the markets become "random" again... So that's why you need to ask how the market's aren't random and trade there. Everything looks random until it's discovered. There is nothing in this world that is random. But that's a whole other philosophical debate.
Yes, but only if your trading system is inconsistent with your beliefs, AND the market is actually nonrandom, AND you are able to avoid psychological screwups as a result of the obvious conflict. Looking at the number of great traders who believe the market is truly random, your odds of success are not good.
I think I see what you're saying. Most trades are placed for a reason and can be attributed to some belief about the stock. Wether its a technical reason, a complex or simple buy/sell program, a stop order..etc. Its not like people are putting on a blind fold and hitting the buy/sell button here and there.
Hmm. I think I'm paraphrasing another poster, but if you think the market is completely random, you should use a strict rule based method- And if you think it is highly ordered and structured, you should use a close- enough to random method for best results. Thoughts? I doubt this applies to quants though.
Define "totally random." I believe one glance at the Dow from inception to date should provide some evidence that it is not entirely random. Fletch
The market is a "tool" best used by those skilled, often used by those that are not. Each instrument is like an arrow in one's quiver. Find target, aim, shoot!