Forex is random

Let's be clear on this point. You are trading with or against the major interbank market makers when you enter a trade in your retail forex account. The charts you are analyzing receive data feeds from the large interbank market makers, plus the large non-bank market makers. It is basically the same data feeds that bank traders see on their charts. So, your analysis of charts is based on what the banks are doing and the market they are making. You are reacting to what they are doing, as they are doing it. In addition, the prices that I see on my broker trading stations is exactly the same as the price I see on my charting software (with a spread).

When you enter a trade with your retail broker, you must have some semblance of what is happening in the market, and set your expectations of broker performance accordingly. If you enter a trade in a fast market and it gets executed at a different price from your expectations, that is on you, not your broker, just like if you try to turn the corner at 80 MPH and end up parked in your neighbors front room, that is on you not the road or your neighbor. And you are not participating in a pseudo market or a shadow of a real market, you are participating in the full blown forex market. If you are unaware of what the market makers are up to or are likely to be up to, then you are going to end up parked, figurative speaking, in your neighbors front room, only in the forex, that means you will lose all your money. If you are trading a live forex account, and you carry with you the same notions that Mingary expressed, that you are actually trading in a pseudo market not connected to the live forex, or your trades are not impacted by what the bankers (who never looks at a chart lower that a 1H chart and trades in 100 lot increments) are trading, then you're earning the reputation of retail forex traders as being the dumb money.

If you follow people like Mingary, and you can read what he thinks and believes to make your own judgement, you are following someone who has an uninformed view of what is happening in the forex. He can run off list after list of excuses about his experience and excuses for his losses, but none of those lists will include the statement, "I had no idea what the hell I was doing". In fact, if you listen carefully, you will hear, "since I had no idea what I was doing, it is unfair for the retail forex market to exist".

Good luck to everyone, and good trading to those that are trying to make their way through all this to discover success. This thread has exhausted the subject matter and this discussion with Mingary has taken you off topic. I am out of here.

You're right.

My mistake.

Have at it.

The market is not random, just unpredictable 99% of the time, a bit like waves on the ocean. its up to you to find that 1% left.

The market is not random, but random charts deliver all patterns technical analysis claims to be worth trading off.
For me this is enough evidence that technical analysis doesn't provide a benefit beyond that of a self fullfilling prophency.

However, markets are not random because it's smallest element - the decision of a trader to take a bid or an ask offer - is not random.
By taking this decision the price moves in a non random way by filling an other open order.

If you place an market order of 1'000'000'000'000 you will certainly discover that the price moves in the direction of that order and fills a lot of existing limit and stop orders along the way till it is fully filled. So again, this is clearly a non random reaction of the market related to a non random action of one participant over a certain periode of time.

However....if you combine all the actions of all market participants the non random actions of each participant in their sum will create a market that becomes the more unpredictle the longer the time frame you look at.

So while you can predict the market over very short periods of time with a relatively good acuracy - trading cost prevent most market participants from benefiting from it. However, this is the reason why HFT makes money.

The longer the prediction timeframe the closer your prediction probability comes to 50% in a zero sum market.

Transaction costs transform a zero sum market in a clear negative sum market, especially for all retail traders trading with huge transaction costs compared to other market participants. Most bigger market participants generate their huge profits just based on this fact and actually taking close to zero directional risks through exposure.... they arn't in the game to predict market direction.

After 5 years 98.1% of all retail traders that trade on a regular basis and trade based on a price prediction will lose money. The rest can still be explained by pure luck. Take 10 years an you are at 99.8 %...... and so on. A speculative approach will always fail in the long run and isn't something you should waste your time. All traders that profit in the long run are not profiting based on their price prediction skills.....if they believe so, they don't understand why they are profitable.

Conclusion: You just feed the snake oilers and brokers. Best thing to do is stop it and dedicate your time to a real productive job.

Retail forex is and will allways be a negative sum game for losers.

Yes it is ....
But you know how to react when you right and when wrong.
GL.

live it self is random .... just how yaa player wannan dig it ....
it a plane ... its a birttt ... all look good .. just make it fly ...

Randomness is not a condition. Everything in the universe (this one included ) is caused by a set of prior conditions that existed apriori to the condition at hand, The nature of all things including forex trading is causative If, for example, we examine the case of a croupier throwing a roulette ball on to the spinning turntable most people would claim that outcome to wholly random in nature. However , if we were to know the arc of the ball . the speed of the turntable , the amount of thrust used by the croupier in making the toss and an infinite amount of other conditions governing the exact moment of the toss we could determine where it would land , how it would bounce and where it would finally land. Conclusion: to those conditions in which the number and type of variables is so infinitely large and complex that we cannot process them , even with the aid of our fastest computers, we assign a word to describe that circumstance named "random" Randomness is merely a locution that does not have a basis in the material world in which we exist

if you think that way, you believe in determinism
but i don't think we're just robots, moved by electric impulses, in an all predictable world because each atom reacts with its pairs around it.
I believe we humans have souls, and that soul is a part of God, and that's what makes us unique and totally free of our will, not governed only by exterior laws

Forex is not random though at most levels and over most time-frames its too complex to be predictable.

The resemblance of forex price movements to random price movements is close enough that people have proven in the past that with good money/risk management, it is possible to make a profit by making random entries into the market. But I believe the profit levels were poor compared to well performing active participants and the time period for profitable returns is very extended. For most private retail traders, the low positive expectancy, the amount of capital required and the time period required make random entries impractical as a strategy.

Failure at using active trading strategies does not mean that success will follow trading via random strategies. And since there's no profit from debating unprofitable strategies, that's kind of the end of it.

Two Facts.
1.The currency pairs do not move daily in a random distribution.
2.The currency pairs aren't likely to have a 50/50 distribution using random entries with fixed stops and long hold times.

Those two facts hold true for any freely traded , major market you can test.

Sir; there is no conflict between determinism and the causative nature of the forex market as your post asserts. For example: if I am carrying my cup of coffee across my kitchen and I decide to reach for my newspaper on the kitchen table and ,in so doing ,the cup slips out of my hand and shatters on the tile floor (1) the decision to reach for the news paper was deterministic (2) the fact that the cup shattered on impact was causative . Conclusion: Both determinism and causation can exist sequentially in the same set of events without without violating rules of God or nature

It is not about randomness alone!
all financial markets follow the complexity theory; which is by definition from wikipedia:



the latter states that this organization that can self adapt, can be highly affected by random events in the market microstructure; for example consider the forex participants who can be banks, brokers, retailers, and of course the black box algos!
this complexity leads to chaos sometimes, and chaos leads to order.

that's what markets sometimes tend to move in trends and sometimes goes choppy! any small event in the market can affect the whole thing!

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I am not here to say that TA doesn't work at all or any other strategy can't work! TA works when the market is in order, and doesn't work when it turns chaotic!

generating sequential random binary variables (1,0) using the known Martin-Löf randomness can lead to a profitable strategy that works in chaotic mode but fails in order mode.

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ps. this is my first post so please be nice with me

Hi Mingary

I don't think you get it.
You don't need to trade "the real market" to make money but you do need to understand how the sharks manipulate the Retail Forex market. Once you learn their little tricks and see how they run stop pools, making money is very easy.
You can't always predict price action in this "pseudo market" as you put it but you can predict how they will manipulate the price because they do the same actions every single trading day. Most times, they are so bloody predictable.

Cheers

I posted this a few years ago from a forum elsewhere.

Disregard the indicator view point but the gist is there

hi,posted this somtime time ago on my journel,thought it might be helpful on topic,i found it on another forum so cudos to OP.its regarding an indie,but the topic has some relevence

,If the FGDI is equal to 1,5 there is a 50/50 probability.

The FGDI estimates the fractal dimension of the times series.
The fractal dimension = 2 - Exponent of Hurst (H)

So if the exponent of Hurst is equal to 0.5 we have a FGDI equal to 1,5.
Exponent of Hurst of 0.5 means that the movement is random without long term memory processes.
Exponent of Hurst > 0.5 - persistent
Exponent of Hurst < 0.5 - antipersistent

This is explained elsewhere and I just remember that basic stuff. The FGDI (FDI) according to me is better than the fractal dimension indicator published by Ehler, and moreover its mt4 implementation is not free but in the elite section of TSD.

The IVAR is similar to the FDI but its scale is different. The center line is 0.5.

The interpretation is the same when it goes below 0,5 the movement is persistent and vice versa, it is antipersistent.

According to the statistical mechanics if the time series are random walk the H should be equal to 0.5.

Hurst has discovered that a lot of natural phenomena follow a "biased random walk" or trend with noise. The strength of the trend can be measured by how the Hurst exponent is above 0.5 (that means FDI and FGDI below 1,5 and Ivar below 0.5)

In fact all those formula are estimating the Hurst exponent. I think that the easiest is to understand the Rescaled range analysis as a method, to understand what is going on. I precise that I have no high education in mathematics and I was able to understand the logic.

The fundamental principle is if the time series are random their range will increase with the square root of time (this is original idea of Einstein in his paper for the Brownian motion). Einstein found that the distance a random particle travels increases with the square root of time used to measure it.

And Hurst decided to make a ration dividing the Range by the the standard deviation of the observations (R/S) R- range S - standard deviation.

So

R/S = (a*N)^H

R/S = rescaled range N = number of observations a = a constant H = Hurst exponent

So we expect to have H=0.5 if the price time series are random. But they are not folks, that does not mean that they are easily predictable either .

All this may seem very theoretical. The exponential moving average is either theoretical but easy to use. This is the same.

Fractal break -out

Basically the ideal price movement is in a price channel. The price channel can be horizontal (range channel) or directional (trend channel). In fact it does not matter the type. When a price breaks the borders of a chart channel we have a break - out of the channel. If that happens we have a probability that the market conditions has changed and the price will further go away from the channel.


The channel can be regular but it can be irregular. All the classifications of the channels is in fact the technical analysis.

A channel defines a trading range. We have up limits and down limits of the channel. You need at least two points from above and from below to draw a price channel. Then just draw a line connecting the up limits and the down limits of the channel.


Well, but when the prices goes beyond the channel and the gets back to the channel often the technical guys will tell you that you have drawn the channels improperly and you need more educations. When you get more education you will draw the lines properly but again you will see the prices go beyond the channel and get back to the channel. As in the avatar the pilot says before going to battle Ain't that a shit.


This is called a false break - out that happens more often that we want to admit (50 % of the cases ). Ain't that a shit again?


Anyway My idea is to get new details how to trade a Break - out.


1. Use of the volatility probability
We have a break - out probability in periods of increased volatility. So it is necessary to check statistically the volatility. This is well known by the professional players. On the net there are studies with the volatility. Usually we expect a break - out during the open of the European Session and the US session


2. Use of fractal indicators FGDI, IVAR, FDI
We use a fractal dimension graph index indicator (FGDI). When a breakout occurs it is accompanied with a change of the fractal state of the price series.

That means that the graph goes from a state of high fractal dimension to a state of low fractal dimension. We have a shift in the internal structure of the price time series.

2.1 Fractal Break - out
Conditions: We are at a blue zone with fractal dimension greater than 1.5. We move to a zone below 1.5. This is a fractal breakout


This is usually observed after a range (FGDI greater than 1,5)


2.2 Fractal Break - in
We are at a red zone, fractal dimension less than 1,5. The fractal dimension get lower.
I call it so because we are in a red zone of low fractal dimension and the fractal dimension gets lower.

This is usually observed in an established trend when we have a breakout in the direction of the trend


3. A peak in the Hurst Difference
Well this is a kind of measure of the change of the transition of the fractal dimension from one state to the other.
This is a new indicator find in the code base of mql. So the idea is to measure the rate of change of the Hurst Exponent. A high peak means that something is going on.

So when we have a lower fractal dimension the movement is persistent. There is a bigger probability that the next movement will be in the direction of the previous. So when there is a reversal, the reversal tends to be quick and abrupt (Black noise). So that explains how the V tops and V bottoms are formed.

On the other hand when the fractal dimension is higher than 1.5 we have a bigger probability that the next movement will be in the opposite direction.
And the price goes up and down in a lot of oscillations. There we can find pink noise, a lot of whipsaws up and down.


If the price time series were random there would be no correlation of each movement with the previous movement.

I can give a lot of examples of this. This approach is different and independent from the TA perspective so it combines really well with it.

H - Hurst exponent
When H = 0,5 the FGDI = 1,5

Pink noise 0<H>0.5
Black noise 0,5<H<1.0

See chapter 13: Fractional noise ans R/S Analysis
From the book fractal market analysis.


The best use of the system is when there is a low dimension in both two key levels 15 and 30.

If we have red on both 15 and 30 time frame our Persistent Movement Roller Coaster can begin . We will show to the old guys how we can pick tops and bottoms. If we have on both 15 and 30 time frame high fractal dimension that means that the phase space is deemed to be too complex. I call it high phase space singularity. The phase space is so complex that nobody is right. The price goes high and low like crazy.

The theory is that the market is not a signal. What we have is a multidimensional phase space. In those multidimensional space there are fractal attractors. There are many of them there are simple and complex (point attractors, cycle attractors etc.). For example when we see some number of cycles that does not mean that we have a signal with periodicity and frequency etc blah blah blah. The theory is that we have an underlying phase space wherein some attractor produce those cycles.

The fun thing is that the complexity of the phase Space is changing. Sometimes the phase space is relatively simple and sometimes it is really complex with its multidimensionality.

When the phase space is extremely simple we observe a Low Phase Space Singularity. When the phase space is extremely complex we see High Phase Space Singularity.

I call it singularity because the market dynamics start to be different from the normals market conditions.

Low phase space singularity. What is typical of that is that many different algorithms are able to find the same solution simultaneously and act accordingly. Is it an accident that the Brain trend, the ASCTrend stops with digital smoothing, the ASCtrend signal, the Trend magic with or without digital smoothing and the SSAsqueeze find simultaneously the same solution?

You see brain trend had good results, ASCTtrend had good results, Trend Magic had good results. A simple moving average will have good results. The human trader judgement is blown out the statistics may be blown out and we can go against the trend and can be hurt.

The idea is that when we have a relatively simple phase space of the possible solutions the algorithms are able to find simultaneously a solution. The algorithms are able to cooperate, but the humans we do not cooperate (one guy think it is oversold, the other it is overbought, one guy has long term horizon the other has short term).

And if FGDI (FDI) is in red (iVAR below 0.5) at both 15 and 30 m. time frame is a good approximation of the possible Low phase space singularity.

This Low phase space singularity is scary for the public policy makers, because all the market participants start to have the same horizon simultaneously. They are not able to adjust the economies to the market neither to guide the market as efficient as they would like.

They even may not have an idea what is going on and how their direct expensive interventions fail one after another on the Forex market.

Sometimes the Singularity goes into one direction, sometimes we have a series of ping - pong movements. All that is highly unpredictable several movements into the future, try to train a Neural Net to predict those market conditions and you will see, in fact whatever predicting algorithm you try to implement you will fail predicting the low phase space singularity. You have to react as quick and intelligent as possible, and even a SMA is good enough.

The High Phase Space Singularity is exactly the inverse phenomenon. The Phase Space is terribly complex: nobody is right. The market gos up and down up and down. In that type of market conditions the statistical methods are the best. The Gaussian model approximates very well the market during those times.

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Long paper or dissertation void of any relevant information.

This can be true

If you do not know what one is looking for,one will not be able to find it

Bit slow to read this but I use this analogy myself... or rather.. I like the analogy that PA is like the tide coming in and going out, and making profit is easiest buying with the incoming tide, and selling with the outgoing tide, yet understanding that the tides are fluid and still quite unpredictable and affected by the weather etc....

I rather see it as random ripples of a swimming pool most of the times. Not unpredictable, Random. Moving around aimlessly like a drunkard. However from time to time we have a news event coming out that give purpose to the movement.

OK, but ... If you imply that you see this price manipulation on the price chart, I believe you are "seeing things" that are not there.
On the other hand, if you have a direct phone line to "the sharks who manipulate the retail forex market" and they give you insider info, then that is more believable IMHO

Hi Mingary

How fast can you blink. Manipulation occurs on order flow and best seen on the M1 chart. Most traders are looking at H1 / H4 to see it. They will see the result of the action but they will miss that crucial second.
This is classic Manipulation, push price up 8 pips then hit it with extreme speed to reverse the market. It takes a bot to do this and you also need to be watching tick charts to have any chance of seeing it happen.

If you blink, it may have already occurred.

IF YOU CONTROL PRICE - YOU CONTROL SUPPLY & DEMAND