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why have you accepted the price-predictability assumption?

Quoting jmn5611
{quote} That is correct, the more markets traded, the more millipedes created. As far as making money X times faster, the market determines that. But your main point is correct, the more markets the more millipedes. In fact, in that thread, it is advocated that instead of increasing lot size to make more money, one should increase the amount of markets traded instead. The effect will be the same, and the risk will be reduced due to the ability to diversify more effectively. Edit: Yes, the way I trade can be automated as it is completely mechanical,...
Yes i respect your approach, but i think that everything can be automated.The fact that it is more comfortable to you this way is ok , but as a human thinks and picks good trades a well programmed an sophisticated AI can do the same.That is why i hold the artificial intelligence doctrines in my trading strategy.

As for diversification ,yes it is true.Lot size increase will increase your risk in that specified market, some anomaly happens there you will lose all your cash.But if you distribute your trade size to more than 1 pair then even if 1 or 2 markets behave strange, you lose way less than if you were to trade only 1 market.
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But to go back to topic, my usual stand is that, if the market can be predicted or not may remain a mistery for a while, but it should not be a traders main focus.On what each trader should focus is to predict and determine his own account profit.So that is why its crucial to keep detailed statistics on your account information.Because if you repeat the same process again and again, only the market can vary here, so because of that if you know where your balance is going and how fast, you can predict/estimate how much money you will make after x trades, and you can diversify, and pick your trades in respect to that.
"There's a sucker born every minute" - P.T. Barnum
Hi Guys,

I've been trading for several years now. I have studied dozens of technical trading techniques and have programmed and manually backtested many mechanical systems. After all of this time, honest truth is that while I'm an awesome analyst my account balance indicates I'm a lousy trader. Sure I've had periods with awesome returns and have developed systems that worked great on paper over limited time spans and markets, but overall in the real world I am not profitable despite good technique, money management and psychology.

Because of my experience and the coin flip program that I found tonight, http://www.forexfactory.com/showthre...+mcgrew+random, I am currently having an epiphinany that I may have been duped by apophenia.

Anyone want to hire a skilled technical analyst?

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Quoting Proximus
{quote} Well you can create money in more ways but i dont think its constant, money as such is is just the paper, but we are more talking about the worth of an object.You can create the paper with the mint, but you cant create the value by a mint.So the money minted has no value, and only distorts the dollar value, yet it helps ease the pain on the U.S's shoulder.That is why it's called Quantitative Easing.They increase the money supply but that money's worth is absolutely 0. To increase the worth of a stuff you need production, a service oriented...
I cant add to the rather in depth maths.but your point on the market behaving randomly during consolidation and taking on some semblance of structure between such periods.i believe this to be the case.Ive found through my own way of calculating the obvious levels of interest .they are converged range were I can expect a period of conflict ion. Random pricing within a zone.when these zones represent overall interest and are a result of not any particular time period.time is not Regarded.i can determine the lower level and upper level .although I have no initial bias as to its direction.but when structure takes place I can be correct more than 50 % of the time.price travels through what can only call the liquidity gap .this structure is seen in all time perspectives.theres a possibility that this happens through random chance .but I believe the majority of variables have agreement.so a small period of structure inadvertantly takes place.

I would suggest this is inefficient market behavour.and one of the few oppurtunities to take advantage of.these moments are not easy for manipulation. Although there correction often follows
Quoting diceman555
{quote} I cant add to the rather in depth maths.but your point on the market behaving randomly during consolidation and taking on some semblance of structure between such periods.i believe this to be the case.Ive found through my own way of calculating the obvious levels of interest .they are converged range were I can expect a period of conflict ion. Random pricing within a zone.when these zones represent overall interest and are a result of not any particular time period.time is not Regarded.i can determine the lower level and upper level .although...
Agreed, i too think the market is inefficient, and it looks only efficient because the cash rolled in the market has no inflation calculated with it.If some guys take out cash from the market (gets into a bank deposit which is shielded from inflation), and its quickly replaced with inflated money,then the market wont lose its value, it still remains a zero sum game, but only if you look at the quantity perspective. But in terms of real value its degrading or stays the same if you consider in GDP growth.

Just look at the forex market capitalization growth, from 2 trillion to 5 trillion in the past few years ? It is weird that only 2 trillion has accumulated through 100 years of modern capitalism and suddently 3 trillion out of nowhere in the past 10 years :|
Must be inflated money, no other explanation

I think we should claim the 1 million dollar prize of solving this ancient mystery of market enviroment
"There's a sucker born every minute" - P.T. Barnum
Speaking as an ex trader and I cannot believe I am answering some ones question here in FF.
Anyway,,,
The whole market setup is not random but contradictory and once you get your head around that, you guys will succeed...
what do you mean??? I might be asked,,, ie waves within waves as in Elliot theory, short term trend within a long term trend,
I will not say more but think about it, happy days and have a good christmas
SEE LINE,TRADE LINE..PRICE HAS TO GO SOMEWHERE,,, PRICE WILL GO SOMEWHERE.
Quoting billytt
Speaking as an ex trader and I cannot believe I am answering some ones question here in FF. Anyway,,, The whole market setup is not random but contradictory and once you get your head around that, you guys will succeed... what do you mean??? I might be asked,,, ie waves within waves as in Elliot theory, short term trend within a long term trend, I will not say more but think about it, happy days and have a good christmas
I thought about that many times, thanks for pointing out.But does it still make the market predictable ? Maybe many eliott analysts made good success that i know.

But that does not prove that the market or atleast the distribution of candlestick is not random.It may have a bias but not certainly non-random.

Like if you have an unfair coin and toss that, it will have a bias towards a value, but it still be random.I might view the market the same, the SUPPORT & RESISTANCE levels are the "unfair" parts where the market behaves somewhat predictable, and the rest is just a mess in-between.

May i ask why you left trading?
"There's a sucker born every minute" - P.T. Barnum
Quoting diceman555
{quote} I cant add to the rather in depth maths.but your point on the market behaving randomly during consolidation and taking on some semblance of structure between such periods.i believe this to be the case.Ive found through my own way of calculating the obvious levels of interest .they are converged range were I can expect a period of conflict ion. Random pricing within a zone.when these zones represent overall interest and are a result of not any particular time period.time is not Regarded.i can determine the lower level and upper level .although...

I have thought of a similar Idea, about the market before but I have no way or perharps lack the imagination or knowledge to actually test it to at least call it a hypothesis. My apriori is that the market has an underlying tendency created by the macro economic picture which in turn affects the supply/demand of a currency but on a whole is random-like. the model then would be something like this price * e^((drift+[volatility* squared root of time]) * random) where the resulting structure would be a random price structure with a certain directional tendency, that can quickly change according to volume or influx of orders like the financial crisis etc.

the implication of this is that we have a random like market that can change direction at any time according to real events with a tendency to move in one direction in an unpredictable way.
AVT INVENIAM VIAM AVT FACIAM
Quoting PipMeUp
{quote} May you generate a qq-plot against a Cauchy distribution?
I will once I learn how to lol, then I will post it here.

would that be a fair way to describe a Cauchy Distribution? http://en.wikipedia.org/wiki/Cauchy_distribution
AVT INVENIAM VIAM AVT FACIAM
This is exactly it. I found web sites where the authors show a qq-plot of a Cauchy against a Gaussian. In all honesty I don't know how they do since a Cauchy distribution has got no quantile defined...

Let me call a imaginary thing the "intrinsic value" of an asset (like a currency, gold, oil, whatever). 7 billions of people would influence randomly its value. Usually in a microscopic manner. If you collect such a huge number of random influences it will converge to a Gaussian distribution (Central Limit Theorem). But we always price something against something else. Gold for USD, German stock for EUR... I think that the distribution of EUR/USD would be the ratio of the distribution of the intrinsic value EUR and the one of USD. The ratio of 2 Gaussian distributions is a Cauchy distribution.

The pips returns fit quite well the Cauchy: http://www.forexfactory.com/showthre...58#post6646358
No greed. No fear. Just maths.
Quoting Proximus
{quote} I thought about that many times, thanks for pointing out.But does it still make the market predictable ? Maybe many eliott analysts made good success that i know. But that does not prove that the market or atleast the distribution of candlestick is not random.It may have a bias but not certainly non-random. Like if you have an unfair coin and toss that, it will have a bias towards a value, but it still be random.I might view the market the same, the SUPPORT & RESISTANCE levels are the "unfair" parts where the market behaves somewhat predictable,...

Proximus, I pinged you with the why I retired from trading.
an example of market contradictions is,,, sell at a resistance level and buy at a support level this is predictable and works a lot) ... CONTRADICTION TIME....
then we have the breakout traders,,, buy at resistance level and sell at support level, this too works.
market conditions are predictable hence non random but then we have governments playing against each other or for each other and this is where it gets tricky also the Chinese like to play games. I traded oil a lot and unknown facts such as weather had a big affect on prices.
SEE LINE,TRADE LINE..PRICE HAS TO GO SOMEWHERE,,, PRICE WILL GO SOMEWHERE.
Quoting the redlion
{quote} would be something like this price * e^((drift+[volatility* squared root of time]) * random)
Wow looks like you have a formula to describe the market, that would atleast be worth a Nobel Prize in economics, good job

Quoting PipMeUp
This is exactly it. I found web sites where the authors show a qq-plot of a Cauchy against a Gaussian. In all honesty I don't know how they do since a Cauchy distribution has got no quantile defined... Let me call a imaginary thing the "intrinsic value" of an asset (like a currency, gold, oil, whatever). 7 billions of people would influence randomly its value. Usually in a microscopic manner. If you collect such a huge number of random influences it will converge to a Gaussian distribution (Central Limit Theorem). But we always price something against...
I dont know if a market follows a gaussian distribution.I just simulated the normal distributions of the close prices of EURUSD from 2003 to 2013 on M30 and i ended up with this:

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Mean: 1.320362785
StDev: 0.098549754

Not really a gaussian curve isnt it

I should have made the pic bigger but the excel cannot render more than 60.000 data pieces
"There's a sucker born every minute" - P.T. Barnum
I don't accept it, it's 50/50 no matter what anyone says or thinks or anything that has happened in the past.... If you accept that then you can focus on what really matters.

In the mean time trading is an excellent way for losers to sound clever.
tradewith60
  • Post #73
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  • Edited 11:32am Dec 15, 2013 11:09am | Edited 11:32am
Quoting Proximus
{quote} Wow looks like you have a formula to describe the market, that would atleast be worth a Nobel Prize in economics, good job {quote} I dont know if a market follows a gaussian distribution.I just simulated the normal distributions of the close prices of EURUSD from 2003 to 2013 on M30 and i ended up with this: {image} Mean: 1.320362785 StDev: 0.098549754 Not really a gaussian curve isnt it I should have made the pic bigger but the excel cannot render more than 60.000 data pieces

i think most statistics are made on returns

i can expand on this if you wish, and on the formula I didnt come up with it (I agree with this model of price simulation)

* I can see how , seems like I'm Implying that I came up with the formula......I think I ran two thoughts into one. I have not or do not know how to test my a priori, idea #2 there is a way of simulating prices in quantitative finance that takes that assumption (I do not know if in fact it is the correct assumption)
AVT INVENIAM VIAM AVT FACIAM
Well as a Short term M1 trader, I can safely say that my odds on seeing direction are much better than H4 chart, as I have a much better odds on momentum giving me 20 - 60 green bars than H4 which is basically ZERO chance.

No it's not worth as much in pips, or doesn't take as long, but it proves markets are predictable in ways. if you believe the market isn't predictable then it's just not predictable in the way your trying to predict it, simple as.

News is the random variable, which can change the momentum at any time ( normally scheduled but not always ), but news has a 50/50 chance of moving the market the way you'd want it to, so the net result allowing for a good ish SL should be positiive.

They do play games and sucker retail traders onto the wrong side of a news trade though, that's why most do seem to go against you.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
Somebody has to be making the money almost everybody else loses. Brokers take a share but overall they just don't cut it. How's that for evidence?
Quoting 60minuteman
I don't accept it, it's 50/50 no matter what anyone says or thinks or anything that has happened in the past.... If you accept that then you can focus on what really matters. In the mean time trading is an excellent way for losers to sound clever.
Random, i would say half random, or random with a bias (due to economic stuff: interest rates,interbank rates,gdp,cpi,salaries,etc) which alternate themselves.

So it may have a default 50-50 setup but as soon as an economic turmoil in the US or in the EUROZONE happens it gets a bias, like a coin gets unfair, and it will have a bias towards that value.But i`m sure in final, there is never 50-50, since in every given time there is some news which disturb the market.

I can easily demonstrate that its not 50 -50 just by calculating red and green candles on M1 for the past 20 years and you can see that it will be much more candles in 1 type than on the other, way past a reasonable distribution, so in either way its biased.But to say random, i agree.

BTW the gold and silver is upward biased more than 35% than the equilibrium, thats not a coincidence, but the seed of candlesticks is probably a true random sequence

Quoting the redlion
{quote} i think most statistics are made on returns i can expand on this if you wish, and on the formula I didnt come up with it (I agree with this model of price simulation) * I can see how , seems like I'm Implying that I came up with the formula......I think I ran two thoughts into one. I have not or do not know how to test my a priori, idea #2 there is a way of simulating prices in quantitative finance that takes that assumption (I do not know if in fact it is the correct assumption)
Sure i`m very interested in it ,but please consider working with true random numbers.I found a post here on FF where they explain the randomness in the market, you might want to check it out:

http://www.forexfactory.com/showthre...?t=7612&page=3

But there they used pseudo random algorithm which is really crappy

Please use true random numbers:

http://www.random.org/bytes/
"There's a sucker born every minute" - P.T. Barnum
Quoting Proximus
{quote}.I found a post here on FF where they explain the randomness in the market, you might want to check it out: http://www.forexfactory.com/showthre...?t=7612&page=3 But there they used pseudo random algorithm which is really crappy Please use true random numbers: http://www.random.org/bitmaps/
The random generated charts which look close to real, where momentum seems to play parts is due to the pseudo randomness of computers, which can't generate truely random numbers.

Well the C64's could, they used there sound SID Chip and actually had REAL random numbers, everyone else had to use a seed and therefore Psuedo.

See they've found a C64 like way using some other external variable, nice, used to be based on Time before.

Set Dragon 32's Timer to 0 and same line load a game ( Timer stopped while loading ) and get the same security question well within 3 worked great
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
Quoting Turveyd
{quote} The random generated charts which look close to real, where momentum seems to play parts is due to the pseudo randomness of computers, which can't generate truely random numbers. Well the C64's could, they used there sound SID Chip and actually had REAL random numbers, everyone else had to use a seed and therefore Psuedo. See they've found a C64 like way using some other external variable, nice, used to be based on Time before. Set Dragon 32's Timer to 0 and same line load a game ( Timer stopped while loading ) and get the same security...
I'm not sure how you can ever have "truly" random numbers. An algorithm has to produce the numbers some way.
Hi all!

Very good topic idea/question. As simple as it sounds, there are some very technical and fancy math replies. (page 2-3). I study Engineering, (automation&compu science) and i was kinda lost in those distributions graphs. I don't think that they are useless, god forbid, I love graphs and quantifying anything that moves, but I do not think they give an edge to a trader.

This being said, let's remember WHY the market MOVES. Well, the easy answer is: somebody buys/sells this particular asset.(i know there are more hidden reasons: cash flow, hedges, profit taking, sci-fi maths, distributions and all that, but let's forget about them for the sake of the reason).

The next question that arises is, WHY does he/she/it(algos) DO it?
To answer it I only took account of the doji candle formation & historical resistance CASE 1. And only doji formation for CASE2.
(market inefficiency starts here & retail trader profit making starts here)

So, we have a reason and we have a direction along with a reasonable stop loss and multiple times bigger take profit. Right now, I (as a trader) found an area that gives me great reward for little risk. holy grail!!! ) The processes of speculation starts.
Both trades went into profit and we're happy drinking a mojito near the pool on a Monte Carlo roof top )

But why did this happen? why did the price fulfill our prediction? Let's assume this simple&made up order book for CASE 1:

[doji candle formed @H1] --> trader1 goes short (he knows from historical events that dojis are trend revarsals)
trader 2 goes short
trader 3 closes buy -> short ...
[new lower high @M30] --> trader 67 goes short ...

[the last support was breached @H1] --> trader 356 goes short...
[new H1 candle open below support] --> trader 1034 goes short...

[reached the previous suport level @H1] --> trader 67 closes short -> buy
trader 1034 closes short -> buy

and so on to infinity and beyond, every day of the week and on every trade-able thing on earth that has a chart. (case 2 is the same)
As this example portrayed, the markets are far away from being random. They are just a bunch of people that act for a reason.
I tried to make it as "random" as possible and just scrolled the aud/usd chart and started looking for dojis. I have no idea if there were news, earthquakes, volcano eruptions, or someone just farted. And frankly we're here to make a profit and taking rewards from speculation/prediction/call it whatever you want.

@60minuteman (your post popped up as i was writing the replay)
Yes it's 50/50.there's just 2 options up or down
BUT, if you look at the picture attached to this reply you will see that CHANCES ARE the price will fall. And that's were you make money. So, the 50/50 turned into a, let's say, 75/25... market inefficiency at its very best

To recap,
markets are sometimes predictable.
behind every trade there needs to be a reason.
always keep it stupid simple (kiss). It's just up and down for god's sake stop making it black magic science.

Have an awesome week!
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Quoting Kanzler
{quote} I'm not sure how you can ever have "truly" random numbers. An algorithm has to produce the numbers some way.

SID chips reading was on the C64 truely random, some Noise thing on that site, would like more information, truely random seed = truely random number.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
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