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Is random really random?

http://i59.tinypic.com/kajz9y.jpg

Price after 21:00 hrs does what? It immediately sets its 21:00 Lowest Low and then retests its early in the 21:00 hr. This is a trigger for a Long trade to the historical limit of this particular Hourly B2i Pattern which is running at about 11 pips thus far.

Note: I am not trading this B2i Pattern. I am merely using this as an example of what a B2i looks like, how to construct it and what to look for when trading it. I am currently on B2i Version 5.1 patterns. This happens to be the prototype B2i I developed back in 2008, so this would not even been Version 1.0. However, it does show the structure of the B2i Pattern and the logic behind it.

So, what happens if this B2i's Lowest Low gets extended even further to the downside? In that case, the Shape of the B2i BEFORE entering the Long position tells me clues about the probability for a move to BE or better and thus provides evidence for a Hold signal, if that happens. Notice the Shape of this B2i Pattern. It is more Rectangular than the 20:00 hrs B2i. I am not trading the USDJPY right now, nor do I have its data loaded into my model, but by just eyeballing the Shape of this 21:00 B2i relative to the Shape of the 20:00 hrs B2i and the proximity of both Lowest Low levels, I would be confident in allowing this B2i to rise back to its own Fall Line, should the 21:00 hr close with price below the 21:00 hrs Fall Line.

This is also not the normal time of day where I would trade a USDJPY B2i Pattern, as B2i Patterns do better with higher intra-hour volatility. This is only for illustration purposes and for demonstrating what a B2i Pattern looks like.
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
Quoting iDoubleStoch
{image} Price after 21:00 hrs does what? It immediately sets its 21:00 Lowest Low and then retests its early in the 21:00 hr. This is a trigger for a Long trade to the historical limit of this particular Hourly B2i Pattern which is running at about 11 pips thus far. Note: I am not trading this B2i Pattern. I am merely using this as an example of what a B2i looks like, how to construct it and what to look for when trading it. I am currently on B2i Version 5.1 patterns. This happens to be the prototype B2i I developed back in 2008, so this would not...
great sir where to follow your patterns is there a book you are publishing or a site where we can follow them out
thank you very much in advance for sharing with us
focus while relaxed to see better
Quoting GEfx
{quote} Hello again 60. The above statement is clearly not true. Future price (the "track" that price is likely to take) frequently has a lot to do with past price action. "Right now" is just a point on the chart. Patterns develop as big players work their processes, and the pattern persists until they change to a different set of processes. It's all part of the market structure. When you have agreement in process/pattern/structure, you trade and enjoy predictable results. When these three things are not in agreement you stop trading. Of course,...
Hi GE... if what you believe is true then it could be measured and quantified. Nobody has been able to achieve that. What makes you so sure other elements such as fundamentals or even luck is not playing a hand in your 'predictable' results.

Also, the only people I know using phrases like predictable results are trying to sell something, the market is always uncertain because you are trading against other people and their feelings.
tradewith60
  • Post #84
  • Quote
  • Edited 4:29pm Jul 24, 2014 3:49pm | Edited 4:29pm
Quoting PipMeUp
If the market is completely random then follow the trend! Why? Because if you assume that the market is a random walk then the probability of UP and DOWN moves has to be the same.
I don't understand. If the market is a completely random walk, then aren't all trends effectively an illusion?

If we use the fair coin flip as an analogy, where heads equates to a market uptick, and tails a downtick, how would we get an edge from betting on heads, because we've just had a 'trend' of heads, or by betting on tails, because we've just had a 'trend' of tails?

In post #62 you say:
"1- U D D D D U U U U U D D D D U D U U U U D D D D D D D D D D D D
2- D D D D D D D D D D D D D D D D U U U U U U U U U U U U U U U U
3- D D D D U U U U D D D D U U U U D D D D U U U U D D D D U U U U
4- D U D U D U D U D U D U D U D U D U D U D U D U D U D U D U D U
In the 4 sequences above, the 1st was generated randomly and can be seen as a choppy market, the second can be seen as two impulsive trends, the third can be seen as a range, the fourth can be seen as a congestion. Yet all of them have 50% U and 50% D. Overall they have the same distribution as a coin flip. The market alternates between those four states for a given time scale. Each of these states shall be traded differently. As far as I know the duration of each of them is also random."

Isn't that the same problem? If the duration of each of them is completely random, then the sequence as a whole, as it randomly moves between the 4 patterns, is effectively a random walk, i.e. the same as a coin flip?

Conversely, if we were to flip a coin repeatedly, we would find sequences 1, 2, 3 and 4 appearing occasionally, but that doesn't give us an edge in being able to forecast the next flip — it is still 50/50. And because it is 50/50, any patterns we see are effectively an 'illusion', hence we are being 'fooled by randomness'. Am I making sense?
http://i60.tinypic.com/26380nd.jpg

Second re-test of 21:00 B2i Lowest Low (blue circular highlight) coming in at 22:41 hrs. Several other things are also happening. The 21:00 hours is almost closing in on its last 15 minutes with no substantial Highest High level having been set. The B2i Shape itself is "Rectangular" which indicates Higher Than Normal Recoil Potential away from the Lowest Low area. A previous B2i Fall Line (20:00 hr) exists above the current price level, offering additional incentives to engage the historical B2i Price Range - which is about 11 pips at the time of this post. This would place USDJPY $101.901 as the target per prototype logic. Note: B2i V5.0 logic has a completely different Fall Line and a different target.

Let's watch what price does - keep in mind this is not the optimal time to be running B2i trades as the volatility is too low in the US and Japan right now - but let's see how well the tendency of price is to "behave" according to the historically observed patterns of this particular "Market Shape."
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
i always wanted to memorize harmonic patterns and do researches s in it oh god please help me i think harmonic are the most great pattern science out there until now but it really needs high mind capabilities
focus while relaxed to see better
http://i59.tinypic.com/2642yqo.jpg

A new 21:00 hrs Lowest Low created, so the B2i structure is redrawn and wait patiently for the close of the 21:00 hour. Potential trade has now moved to right about par with the historical B2i target range of 11 pips on this Box. It took the full hour to get there, but it got there nonetheless.

It is now the start of the 22:00 hr and the 21:00 hr B2i is completed. Price finished at the low end of the B2i structure, so I will enter Long here for what I estimate would be the historical B2i target of somewhere around 11 pips (again, I don't have the actual data loaded into my mode - I'm just estimating the target based on some hand calculations across a very short historical sample in real-time).
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
The spreads are way too high and the volatility is way too low, but that's ok, I just want to illustrate how a B2i is supposed to work. Position opened at: http://i57.tinypic.com/244un95.jpgfor one (1) lot.

Replaced image with one that I hope can be seen.
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
  • Post #89
  • Quote
  • Edited 4:30pm Jul 24, 2014 4:17pm | Edited 4:30pm
From an Auction Market Theory perspective
Markets are self organizing and driven by feedback. The market adapts to information from trader feedback

Feedback occurs within the system (all traders observe the same system and make changes in their behavior)
As elements change, that changed behavior is returned to the market via the feedback mechanism

Feedback is diverse, affecting each trader in a unique, personal way. The net effect of the feedback manifests itself in the Market.
Markets are driven by feedback, therefore the Time & Rate of Speed in which each trader responds/reacts to new information is "Random" causing the market to appear to move randomly.

Again, my opinion comes from an Auction Market Theory perspective where “price” is nothing more than an “advertizing mechanism” used to solicit trade. The price fluctuates to where price is “quoted”. It’s "how" traders “respond” to these quoted prices. You can quote any price at any time, it’s who chooses to “use” those prices and where.

Price can be quoted i.e. 50 pips away, that does not mean the market condition has changed or a trend has begun, you can’t know that until the trader feedback is returned to the market via the feedback mechanism

AMVT is more about “How & Where” prices are used, to give insight on trader’s intent. We have no control over where price is “quoted”, however we can control how we respond to those quotes. No amount of TA, imho will determine or give insight to where price will be “quoted” next.

I guess you could say it’s about perception and how you view the market, and whether or not you trade “Value”, or chase “Price”..........
Markets are not efficient, rather they are effective - Jones
Quoting 60minuteman
{quote} Hi GE... if what you believe is true then it could be measured and quantified. Nobody has been able to achieve that. What makes you so sure other elements such as fundamentals or even luck is not playing a hand in your 'predictable' results. Also, the only people I know using phrases like predictable results are trying to sell something, the market is always uncertain because you are trading against other people and their feelings.
Ouch! I am not selling anything nor have I ever attempted to sell anyone anything. Having said that, of course fundamentals are part of market structure so they play a roll in my trading. As for luck, I must be on a 7 year run because it's been working just fine for me, which is all the measure and quantification needed, I think. Maybe my journal is a collection of the deception and illusion of patterns and structure. I suggest everyone embrace these "illusions" and make some money. LOL.
Quoting GEfx
{quote} Ouch! I am not selling anything nor have I ever attempted to sell anyone anything. Having said that, of course fundamentals are part of market structure so they play a roll in my trading. As for luck, I must be on a 7 year run because it's been working just fine for me, which is all the measure and quantification needed, I think. Maybe my journal is a collection of the deception and illusion of patterns and structure. I suggest everyone embrace these "illusions" and make some money. LOL.
sorry I wasn't having a dig with the selling thing,

If you have been in profit for 7 years then indeed you have all the quantification you need...
tradewith60
Quoting orabi
{quote} great sir where to follow your patterns is there a book you are publishing or a site where we can follow them out thank you very much in advance for sharing with us

No. No more publishing for me. I just saw someone asking whether or not the market is really random. I always find that question to be the most controversial of all subjects amongst traders world wide. People have already written books, done seminars and built entire careers on that one singular question.

I just wanted to give my opinion on Market Randomness vs Market Predictability. My current little sample trade has approximately 45 minutes remaining. Keep in mind, I have greatly improved this particular pattern (B2i) and have not traded this particular version in years. This is basically the raw prototype, but it does give you the gist of what I was thinking back then. For obvious reasons, I can't get into what I do today, fully. However, I can say that this B2i is now fully multidimensional and the signal takes other B2i inputs from different time frames along with several other key inputs related to Timing, that were missing from this prototype you see here.

Something you probably missed - the 21:00 hrs B2i structure was merged into the 22:00 hrs bar. So, the starting point of the 21:00 hrs structure was extended through the 22:00 structure with that late 21:00 hrs Lowest Low extension the market put on at the end of the 21:00 hour. All this does is INCREASE the total trade time or hold time in the position from 1 hr, to possibly 2 hours. As long as the fundamentals of the structure remain intact, B2i can extend its structure through multiple hours, which essentially means more potential pips are built into the structure itself.

Again, this is not the optimal time to be trading B2i structures as the volatility causes this structure to weaken. This is why I say that you have to know the "Cloud" type, what causes it to emerge in the earth's atmosphere and how to recognize when it is dissipating. Volume, is one big factor for B2i structures and their stability. No one should be trading this with real capital - that would be lame. This just illustrates what a B2i looks like, how it should work and what to look for.

When the Hour closes below the Fall Line, the trade is Long. When the Hour closes above the Fall Line, the trade is Short. These initial rules are optimized with other inputs such as Distance away from Fall Line, which I have not taken the time to cover. Another optimization is the location of the intersection point between the Projected Line formed by replicating and moving the Primary Lines.

That point of intersection will often times exist out into the future, beyond the actual End Time of the B2i structure which in this case is a 1 hour structure (slight more because the Lowest Low of 21:00 was extended into 22:00). Typically, when price clears the tip of the point of intersection, you then see price begin to make its move back towards the Fall Line. The greater the distance away from the Fall Line, the more forceful the move is typically. We are not seeing this right now, because USDJPY Volatility is low at this time during the trading session. So, instead, we are getting some momentum drift in the opposite direction causing more draw.

Just relax. Remember, I said that Pattern traders have to be patient and always wait for the missing components of the patterns Shape to fully complete. In this case, we are looking at potentially 2 hrs or more, if 21:00 B2i extends lower into the 23:00 hr. Couple that with low volatility (which is why you don't trade B2i in those conditions) and you get this light weight momentum drift in the direction opposite the B2i Fall Line in this case. Sometimes, you get momentum drift in the direction of the trade and the Fall Line, but that depends on WHERE price is located relative to the Fall Line at the Close of the hour.

Another very important input is the fact that a brand new Daily Bar is about to start in less than 25 minutes. The D1 B2i also provides input into this trade, though I have not shown the D1 B2i structure.

Using the H1 B2i, $101.861 is now the target (based on my abbreviated calculations - not in my model at the moment). I will calculate the D1 B2i structure and its target when I get back. Right now, I need to head off to a doctors appointment.
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
BTW - when I get these overlapping B2i structures (like this 21:00 to 22:00 overlap) I stick with the current trade, if I've already entered the position - unless I was intentionally setting aside capital in reserve just in case I get B2i overlap. In that case, I could open multiple positions based on two or more different B2i structures (not uncommon for me when trading B2i).
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
http://i57.tinypic.com/nwiqtc.jpg


Last update before heading to my doctor's appointment. You can see here the example I mentioned above where price needs to clear the tip of the B2i Projection point. It is like turning a car around a corner. You can't drive through the corner as you might hit a building or run over a pedestrian, so you have to make sure the front of your car is clear of the apex before you fully commit. Well, we see market doing that now as price has now returned back to the 21:00 extended B2i Fall Line.

What is now needed is follow through to the 11 pip target which is based on the Lowest Low point within the B2i structure at $101.771 (Time = 21:59). That puts the target at $101.881 for this hours B2i structure (which got extended into the 22:00 hr structure).

Ok, off to the doctor and we'll see how it turns out later.
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
Quoting 60minuteman
{quote} Hi GE... if what you believe is true then it could be measured and quantified. Nobody has been able to achieve that. What makes you so sure other elements such as fundamentals or even luck is not playing a hand in your 'predictable' results. Also, the only people I know using phrases like predictable results are trying to sell something, the market is always uncertain because you are trading against other people and their feelings.
60mm,

Perhaps there's another way of looking at this. Here's a quote from Fudomyo in one of the links I posted earlier:
"Trading is the art of seeing and having the ability to act on certain conditions. These conditions never look exactly the same because you never have the same amount of traders taking the same position sizes or entries in a repeatable pattern. Every accumulation and every distribution looks different, but it doesn't mean the market isn't constantly accumulating or distributing. And there is absolutely nothing random about the functionality of this process."

If I understand what he's saying, then if we can recognize accumulation and distribution, albeit in its many chart-based disguises, we have an understanding of what's going on behind the candles, and the basis for developing an edge.

There's another post by skfx here that's in much the same vein. He is talking about reading liquidity and volatility directly from a naked price chart. Apparently these are recognizable patterns that can likewise potentially lead to an edge, but they're not the kind of patterns (e.g. morning stars, haramis, head and shoulders, falling wedges, S/R, etc) that most TA practitioners talk about.

I read the article in your earlier link ("5 reasons to be skeptical about TA"). The writer seems to be talking about the 'traditional' TA patterns and techniques. I haven't performed a study myself, but I believe that it's quite possible that these patterns don't, on average, signpost a directional bias (hence justifying the skepticism). But, if the FX market is manipulated to some extent by heavyweights, and their modus operandi leaves some kind of recognizable chart-based footprint, then perhaps there are patterns, albeit of a different nature, there for those who are looking at charts through a less conventional set of lenses.

Does any of this qualify as TA? Again, I guess it depends whether one's definition is broad enough to include any kind of probability-based forecasting that's derived from analyzing prior price behavior.

I could be wrong, of course. Just voicing some random thoughts.

David
  • Post #96
  • Quote
  • Edited 5:56pm Jul 24, 2014 5:42pm | Edited 5:56pm
Quoting hanover
{quote} 60mm, Perhaps there's another way of looking at this. Here's a quote from Fudomyo in one of the links I posted earlier: "Trading is the art of seeing and having the ability to act on certain conditions. These conditions never look exactly the same because you never have the same amount of traders taking the same position sizes or entries in a repeatable pattern. Every accumulation and every distribution looks different, but it doesn't mean the market isn't constantly accumulating or distributing. And there is absolutely nothing random about...
if we are gong to consider trading a science then it could be measured and quantified and have identical results every time...

if these other types of analysis existed and indeed have an edge, why have more people not discovered them? you know someone would spill the beans, that's human nature.

The outcome can never be predictable or quantified, the best you will do is trade with the higher TF trend as then it is likely there is a fundamental reason for the move - at least I can not find any proof to the contrary.

perhaps watch this again and ponder why the banks, when they want to know where the liquidity is, they look at the order book, why dont they look at the chart?
Inserted Video
tradewith60
Quoting hanover
I don't understand. If the market is a completely random walk, then aren't all trends effectively an illusion?
The point is that this illusion will last in time. If you're long and the price goes up you make money. Is the reason why the price moved up makes you more or less money? No.

The fair coin analogy has some limits. The coin only gives heads or tails while the market can move up 1 pip then down 1.7 pips. If you consider mapping head to +1 and tail to -1 the expectancy of the next flip is 0. Yet 0 is none of the possible outcomes of the coin. Market can move 0 pips between two sampling (doji).

A coin flip is hit or miss. The idea is not to guess if the next flip will be head or tail or if the next bar will be up or down. In the market you can set a SL and no TP. If the market moves a lot either it will hit your SL and you lose a small amount or it can give you a profit much bigger than the risk. If I could tell you the market will move 500 pips now with 100% confidence but the direction is fifty-fifty you could flip a coin for the direction and use the fact that your expectancy is positive thanks to the stop. But I can't do that because the market's most probable next move is zero. I can't predict the next big move.

If I tell you that the price is strongly trending up with 100% acuracy but I can't tell for how long and you were forced to open a position, are you going to short? My answer is NO because with high probability the trend can not change fast enough (it can but it is a low probability event). Even in the case of a completely random movement! I'm not telling that you shall long anywhere within the move I'm just telling that it is unwise to fade the trend. Even in the case of a completely random market.

Quote
Isn't that the same problem? If the duration of each of them is completely random, then the sequence as a whole, as it randomly moves between the 4 patterns, is effectively a random walk, i.e. the same as a coin flip?
This is the whole point of the post. Indeed the sequence as a whole is 50-50. That's why the distribution of the market is a symmetric curve when you take all the data available in your database. But sub-sequences are not 50-50 iid. The problem is that it is impossible to acurately find the distribution with very few samples and when you increase the window of the last N samples to get enough acuracy you get again the 50-50 because you have merged several sequences and the local conditional probabilities vanish.

This is why I can also not tell with 100% certainty that the trend is up. But if I can estimate with a good enough acuracy 1/ the trend is up and 2/ that the price is low with respect to the (upward drifting) mean, I can say that opening a long is a good choice. If the estimation is wrong the SL does its job. If I'm correct I can catch the next swing of the trend. And this is also true within a fully random market. But it is not true with Bernouilli trials (coin flips, Roulette...)

I found another same kind of property that allows to spot some tops/bottoms to be statistically valid to pick: the trend is itself mean reverting and its mean it fixed and known (0). When the estimation is wrong it is dead wrong and it seems (didn't validate yet) to make it quite easy to exit quickly for a small loss.
No greed. No fear. Just maths.
Quoting 60minuteman
{quote} if we are gong to consider trading a science then it could be measured and quantified and have identical results every time... if these other types of analysis existed and indeed have an edge, why have more people not discovered them? you know someone would spill the beans, that's human nature.
Auction Market Value Theory is about an objective, scientific approach, and scientific use of the data. We identify balances and generally require that the data we use in our analyses are valid for their application. This is admittedly more restrictive than reading patterns, but it is repeatable and not biased by the observer. The starting point is 'data validity' for the job at hand, whatever it might be.
The approach is empirical. Observables are identified, cataloged and interpreted to provide a structurally sound market description that applies to real world situations

The elements of the theory are both descriptive and numeric.
Many don’t understand the fundamental difference of the “Market Profile” indicator, and the Scientific Theory behind it………………

Measured and quantified data does not have identical results every time.
Markets are not efficient, rather they are effective - Jones
Quoting 60minuteman
if these other types of analysis existed and indeed have an edge, why have more people not discovered them? you know someone would spill the beans, that's human nature.
Call me a selfish old b-stard, but if I discovered an 'unconventional' technique that provided a significant edge, I wouldn't be sharing it publicly, or even selling it. But everybody is different.

Somebody posted that particular video a few months ago, and I recall watching it.

I share your view that longer TFs are supported by macroeconomic factors, and also a greater amount of collective averaging. That's why I tend to query the notion that a good system should be able to deliver a similar profit, regardless of the TF on which it's run.

Quoting PipMeUp
The point is that this illusion will last in time. .........
Wow, thanks for the comprehensive explanation!

I think I can now see how I misunderstood. When you say that the market is completely random, you include the possibility of directional bias among the many possible outcomes (which makes a coin flip an imperfect analogy).

Whereas (rightly or wrongly) I tend to envisage something that's evenly balanced, simply because I have no knowledge of who the participants are, or their agendas, and therefore whether the volume of buyers exceeds the volume of sellers, or vice versa, at a given point. Hence, in lieu of anything better, I assume an evenly balanced distribution, with no implied upside/downside bias. Of course in reality that's not the case, but it's the best assumption that I can make, given the (lack of) information that I have.
Back from Doctor's appointment

H1 B2i Pattern plotted on M1 Chart:
http://i57.tinypic.com/vr61b9.jpg

The above chart shows that the B2i tendency worked. The highlighted and elongated blue shaded area shows that after price cleared the tip of the 21:00 projection level, it predictably began its journey up to the 21:00 B2i Fall Line (setting Direction). The pair faltered as suggested by a lack of volatility which causes a loss of follow through. However, 54% of the 11 pip journey was made which fits a low volatility performance for the B2i.


The tendency was clear. Price began moving in the direction the B2i predicted - BEFORE it happened. Trading this B2i according to the rules which requires higher volatility, easily carries the remaining 5 pips to the historical H1 target for the B2i Pattern. So, I was looking for tendency and got it precisely what the B2i predicts from the 21:00 Long trade.

I have drawn a few of the other H1 B2i Patterns after 21:00, so that you can see how these B2i Patters interact with each other. The B2i Pattern itself is indicative of the Volatility condition of the market, which can be seen in the 01:00 B2i Pattern which is fully encapsulated within the 00:00 B2i Pattern. That's a clear indication of weak volatility because the patterns don't extend into new price territory which would establish Fall Lines further away from each other.

As you can see, ever single B2i Fall Line was struck AFTER price exited the Box and cleared the Projected Intersection - with the exception of the 00:00 B2i Pattern. That would set-up the 00:00 B2i Fall Line as the next trade target, if I were actively Intra-Day Trading the B2i on USDJPY. That's how you cycle through B2i trades, you wait until you get sufficient distance between Price and Fall Line without a previous touch of the Fall Line. That sets that Fall Line as the active trade, which is what we now see in the 00:00 B2i Pattern.

Daily B2i Pattern plotted on H1 Chart:
http://i62.tinypic.com/2ztc3es.jpg


And, now we see the move in the direction of the 00:00 B2i Fall Line taking place as I type this post:
http://i60.tinypic.com/168ajjr.jpg

Not ironically and not by coincidence, the distance between what would be the entry point into the Long trade for the 00:00 B2i Fall Line target sitting at $101.796 from the 02:00 B2i Box completion point at roughly $101.731, is approximately 6 pips - which is once again 54% of the 11 pip historical range for this USDJPY B2i Pattern. This again shows that B2i is fairly "aware" and a good tool for measuring internal Volatility. Again, B2i is most effective when Volatility levels are higher. This time of day volatility is at its lowest, which speaks to the low target achievement on these B2i trades.
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
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