Is the market random or not ? | Page 6 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Is random really random? 231 replies

Why do indicators not work/work? Why is Forex not truly random? 129 replies

Market Random and Predictable Parts 26 replies

Pro Traders in a Random Market 60 replies

Random Market vs Set Expectancy 8 replies

Attachments: Is the market random or not ?
Exit Attachments

Is the market random or not ?

  • #101
  • Apr 14, 2008 2:18am Apr 14, 2008 2:18am
Quoting zamakhtar
Some of you are in binary mode. Forex is not completely random nor completely 'not random' from a trader's perspective, remember a lot of the time a trader can correctly predict the direction of the trend but still fail due to poor entry timing, stop loss placement, or profit target placement.
you're right, we are sticking our heels in a bit arent we.

but i disagree with your wording 'predict' more like correctly identify.
https://linktr.ee/Soultrader
  • #102
  • Apr 14, 2008 2:50am Apr 14, 2008 2:50am
Market is not random for long time frame.

Since over the long time, fundemental factors decide long term price movement, and fundemental factors are not rantom, it takes time maybe several years to change. Just like subprime crisis, it takes several years to change that.

Market is random for short time frame.

Any unexpected news, a hedge fund closing position, big boys talking, traders mode can change the price for 50 to several hundred pips. And nobody can systematically predict correctly all these factors and the correct weights of infuluence.
  • #103
  • Apr 14, 2008 3:14am Apr 14, 2008 3:14am
The best analogy for me is the ocean .When I look back over the previous posts of people claiming the market is not random I stagger,I feel my world is coming to an end.I can only come to a handful of conclusions.Every one knows there is order in the markets or nobody could make money consistently but just because we can make money consistently does not mean the markets are consistent.

Picture a wave pool in a laboratory .With enough sensors placed throughout the lab we can approximate (very accurately) the size a wave will reach when wind is passed over the surface .There are endless formulas that can be applied to the information we gather from the sensors and if the scientists say the wave will reach 1 Meter in height then you would be a fool to argue with them.
They can attain this level of accuracy because every one in the lab is on the same page and they have an adequate data set.The formulas they apply came out of a textbook and they all know the same formulas with regards to the experiment so they all come up with the same answer.

These scientists exist in the real world they are called meteorologists aka weathermen (do i even have to go any further to illustrate my point).

My point is this:weathermen like us do not possess an ADEQUATE array of sensors to measure every variable they would need to give us an accurate
weather prediction and thus "FU*%ing stupid" will often precede weatherman in a conversation between fishermen on a boat being pounded by 20 foot waves on a day when 5 footers were predicted.There is not a weatherman alive who can accurately predict the weather for his entire career and i must admit i have never heard of a trader that can forecast/predict/guess where the market will go for his entire career .

So my question to all the pollee's is if the market is not random then in a word or a phrase what would you call it.
  • #104
  • Apr 14, 2008 4:41am Apr 14, 2008 4:41am
Here's the full online text from Princeton University press. The study was on the stock market, but forex is probably not very different at a basic level. They both are products of the same basic game, though currencies are far more liquid, and the markets have become much more efficient than when the study was conducted. Either way, enjoy:

A Non-Random Walk Down Wall Street


http://press.princeton.edu/books/lo/
Virtue finds and chooses the mean. Aristotle, Ethica Nichomachea
  • #105
  • Apr 14, 2008 5:34am Apr 14, 2008 5:34am
I'm no economic expert, but... Overall, of course it's not random. It's a lagging indicator of a country's economic status.

Look at the USD, it's been falling for years now against most other major currencies. Possibly due to the sub-prime crisis, war on terror may have played its part and most likely due to the fact that Nixon untied it from the value of gold (which is finally catching up - quite a lag).

There are too many variables that determines what it does, that's why it can seem random looking at the smaller picture. We simply can't factor them all in at once or know when a certain variable is going to have an effect on it.
  • #106
  • Apr 14, 2008 5:37am Apr 14, 2008 5:37am
Are these the same guys that proved beyond a doubt that a bumble bee cannot fly.Trading is far from a science, it is a world filled with gut feelings hunches and tip offs sometimes i sit in front of my screens and i just know where the markets going for no apparent reason.If Da Vinci had written the paper i would have probably read it .Science and art can only scratch the surface
  • #107
  • Apr 14, 2008 7:16am Apr 14, 2008 7:16am
Quoting Green_David
Market is not random for long time frame.

Since over the long time, fundemental factors decide long term price movement, and fundemental factors are not rantom
please let us know where we can get hold of non random fundamental information - i mean 100% predictable fundamentals.
https://linktr.ee/Soultrader
  • #108
  • Apr 14, 2008 7:20am Apr 14, 2008 7:20am
Quoting Plutonite
Here's the full online text from Princeton University press. The study was on the stock market, but forex is probably not very different at a basic level. They both are products of the same basic game, though currencies are far more liquid, and the markets have become much more efficient than when the study was conducted. Either way, enjoy:

A Non-Random Walk Down Wall Street


http://press.princeton.edu/books/lo/
there is a significant difference between forex and stocks - as previously stated there is an inherent bias towards longs on stocks - everyone involved wants the stock to rise - the company itself wants a strong share price so it is worth more, investors want the price to rise to make their profit.

Forex has no bias, is not seen as an investment vehicle, and is therefore a completely different matter.
https://linktr.ee/Soultrader
  • #109
  • Apr 14, 2008 7:21am Apr 14, 2008 7:21am
Quoting itechdev
I'm no economic expert, but... Overall, of course it's not random. It's a lagging indicator of a country's economic status.

Look at the USD, it's been falling for years now against most other major currencies. Possibly due to the sub-prime crisis, war on terror may have played its part and most likely due to the fact that Nixon untied it from the value of gold (which is finally catching up - quite a lag).

There are too many variables that determines what it does, that's why it can seem random looking at the smaller picture. We simply can't factor them all in at once or know when a certain variable is going to have an effect on it.
i give up lol

https://linktr.ee/Soultrader
  • #110
  • Apr 14, 2008 7:32am Apr 14, 2008 7:32am
Quoting soultrader
please let us know where we can get hold of non random fundamental information - i mean 100% predictable fundamentals.
You cann't predict a fundermental 100% precisely for each release.

But the trend of fundermentals are clear. Say, last year July, US subprime crisis began, the US economy is surely going worse. And it would take years to end crisis. If a country's ecoomy is deteriarating for a long time, its currency will depreciate.

This is not random, however when it would be the end, and how it would end, that will be random.

Similiar to TA, E/U definately has a clear up-trend, but it must have an end to this long trend, but how and when it's random, we never know.

I wish I made myself clear.
  • #111
  • Apr 14, 2008 8:54am Apr 14, 2008 8:54am
Quoting soultrader
there is a significant difference between forex and stocks - as previously stated there is an inherent bias towards longs on stocks - everyone involved wants the stock to rise - the company itself wants a strong share price so it is worth more, investors want the price to rise to make their profit.

Forex has no bias, is not seen as an investment vehicle, and is therefore a completely different matter.
Please try to read the document to understand what a random walk is.. you basically wouldn't be here if currency charts (which does have bias towards interest yielding pairs, btw) were a random walk through prices - you could not have any predictive edge whatsoever and nobody could ever consistently win on average. The speculative interference in the market, arbitrage, plus large banks dealing with commercial activity in the most profitable way they can, means that the market will have some patterns of activity that imply buying/selling in the near future. The issue is not as simple as you seem to think (or else we are talking about different meanings of random, as noted before).
Virtue finds and chooses the mean. Aristotle, Ethica Nichomachea
  • #112
  • Apr 14, 2008 9:55am Apr 14, 2008 9:55am
Quoting Plutonite
Please try to read the document to understand what a random walk is.. you basically wouldn't be here if currency charts (which does have bias towards interest yielding pairs, btw) were a random walk through prices - you could not have any predictive edge whatsoever and nobody could ever consistently win on average. The speculative interference in the market, arbitrage, plus large banks dealing with commercial activity in the most profitable way they can, means that the market will have some patterns of activity that imply buying/selling in the near future. The issue is not as simple as you seem to think (or else we are talking about different meanings of random, as noted before).
I totally agree with this bit "you could not have any predictive edge whatsoever"

i don't believe that there is a 'predictive' edge. (and neither does Mark Douglas by the way). just because you cannot predict though does not mean you can't make money. I do not predict price movements at all in any way shape or form. I take a chance based on newtons law for action / reaction - how i manage that chance once taken is what makes or loses money. in a nutshell if it's going up i'm long, if its going down i'm short and if it's going nowhere then im flat.

the definition of going up or going down vs going nowhere is based upon momentum. if its going up with some weight behind it the chances are it will continue until acted upon by another force which drives it the other way. the chances of it continuing decrease the further it goes unless momentum is maintained - but they still keep going don't they.

they can turn on a sixpence and they do - some win and some lose and it is a random chance of how far any move with momentum will go. This is the basis of my trading decisions and as I accept that the market can and will turn at any time i do not attach any mental responsibility to any trade.

On the other hand, the trader who predicts through the use of squiggly lines is automatically giving over power to those lines by believing they have some predictive capability. they take trades based on a belief system that says "YOU are wrong in that decision you muttonhead - look, the other indicator clearly showed short you thicko" - this attachment to trade direction prediction is what causes most traders to fail and lack belief in their own capabilities. - the lines dont work and i cant work out a way to make them kinda thing.

New traders are superb - they come in see price going up and buy - it goes down they sell. new traders make money - enough money to get them hooked in the game - then they are doomed to spend an eternity grazing for ways of avoiding losing trades and spotting winners earlier and earlier.

My advice, forget prediction - if it's going up then buy, if it's going down then sell and if it's going nowhere then stay flat or close.

The answer of random or not will prob never be solved - you cant prove it is and cant prove it isnt - you can only hypothesise. the real question is why does it matter? it only matters if you are trying to predict like most traders do.

Think about this - if it wasn't random then why hasn't someone on here made a billion yet? god knows enough man hours have been put into systems - why arent the writers of the non random walk rich beyond their wildest dreams if they proved it isnt so?

Now open your mind and just try working on the premise that it IS random - think how would you make money if it were - then when you find a way you will make money wether it's random or not! - a random method will work on a non random market - the same cannot be said for systems that rely on non-random markets
https://linktr.ee/Soultrader
  • #113
  • Apr 14, 2008 10:19am Apr 14, 2008 10:19am
Please try to read the document to understand what a random walk is.. you basically wouldn't be here if currency charts (which does have bias towards interest yielding pairs, btw) were a random walk through prices - you could not have any predictive edge whatsoever and nobody could ever consistently win on average. [quote]

At the end of the day you are still guessing/gambling.It seems like a glass half full/empty scenario.The markets contain psychological patterns that repeat themselves over and over but they also contain random events that repeat themselves day afer day .If you start at the bank that provides your quotes and end with your order being placed there are large number of innefficiencies in every trade(the lag time for quotes to reach you even if only 1 millisecond is a random input into the model as is the lag time for your order to be sent and then to be executed).For me these inefficiencies equate to randomness, they mean the difference between the price running up to your stop or running your stop.There are trillions of variables that make up the price feed you see on your chart and the price you see is an accurate representation of all the known inputs AND UNKNOWN INPUTS

and as far as i know if you introduce random inputs into a model it produces...................random results
but then again i barely made it through highschool
  • #114
  • Apr 14, 2008 10:24am Apr 14, 2008 10:24am
i don't believe that there is a 'predictive' edge. (and neither does Mark Douglas by the way).

I second that its an awesome book
  • #115
  • Apr 14, 2008 10:30am Apr 14, 2008 10:30am
Quoting Pavlov's Dog
i don't believe that there is a 'predictive' edge. (and neither does Mark Douglas by the way).

I second that its an awesome book
i wouldnt go that far.
https://linktr.ee/Soultrader
  • #116
  • Apr 14, 2008 11:33am Apr 14, 2008 11:33am
Quoting soultrader
if its going up with some weight behind it the chances are it will continue until acted upon by another force which drives it the other way. the chances of it continuing decrease the further it goes unless momentum is maintained - but they still keep going don't they.

Congratulations. You've just converted to the "non-random" school of thought. : These statements are a description of non-random behavior.
  • #117
  • Apr 14, 2008 11:37am Apr 14, 2008 11:37am
Quoting soultrader
Forex has no bias, is not seen as an investment vehicle, and is therefore a completely different matter.
HuH? So investors like Jim Rogers just buys Chinese Yuan w/ U.S. Dollars for the fun of it? No preconceived reason, no analysis of long term fundamentals (it isn't an investment after all), no desired yield return? If Rogers does it, HSBC does it, RBS does it, Mizuho does it and the price of Yuan is going up against the Dollar (because more people want it now, thus the price will naturally become more competitive to get), you don't see any non-random reason why that movement is occuring?
The market is my nation. Traders, my family. Hello, brothers and sisters!
  • #118
  • Apr 14, 2008 11:43am Apr 14, 2008 11:43am
Hi,

The amount of market participants almost guarantee the randomness of the FX market. If anyone here has read, heard of or studied fluid dynamics will agree. Its like a shoal of fish in the ocean, driven by current, tide, other fish etc.

In this discussion though I would say that the term "random" has a rather discouraging feel to it - like you can't trade anything random because you don't know what's going to happen next.

So, even if the market is random (which I believe), it is still tradable for profits.

A coint toss is also random in the first place - but there are only two outcomes possible: heads or tails - or for the market: up or down.

Price behaviour is not much different from a coin toss. Prices can have only one direction at the time - I leave out the odd choice price here.

The question is now, (and here lies the difference to a pure coin toss), once you have got your result, i.e long or short, for how long will the price carry on in that direction? - Nobody knows, everyone is guessing....

In trading, uncertainties can never be eliminated and will always be present but there is the approach of probabilities - and that is all a trader needs to beat a random market - and what is probably likely is by no means certain....which makes the trader put on a stop (whether physically or mentally).

So, random is good - it keeps the trader alert - otherwise we would not have to think about losing a single trade since the price would always go in the predicted direction for as long as predicted.

hope this makes sense

regards
daytrading
Enter Signature
  • #119
  • Apr 14, 2008 12:11pm Apr 14, 2008 12:11pm
Quoting StockKJay
HuH? So investors like Jim Rogers just buys Chinese Yuan w/ U.S. Dollars for the fun of it? No preconceived reason, no analysis of long term fundamentals (it isn't an investment after all), no desired yield return? If Rogers does it, HSBC does it, RBS does it, Mizuho does it and the price of Yuan is going up against the Dollar (because more people want it now, thus the price will naturally become more competitive to get), you don't see any non-random reason why that movement is occuring?
sorry, you misunderstand my definition of the term 'investment vehicle' - by that term i mean as a long term investment for pension funds etc - it's an asset class alright but is classed as an 'alternative' investment vehicle - i meant in the traditional sense of the word as in buy and hold investing. you woudnt buy and hold a forex pair for 20 years now would you.

its an investment vehicle to the same extent that a roulette wheel is.

my bad.
https://linktr.ee/Soultrader
  • #120
  • Apr 14, 2008 12:12pm Apr 14, 2008 12:12pm
Quoting daytrading
Hi,
In trading, uncertainties can never be eliminated and will always be present but there is the approach of probabilities - and that is all a trader needs to beat a random market - and what is probably likely is by no means certain....which makes the trader put on a stop (whether physically or mentally).
Again, just as with Soultrader, you are presenting an argument for NON-randomness not randomness.

One of the problems with this discussion is that many traders aren't clear on what the mathematical meaning of "randomness" is. Random behavior implies that an approach based on probabilities will NOT work.

If the probabilites of an up vs. down move are ALWAYS 50/50 then the market is completely random and a probabalistic approach will fail. On the other hand, the extent to which there ARE probability differences from 50/50 is the extent to which markets are NOT completely random. So if there are situations which consistently show a 53 - 55% probability of a down move for example, that illustrates the presence of non-random behavior.

This by the way is the basic approach to how a statistician would "measure" the amount of randomness in a system. A system isn't "completely random" or "not random at all" any more than we can say a person is "completely tall" or "not tall at all." Randomness, like height, is a measurable quantity.
0 traders viewing now