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Short Term Trading is Quantum Physics

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  • First Post: Mar 19, 2008 11:51pm Mar 19, 2008 11:51pm
Short term trading is completely random. I know that some folks here enjoy my posts, while others despise them. (I'm too cynical, lol)

I just gazed into my EURUSD chart and scrolled back on the H1 for a few months. There is pure chaos at the H1 level. Zero rhyme and reason, just central bankers reacting to news and hunting stops. This is the Quantum (irrational world) and not the Macro Physical world that Newton observed with a bright red apple.

Okay fibonacci traders, start posting how H4 fib levels match perfectly. As for me, I am in the camp that price is a result of Superstring for the Superwealthy (bankers, that is.)
Laff. Is that why price likes to play tag w/ the 50 SMA? =)

Price is inherently random outside of human elements, but resistance and support still show their heads on the H1. IMO the H1 is too tiresome to play for long, but I used it today to exit a trade that had turned against me... so my +140 pips says it's good for somethin' .

What's funny tho... price has other aspects of quantum-ness. Ever noticed how price always seems to move the fastest when you aren't watching, but when you start observing price the velocity suddenly changes? Haha... Heisenberg's forex system anyone?
Just because yer' brain can't see a pattern, doesn't mean there ain't one there. Were you expecting to see the zodiac or something?
The breaking of a wave cannot explain the whole sea.
Sure you'll find patterns. And you'll find patterns in random data sets too.
Everything in this world and universe is inherently ordered. No such thing as random. 'Random' is just a popular word in our day and is closely tied to the financial markets. Why do you think that is? If most people believed that price had an order to it, the 95% of the 'loosers,' as it were, would quit feeding the 5%. The successful traders owe their very success to that word.
  •  TrevA
  • | Joined Oct 2007 | Status: my brain has a mind of its own | 166 Posts
Quoting tdion
Short term trading is completely random. I know that some folks here enjoy my posts, while others despise them. (I'm too cynical, lol)

I just gazed into my EURUSD chart and scrolled back on the H1 for a few months. There is pure chaos at the H1 level. Zero rhyme and reason, just central bankers reacting to news and hunting stops. This is the Quantum (irrational world) and not the Macro Physical world that Newton observed with a bright red apple.

Okay fibonacci traders, start posting how H4 fib levels match perfectly. As for me, I am in the camp that price is a result of Superstring for the Superwealthy (bankers, that is.)
TDion, this is an interesting thread and I'm glad you've started it.

If by saying that short term trading is completely random do you mean to say that price movements follow no specific pattern? If you are saying that price movements follow no specific pattern then are you saying that price movements cannot be predicted?

If yes, then the statement that "Short term trading is completely random" can easily be disproved using logic, qualitative observation and simple statistical models (std dev, back-scholes et al)

This common hypothesis is generally quoted off hand without any boundaries or limitations to quantify the statement.... and if it is a generalization then it is completely wrong because I can prove quite clearly that price patterns are NOT random for some events like news releases, specifically real market movers like interest rate statements.

TrevA
I try to stay with TFs 1 hr and longer, less random noise and a clearer picture of momentum.
Same Whore .... Different Dress
That is to say that people are completely random. Yes but in huge numbers they follow patterns. nature is completely random. Yes but Fibonacci sequencing shows up in just about everything organic. Short term trading is the only way to protect yourself from the market chaos that you proclaim. LOL. Trading is not about knowing where the market is going to go. It is speculation. If you thought there was a way to know, maybe you should share in the wealth of info. Truth is you have no idea where it is going except on the short term. And that is just probability. Plus factor into the equation IB commissions. Scalping is the only profitable way to trade outside of long term institutional position trading. And you need a lot of capital for that.
if short term is random, why would longer term be less random? Long term prices are a derivative of the movements of short term prices. Thus disproving the random aspect of short term trading.
Well, I didn't say anything about higher timeframes, but they are random as well. It's just that shorter timeframes are more generally more volatile, and you can really see the chaos come out there.

Quoting jest1081
if short term is random, why would longer term be less random? Long term prices are a derivative of the movements of short term prices. Thus disproving the random aspect of short term trading.
Let me put it this way. When you play poker and you win a hand no matter what you got lucky true. Because every hand has equity. ie 60-40 80-20 etc. But the point is there are professionals. Because it is not about the fact that every time there is luck involved. It is about getting probably on your side. Besides, Gravity is just a probability. But you can kind of count on it lol.

Winning trades can be lucky, but trading styles work with probabilities to be professionals
PS


I just owned you! hehe lol jk
Random market on 1h lol ?

Let me dig deeper on 30m chart.

Call it whatever you want as long as it's profitable
Attached Image (click to enlarge)
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Measure twice, cut once
Allow me to put in this line from the book "Trade your way to financial freedom" by Van K. Tharp.

The next bias influences trading system development in two ways:
First, people tend to assume that the market is random-that prices
tend to move according to random chance. Second, people make
erroneouss assumptions about what such randomness, if it exists,
might mean.

One reason people like to pick tops and bottoms is that they
assume the market can, and will, turn around at any time. Basically,
they assume that the market is random. Indeed, many academic
researchers still hold the belief that the market is random.’ But is
that assumption correct? And even if the assumption is correct,
could people trade such a market?
The market may have some characteristics of randomness, but
that does not mean it is random. For example, you can generate a
series of bar charts using a random number generator. When you
look at those bar charts, they look like bar charts. But this is an
example of the representativeness bias, and “looking like” random
is not “being” random.
Measure twice, cut once
I believe our ability to predict the markets is random. The market itself is not random. If it were random then a currency would have the ability to depreciate even if all the players in the market were buying it. It doesn't though. Price is tied in to all the transactions of that currency. We don't have the ability to see all those transactions and, therefore, we can't accurately predict the market environment.

For example, hundreds of billions of dollars a day are traded by companies to hedge positions. They don't really care what the currency is doing at the time so long as they can match the derivative with the exposure. Their position may lose, but the exposure will gain to offset. I'm sure this creates plenty of noise in the market. This is especially true since the companies don't care how much of the market trend they're fighting against. They only care about hedging themselves.

This is just one example of where some of the noise may be coming from. It's not necessarily random though. There was some transaction on the market to shift price. It's not random.
At the core I accept that a certain randomness is present.
But this randomness is restricted to only 2 possible outcome, either you win or lose. So the odds are still good.

Experientially the market do not seem to be that random after all, a high level is predictability is evident.
Quoting tdion
Well, I didn't say anything about higher timeframes, but they are random as well. It's just that shorter timeframes are more generally more volatile, and you can really see the chaos come out there.
more volatile? What is your measure of volatilty? Lets compare. 5 min against the 1hr. Swings are generally bigger in 1hr, trends generally lasts longer in 1hr, ranges are bigger too!

Summarised, volatility in the longer timeframes should be bigger. Maybe you meant that smaller frames tends to range more often than not and their swings are more prevalent to be fakes?

The volatility of the smaller frames should and will always be smaller than the large frames, but the SIZING that short term traders usually take in their bid to make big money with small pips. I'd gather that the volatility exists not in the timeframes but rather, in their accounts, lol.
but one mans random is another mans order. As long as there are enough people in the market it will be for all intent and purpose remain generally unpredictable to a day trader.
You are not accounting for the Heisenberg Uncertainty Law Trader...
google:
Quoting tdion
There is pure chaos at the H1 level. Zero rhyme and reason, just central bankers reacting to news and hunting stops.
... so price is moving because stops are being chased, and news is being reacted to .... if that is true, then it doesn't sound so random after all ... you can't offer reason for what you are proposing to be irrational.
You can quit and they won't care, but you will always know.
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