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Is the market random or not ?

  • #21
  • Apr 11, 2008 9:13am Apr 11, 2008 9:13am
Before we can answer, We should first define random in this context.

(A)
A random process is a repeating process whose outcomes follow no describable deterministic pattern, but follow a probability distribution.

(B)
Lack of predictability, without any systematic pattern.

For me, as far as these definitions of randomgoes, the market never was and never will be random.

Trading the market blindly, however, may give random outcome
100% of traders are losers. Just that some win more than they lose!
  • #22
  • Apr 11, 2008 9:21am Apr 11, 2008 9:21am
Quoting kharvell
If there are probabilities, then there is randomness. Why do probabilities exist? Many different trials with random outcomes... The correct answer to "Is forex random?" is "Yes, to an extent." The extent or randomness should be less than your confidence in the trade.

And to put it bluntly, no crap there are times when forex is not random. I'm not dumb enough to sit here and say that in a 500 pip upmove that it's probably not gonna go up. I'm saying there is always the random factor. There is not anyone here with a 100% record, because that randomness got you. If so, tell me now and I'll be quiet.

This is a complex issue and a good topic.

Thanks for the welcome, but I've been around a little while.
We only disagree on extent or semantics, otherwise we agree.

There are definitely random events. No trader can deny this. Randomness, as you put it, exists, without question.

I took the question as, "are the markets always random?" or "completely random". If they were, we'd be depending only on luck, gambling, and that would be stupid.
  • #23
  • Apr 11, 2008 9:24am Apr 11, 2008 9:24am
Quoting Mr demark
Before we can answer, We should first define random in this context.

(A)
A random process is a repeating process whose outcomes follow no describable deterministic pattern, but follow a probability distribution.

(B)
Lack of predictability, without any systematic pattern.

For me, as far as these definitions of randomgoes, the market never was and never will be random.

Trading the market blindly, however, may give random outcome

Personally I don't think that is an accurate statement. Predictable patterns occurs only at various point of times, certainly only a fractional portion of any given trading day.

To qualify market non randomness, EVERY cyclic changes and market swings must be presented with accuracy. Obviously nobody has been able to do that, even the most successful of traders.

mARK
  • #24
  • Edited 10:15am Apr 11, 2008 9:27am | Edited 10:15am
Quoting kharvell
aediaz,

I'm one of those "1KT traders that should know the answer", in your opinion. Sorry to have to tell you that my answer is different, and I venture to guess I may be the one you're talking about since I've had this discussion before. The bottom line is forex IS random.

Can you predict human decisions of buying and selling patterns?

Really?

NO YOU CAN'T. WHY? Because if you could, you would be a fortune teller, and I sure as hell don't believe in those.

Why MUST you be a fortune teller? Because NO ONE in this world can predict human decisions 100% of the time.

Now, with this being said, successful traders must always have probabilities in their minds. "Is it probable I will win this trade?" Or "Will this news affect this currency this way?", "What's the trend?", etc. Does this mean forex isn't random? NO. It means there are probabilities of events happening. Never will the probabilities of the intended event reach 100%.

Bottom line: Forex is random. If it wasn't, you wouldn't lose.

Tell me you don't lose, and I will tell you there is someone for whom forex is not random.
I see your point here but I must admit its an odd statement.

If forex was random why not choice gambling ? Much easier playing red/black on a casino. No spreads, no SL hunting etc etc. Why even bother with the long learning-curve you're going through in here when the market is random ? If so, we would be better of tossing a coin and apply good MM to be successful, right ?

To win in this market you need setups that give you higher than 50% win-rate, viewed from a "normal" perspective if you catch my drift here and to provide an example.

From what I understand in order to have 50% + WR you need some system that spots/benefit from different price-behavior's with the chance of (pattern to) reiterate itself.

If this market was random, how is it possible to analyze potential outcomes/prices of different price patterns, indicators, fibs, S/R, momentums etc which we have noticed from traders in here at FF. Because many other traders follow these same strategy's making this market not random. I once read that 90% + of all movements is caused by investors (someone kick me in the leg if I'm wrong).

Sure you can guess the outcome of a poker match, but you have no way to "analyze" how many chips each participant have the end compared to start because the outcome depends ALSO on the cards (which is random).

Can the answer to all this fuzz be different understanding of the term random ?
Measure twice, cut once
  • #25
  • Apr 11, 2008 9:27am Apr 11, 2008 9:27am
If the market was completely random then the next tick has a 50/50 chance of being up or down. Deviation would be the only explanation for trends and no trend would have a higher or lower chance of starting or ending at any point.

There would be no accounting for established resistance or support. Fib ratios would have no meaning, there'd be no reason for fibs to be proportional as they often are, there'd be no accounting for breakouts, etc.

Clearly that isn't the case.

At any given random point the odds of one or the other may be 50/50, but at specifically chosen points such as right outside of a consolidation area, this is clearly not the case. You have a million orders placed with stops around the same place and entries around the same place, then you'll have a million speculators behaving very humanly when the breakout finally occurs. At these moments you can predict with great accuracy what will happen.

In other words... at some point the market must discount one set of outcomes for the other. The odds stop being 50/50 and go to being 90/10 or 80/20.
  • #26
  • Apr 11, 2008 9:28am Apr 11, 2008 9:28am
Quoting blueruby
We only disagree on extent or semantics, otherwise we agree.

There are definitely random events. No trader can deny this. Randomness, as you put it, exists, without question.

I took the question as, "are the markets always random?" or "completely random". If they were, we'd be depending only on luck, gambling, and that would be stupid.

Pardon me, I thought there are profitable strategies for random markets ?

Does market randomness restrict a trader's profitability ? I doubt it.
  • #27
  • Apr 11, 2008 9:59am Apr 11, 2008 9:59am
Unlike the universe that has an unlimited Macro and an unlimited micro, the Forex universe has defined boundarys. Governments to micro account holders.

Having defined boundrys, creates a closed system. If a government wants to intervene on a currency, the central bank, thru tier1, thru interbanks, will non randomly make the currency move. Big money has that magical power. There is a time component to it.
This is non random. IMO

The random period is the correction , where the majority of the world, under the interbank market fight each other like a tug a war contest. This is random. IMO

As a little trader, I like to think of myself as a pilot fish that swims along a huge whale or shark, and swims in their direction , close to them, and eats the scraps of their kills.
  • #28
  • Apr 11, 2008 10:05am Apr 11, 2008 10:05am
How can it be random when it's traders who move the market?
  • #29
  • Apr 11, 2008 11:30am Apr 11, 2008 11:30am
Response within your quote in red.

Quoting aediaz1
I see your point here but I must admit its an odd statement.

If forex was random why not choice gambling ? Much easier playing red/black on a casino. No spreads, no SL hunting etc etc. Why even bother with the long learning-curve you're going through in here when the market is random ? If so, we would be better of tossing a coin and apply good MM to be successful, right ?

Forex is gambling. It's just another game with different rules, a lot more complex with a wide array of options on how to approach. However, traders are attracted by the allure of a title that is more respectable than 'gambler' but still earns the same amount of cash. Let's be real here; we know this to be a truth. It is viewed as an occupation that requires SKILL, DISCIPLINE, PERSISTENCE, etc. Sure it requires these skills, I agree with this, but it must still be gambling.

The main difference posted by another poster is that we have a set of reasonable values that we can be in at a point in time. This aspect of forex is nonrandom because within reason, we will see price act in this range. Within this range though, there are still 1000's of values. This in my opinion, is where it begins to have the random element when you get into more individualistic timeframes.

To win in this market you need setups that give you higher than 50% win-rate, viewed from a "normal" perspective if you catch my drift here and to provide an example.

From what I understand in order to have 50% + WR you need some system that spots/benefit from different price-behavior's with the chance of (pattern to) reiterate itself.

Not necessarily. Theoretically, someone could pull a system off that has Risk:reward of 1:10 and would only be required to win a small percentage of the time.

If this market was random, how is it possible to analyze potential outcomes/prices of different price patterns, indicators, fibs, S/R, momentums etc which we have noticed from traders in here at FF. Because many other traders follow these same strategy's making this market not random. I once read that 90% + of all movements is caused by investors (someone kick me in the leg if I'm wrong).

The only valid indicators IMO are trend strength (where the price is/has been heading within YOUR individual timeframe) and S/R levels where you can tell there was buyer/seller struggling. Sometimes this would entail trendlines. Not a big fan of fibs.

 Sure you can guess the outcome of a poker match, but you have no way to "analyze" how many chips each participant have the end compared to start because the outcome depends ALSO on the cards (which is random).

Can the answer to all this fuzz be different understanding of the term random ?
  • #30
  • Apr 11, 2008 11:46am Apr 11, 2008 11:46am
Quote
Having defined boundrys, creates a closed system. If a government wants to intervene on a currency, the central bank, thru tier1, thru interbanks, will non randomly make the currency move. Big money has that magical power. There is a time component to it.
This is non random. IMO

I met a hedge fund trader who managed 300 mil of opm.He told me that the biggest loss he ever incured was in 2 minutes .He was trading manually and without stops and went to take a piss, when he came back he had lost a lot of his own and a lot of his clients money.He beat him self up about it for a couple days after then had a computer installed in his bathroom and it never happened again.The point is there are millions of traders in the market every day and those millons of traders are acted upon by billions of daily occurences.If my wife asks me to step away from the computer to help her put in a light bulb who could predict that .Who can predict if i will and who can predict if i will get a divorce because i am sick of her interupting me while im trading and then get drunk one night to drown my sorrows and the next day while i am hungover make a stupid trade and blow my account. .who can predict if i will just ignore her and get back to trading .who can predict if i get angry and blow my account and who can predict how the market is affected if my wife just went to gym that day.The market, any market is an accurate representation of trillions of trillions of interactions .

The reason we make money in the markets is because we accept that after thorough research and analyses that there is a probable outcome to this randomness ie. i win sixty percent of the time or the market is going to bounce off the 78 % fib,but it is only probable and this edge can be negated at ay time if some one steps out to take a piss ,or doesnt.
  • #31
  • Apr 11, 2008 12:04pm Apr 11, 2008 12:04pm
yes, it's random. without any doubt.
https://linktr.ee/Soultrader
  • #32
  • Apr 11, 2008 12:05pm Apr 11, 2008 12:05pm
Quoting Pavlov's Dog
I met a hedge fund trader who managed 300 mil of opm.He told me that the biggest loss he ever incured was in 2 minutes .He was trading manually and without stops and went to take a piss, when he came back he had lost a lot of his own and a lot of his clients money.He beat him self up about it for a couple days after then had a computer installed in his bathroom and it never happened again.The point is there are millions of traders in the market every day and those millons of traders are acted upon by billions of daily occurences.If my wife asks me to step away from the computer to help her put in a light bulb who could predict that .Who can predict if i will and who can predict if i will get a divorce because i am sick of her interupting me while im trading and then get drunk one night to drown my sorrows and the next day while i am hungover make a stupid trade and blow my account. .who can predict if i will just ignore her and get back to trading .who can predict if i get angry and blow my account and who can predict how the market is affected if my wife just went to gym that day.The market, any market is an accurate representation of trillions of trillions of interactions .

The reason we make money in the markets is because we accept that after thorough research and analyses that there is a probable outcome to this randomness ie. i win sixty percent of the time or the market is going to bounce off the 78 % fib,but it is only probable and this edge can be negated at ay time if some one steps out to take a piss ,or doesnt.
Funny post you had here lol. Well, how often do you think rare events like this happen ? Don't tell me all those spikes who cut out my SL some years ago was caused by FM's taking a piss ?! :
Measure twice, cut once
  • #33
  • Apr 11, 2008 12:06pm Apr 11, 2008 12:06pm
Quoting aiyahmarklah
Pardon me, I thought there are profitable strategies for random markets ?
If the market were truly random, all traders would lose over the long term, because of spread. How could there be a strategy for a truly random market?

Quote
Does market randomness restrict a trader's profitability ? I doubt it.

Semantics again. random, randomness, randomity, randificationism, etc.

Successful traders have learned to overcome the existing "randomness" in the market. They are not restricted from making a profit, this is true by observation.
  • #34
  • Apr 11, 2008 12:07pm Apr 11, 2008 12:07pm
Quoting soultrader
yes, it's random. without any doubt.
Mind sharing your view ?

Looks like we have heavy arsenal on both side of this argument
Measure twice, cut once
  • #35
  • Apr 11, 2008 12:09pm Apr 11, 2008 12:09pm
Quoting blueruby
If the market were truly random, all traders would lose over the long term, because of spread. How could there be a strategy for a truly random market?



Semantics again. random, randomness, randomity, randificationism, etc.

Successful traders have learned to overcome the existing "randomness" in the market. They are not restricted from making a profit, this is true by observation.
My brain fail to verify other statements than this. I wonder how its possible for me to understand that market is random ?

How can you make profit from randomness ? In my point of view you hit the nail here.
Measure twice, cut once
  • #36
  • Apr 11, 2008 12:11pm Apr 11, 2008 12:11pm
Quoting seeit
If a government wants to intervene on a currency, the central bank, thru tier1, thru interbanks, will non randomly make the currency move. Big money has that magical power. There is a time component to it.

This is non random. IMO
This is what I consider random. You see your favorite setup. You've been profiting 60 - 70% on it for years. You take your entry. Everything is going along fine.

Then, that which you mention above happens, unannounced, out of the blue, and you're stopped out in minutes.

It happens from time to time, with no real pattern or predictability. It has nothing to do with your setup, the charts, the news, or any other TA or FA.

That's what I consider to be a random event.
  • #37
  • Apr 11, 2008 12:11pm Apr 11, 2008 12:11pm
Quoting kharvell
aediaz,

I'm one of those "1KT traders that should know the answer", in your opinion. Sorry to have to tell you that my answer is different, and I venture to guess I may be the one you're talking about since I've had this discussion before. The bottom line is forex IS random.

Can you predict human decisions of buying and selling patterns?

Really?

NO YOU CAN'T. WHY? Because if you could, you would be a fortune teller, and I sure as hell don't believe in those.

Why MUST you be a fortune teller? Because NO ONE in this world can predict human decisions 100% of the time.

Now, with this being said, successful traders must always have probabilities in their minds. "Is it probable I will win this trade?" Or "Will this news affect this currency this way?", "What's the trend?", etc. Does this mean forex isn't random? NO. It means there are probabilities of events happening. Never will the probabilities of the intended event reach 100%.

Bottom line: Forex is random. If it wasn't, you wouldn't lose.

Tell me you don't lose, and I will tell you there is someone for whom forex is not random.

Maybe you havent been paying attention to the world for the last 150 years but predicting human behavior patterns in groups is EXACTLY what we have learned how to do. Do you watch media??? Why do you think that companies that sell crap continue to do so. Because they have learned that humans have predictable patterns.

People are killing me with this nonsense about how random the market it. Just because you cant have a good girlfriend doesnt mean that women are completely unpredictable either. Complicated. YES!

Does anyone in here even know how foreign exchange rates are set? What is the connection between PPP( price power parity ) and GDP. How can Income per capita and interest rates change that?

If not quit looking at freakin GANN cylcles. And pretending you have any idea what that means. LOL. Go do some research and learn about how this market works.

KNOWING YOUR INDICATORS DOESNT MEAN YOU KNOW THIS MARKET.
  • #38
  • Apr 11, 2008 12:18pm Apr 11, 2008 12:18pm
Some times go out for pizza. And just when I am about to order I think to myself. " Gosh I really dont want pizza "

I am so random!!!!!!!!!!!!!!!

(YOU STILL DONT GET IT DO YOU? )
  • #39
  • Apr 11, 2008 12:24pm Apr 11, 2008 12:24pm
Lets take off the gloves here while we are at it. I am surprised some of you peolple dont need help getting dressed in the morning and have to wear a bid to eat your pureed butternut squash.

Listen closely.

GRAVITY IS A FREAKIN RANDOM PROBABILITY!!!!!!!!!!

if i have to explain that to you there is nothing left to do but shoot yourself.


ps I just owned most of you LOL
  • #40
  • Apr 11, 2008 12:39pm Apr 11, 2008 12:39pm
Random or not random, the Markets are always right.

Maybe a better question would be

Is my trading random?




Roy
Polishing my crystal ball
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