DislikedThe markets are absolutely random. Everybody except the losers and the newbies knows that. It is a pure fact like the fact that the earth is not flat. Why discuss facts?? A waste of time.Ignored
Below an excerpt from a man who has done his homework and made a few bob from 'non-random' markets.
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daytrading
The Nonrandom Market
For the most part, commodity prices are like a drunken sailor, wandering down the street without any knowledge of where he is going, or where he has been. Mathematicians would say there is no correlation between past price activity and future trends. About that, they would be wrong: there is some correlation. Although that drunken sailor does swagger,
stagger, and seemingly move in a random fashion, there is method to his madness. He is trying to go someplace, and we can usually find out where.
While price action involves a large degree of randomness, it is far from a totally random game. If I cannot prove that point, right now, early on in this book, the remaining chapters should be devoted to learning how to throw darts. In a random game, the dart thrower will outperform the experts.
Start with a given-if we flip a coin 100 times, it will come up heads 50 times and tails 50 times. Each time it comes up heads, on the next flip we will have 50 percent heads and 50 percent tails. If heads has now appeared two times in a row and we flip again, the results continue to be 50/50 that a head will appear on the next flip. As you have probably heard, the coin, dice, or roulette wheel has no memory. The odds are fixed, as this is a random game.
If that were true of the market and prices close higher 50 percent of the time, then after each up close we would expect to see another up close 50 percent of the time, and following that up close again 50 percent
odds of another up close. The same thing should apply to a down close: 50 percent of the time following one down close, we should see a repeat; and again 50 percent of the time following two in a row, a third down
close should appear. In our real world of trading, it does not turn out that way, which can only mean price action is not totally random!
Reference:
'The Non Random Market' in Larry Williams 'Long Term Secrets To Short Term Trading'
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