Then do yourself a favour by registering for agea.com's streamster platform, and locate a username by the name Joshfx96. Follow his postings. You will understand my point.
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Dislikedof course I can iterate a random walk creator a couple of times, stumbling upon a pattern that looks like one typically observed in forex price charts, and consequently I claim to have "proven" forex to be fully random?Ignored
Disliked{quote} Of course not - but that wasn't the point here. The question is: Can you prove that the markets are not random at all?! I think we shouldn't discuss if the one or the other is true because we can't prove it. And as neither the one nor the other can be proved, I stick to the worst case scenario (for me the more probable scenario) that markets behave random most of the time. If we can beat randomness, we should be able to trade successfully, too. It may be worthless to prove the market's randomness by generating random patterns fitting the...Ignored
=== How does an AVERAGE CANDLESTICK look like? ===
We could chose any value for N to solve both formulas or we can set N = 1. Then we derive sqrt(2/pi) and sqrt(pi/2).
Now let's assume that our random walk ends above our starting point (the candlestick is a bullish candlestick). Thus, we would expect the close prize to be sqrt(2/p) above the open:
In this case the expected maximal distance reached in our random walk represents the high prize,
Now we only need to calculate the expected average low. It can be derived by subtracting the high prize from the close value (assuming that instead of a bullish candle starting at the open we see a bearish candlestick starting with the close of the bullish candlestick):
With these numbers you can calculate the expected average candlestick ratios, i.e.
Thus, the ratio we may expect to see on average is close to 1/4 : 1/2 : 1/4.
Now you may think "so what, this is just fucking theory!" Yes, it is. However, the true mean proportions of the wicks and the body are very close to the numbers we calculated above. You can compare the numbers given here with the empirical values calculated elsewhere by jimsterk.
But remember - these are just the numbers you will see if you calculate the mean over a big number of candles. If you just look at a small sample the numbers can deviate much. But what does the deviation of a current candlesticks form may tell you about the strength of bulls and bears during the lifetime of that candlestick? Maybe you could use this info in order to determine if a trend that you see is stronger than you would expect it on average (cf. image below). Just more food for thoughts ...
DislikedTo the question if markets are random or not another view: Some times ago I did some research (with R), regarding the question if currency pairs form patterns in their up and down over the day. Yes they do, at least sometimes. Patterns appear, get stronger and disappear. Sample (see picture): EURGBP has a strong tendency to go down at 18:00, the pattern exists since 2 month and got stronger in the last month, and is very strong in the last 2 weeks and the last 3 days. {image} {image}Ignored
Disliked=== The myth of risk:reward ratios === I guess everybody who starts studying the markets may have heard one platitude: "Only open trades with high rewards and low risks!" What does it mean? It means that you should only enter a trade where your predefined prize target is more distant to your entry than your exit level. Sounds great, doesn't it? I mean, you will always win more than you lose. Not bad?! Hell no! Let's analyze it. Although this may be not the full truth, let's consider that the market is random, i.e. you have no idea on where/when...Ignored
DislikedAdmittedly you do not have a background in Statistics, but this is basic Statistics. In order to create a probability, or odds, you need an average.Ignored
DislikedAll this is based on the hypothesis that market is random.......but it is notIgnored
Disliked{quote} You most certainly do need an average, LOL. You sure you teach this? You just said you didn't know anything about it and now you are a teacher and don't know that probability is the average of averages? You might want to delete that post.Ignored
DislikedYou sure you teach this? You just said you didn't know anything about it and now you are a teacher and don't know that probability is the average of averages?Ignored
Disliked{quote} Yes, maybe. I wrote in my 2nd post "Is it only possible with an edge that shifts the winning probability in our favor?". Doesn't it imply that I agree that the market doesn't have to be pseudo-random all the time? I would be very happy if you or any other readers would give some indications/proofs/facts on why the market isn't random. If you claim that it isn't random means that you should be able to predict it with a probability > 50 % (at least partly - but then it is pseudo-random again). I'd like to see an experiment/setup where the...Ignored