Thoughts on randomness and systems | Page 2 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Fooled by randomness 15 replies

Luck, Randomness, and Chance in Trading 0 replies

Best book on randomness in markets and market probabilities? 4 replies

Systems, Systems and Systems... 1 reply

Poll: Are trends rooted in randomness? 16 replies

Attachments: Thoughts on randomness and systems
Exit Attachments

Thoughts on randomness and systems

  • #21
  • Feb 15, 2009 8:28pm Feb 15, 2009 8:28pm
Quoting Cosmo
I don't subscribe to the theory that any market is entirely random...
Cosmo Kramer?
  • #22
  • Feb 15, 2009 8:47pm Feb 15, 2009 8:47pm
Quote
By independent I mean for example choosen by cointoss, picked from different pairs randomly, picked in different period of time randomly, anything that is not the same pair in the same time etc...

If you exclude a pair it isn't random anymore.

Quote
I would bet everything that if god sold one contract of his favourite currency pair on every friday when weekly close was higher than weekly open, and vice versa for oposit conditions he would made a killing when closing all positions simultaneusly at the end of the world [if country that was currency owner didn't disappeared].

When all closing positions what? In what time frame? Give details. You are giving the vaguest of arguments. I bet "God" could buy when weekly close keeps getting lower and lower and still make money.
  • #23
  • Feb 15, 2009 9:03pm Feb 15, 2009 9:03pm
Your view of independent can't be compared to a coin toss. For a coin toss to be independent, it has to be flipped under the same conditions, i.e in a room with no wind.

Buying 'randomly' or what not is like flipping a coin in a hurricane for a few tosses and then flipping it in a climate controlled room. It isn't independent.
  • #24
  • Feb 15, 2009 9:30pm Feb 15, 2009 9:30pm
the laws of charts and men showed me that market aren't exactly random

http://www.forextradingmajic.com/onsubmit1.html

read it and you'll see it a lot differently i just don't believe in complete randomness in how things work all the time. There are always anomalies though that may be or look like randomness, or maybe not. but no one can prove anything really here. nice party conversation though!
  • #25
  • Feb 15, 2009 11:08pm Feb 15, 2009 11:08pm
I always thought the markets were random and so I tested and strategised (using Martingale, semi martingale, anti Martingale, scaling, pyramiding etc etc) on EURUSD (inc spread) .. then gave up. To determine the level of randomness I would let the system open a trade then monitor +/- 10 pips (adjustable) and see the distribution of the number of bull and bear runs (ie two bulls, 5 bulls, 7 bears etc) ... this number was in fact very close to a normal distribution which to me shows the market is random (I excluded all high impact new events). When the spread was removed the system was amazing but with the spread the system was crap.

I eventually found that using martingale was bad, and that a limited semi anti martingale did seem to work. I tried all types of parameters and limitations and variations and I arrived at a system that looked promising - however I later found that one of the conditions which I manually controlled to determine a ranging or trending market was in fact backwards. This led me to believe the system got lucky and so I abandoned it. I wanted to focus on more understandable logic (albeit I gave Parrondos Paradox a go too ... and canned that later as well.)

So for the question that always seem to arise, the markets, excluding high impact news events etc, are random. This is not my opinion, the distribution chart shows it.
cheers ...
  • #26
  • Feb 15, 2009 11:53pm Feb 15, 2009 11:53pm
Quoting Kaligula
I would bet everything that if god sold one contract of his favourite currency pair
on every friday when weekly close was higher than weekly open, and vice versa for oposit conditions
he would made a killing when closing all positions simultaneusly at the end of the world
[if country that was currency owner didn't disappeared].
Quoting loa1452
If you exclude a pair it isn't random anymore.

When all closing positions what? In what time frame? Give details.
You are giving the vaguest of arguments. I bet "God" could buy when weekly close
keeps getting lower and lower and still make money.

No. No. I'm afraid you've both got it wrong.

God uses floor pivots (both daily and weekly - including midpoints)
as well as round numbers to trade major pairs, such as Euro and Yen.

Even though he doesn't need a stop order, he puts one in anyway.
This is one of those " Live as I live, trade as I trade" type of things that God is
well known for throughout the ages, so it's hard to argue with his trading methods.

For exotics, God uses ultra-low leverage and trades off the weekly chart.

All of this is common knowledge to forex traders who've been at this a while.

BTW: this only relates to how The Creator of the Universe trades.
It is still suggested that one do their own research, just to be sure.
  • #27
  • Edited 1:07am Feb 16, 2009 12:53am | Edited 1:07am
Quoting NuckingFuts
The market is not random in the sense that every move is accounted for. i.e. sellers/buyers in control, x bought from/sold to y, yadda yadda. A transaction must have occurred for it to move.

The market is random in the sense that we simply cannot predict what people will do.

To me, random would mean the market could suddenly shoot up in a straight line any number of pips and could do likewise the next instant. While I suppose one could argue semantically that's possible(particularly in today's environment,) the likely hood is small enough statistically so as to eliminate it within reason. There are certain parameters of probability around characteristics within the market that can be used to stack odds in your favor, Bollinger Bands are a perfect example of this, supply and demand lines are another. I think the Martingale method is outside acceptable risk for most successful trading, some may argue. I like the 1.5 percent margin rule myself. The idea I believe overall is to have a system in place that minimizes risk in such a way that optimizes the chances of when a trade goes in your favor it out distances the unsuccessful attempts prior. I really got excited when I realized I don't have to be right all the time or even half the time, instead I just have to be protected against being 'more wrong, ' and risk management does just that.

Not sure if that was on topic, but maybe it was insightful.
  • #28
  • Feb 16, 2009 2:53am Feb 16, 2009 2:53am
Hi,

I wouldn't look so much at the "math" when trading - or trying to explain market behaviour. (except your position size relative to capital and risk)

When you decide to go swimming in the sea, you don't try to mathematically explain to the last cubic mm how high the next wave is likely to be - you just swim - to your abilities....go with the waves and keep your head above the water. You don't swim out too far (risk) and you don't go in the water when it does not look right (storm). But if you like swimming, you will go back in the water, even if you swollow some of it occasionally.

You also rather enter from a shallow point (beach = low risk) then jumping from a rock where there might be rocks underwater (high risk). And you will repeat all that regardless of which beach in the world you are - they all look a bit the same and a bit different.....just like the graph's (or charts) of any financial instrument.

Once you're in the water, you've got to move your arms and legs (manage the trade), which is depending on the weather conditions (market cond.) sometimes harder, sometimes easier.

And finally, the more oceans you've swam in, the more experience you will have in getting it right (swimming further[more profit] without swollowing water or sinking).

Extreme unannounced events like hedge fund liquidation or similar are like the tidal waves - and your surival depends on where you are in the sea (market) and how well you can swim...or sometimes if you have a live vest (stop).

Use your eyes, like all swimmers do....and amazingly enough, the majority of traders do too.

Hope this gives some comfort.

regards
daytrading
Enter Signature
  • #29
  • Feb 16, 2009 3:02am Feb 16, 2009 3:02am
Quoting inflxshn
I really got excited when I realized I don't have to be right all the time or even half the time, instead I just have to be protected against being 'more wrong, ' and risk management does just that.
I like your point
Martingale always gives non pips if you decide to moneymanage it.

I'll post today some xls for illustration, and explanation, why breakout don't work
  • #30
  • Feb 16, 2009 3:12am Feb 16, 2009 3:12am
Quoting daytrading
Hi,
I wouldn't look so much at the "math" when trading - or trying to explain market behaviour. (except your position size relative to capital and risk)
Great point!
Martingale would be comparably like trying to swim out from sinking boat one direction to find land, after 5 minutes of no land you turn back to swim 10 minutes [back to sinked boat and 5 minutes further] than back for 15 minutes, tha back for 20 and so on.
I don't use those ideas straight when trading It's more for geeral divagation, but I will prove today, with those concepts that breakout as a strategy is disaster.

My entire post was iten by post-eatting monster so I got frustrated.
I've answered all of you and now dont feel like repeating it all over again.
Will post later
  • #31
  • Edited 5:47am Feb 16, 2009 5:43am | Edited 5:47am
Ok
I've just finished my excel work, so here's attachement.
I worked on UJ pair, if you fancy you can try same with any other.
Firs sheet is plainly about randomnes.
Number of eight different combinations of three bars are nearly the same, so forget about autotrading method saing after two bear candle third is more probabily to be bull or so.

Second is enormous possible profit you ca obtain when trading second method it for eternity.
I've applied simple rule - when daily candle bigger than 20 pips up, you sell on closig price, if closing lower than open more than 20 pips you buy it.

From 08.16.2001 you could make 103 475 [99 203 after 3 points spread]
during this time the biggest drawdown was 704 523 pips, and the biggest oposit thing [drawup..?] 74 846 527.

I'm starting to consider why not to take those 75 milions and quit trading...

Is that interesting now?

I hope it give clearer picture on what I mean by randomnes, and what I mean by "God's trade".

It doesen't chage the fact that it is possible to make money on this market.
If it's not clear enough just ask again ad I'll do my best
BTW next I'll post in accodance to what I'm trying to show why trading breakouts as a method is not that happily ever after as it is rumored all around

EDIT: Attachement is in zip, as xs was to big to attach...
  • #32
  • Feb 16, 2009 5:53am Feb 16, 2009 5:53am
hi Kaligula:

1. I don't see any attachments

2.

Quoting Kaligula

Second is enormous possible profit you ca obtain when trading second method it for eternity.
I've applied simple rule - when daily candle bigger than 20 pips up, you sell on closig price, if closing lower than open more than 20 pips you buy it.
It seems you do not really believe in absolute randomness - because you apply rules to the market for enormous possible profit
__Thanks__ MJ
  • #33
  • Feb 16, 2009 6:11am Feb 16, 2009 6:11am
If FOREX was random, it would cease to exist. Search a little deeper and you will uncover how perfectly organized FOREX is.
  • #34
  • Feb 16, 2009 6:25am Feb 16, 2009 6:25am
Quoting M_j
hi Kaligula:
1. I don't see any attachments
2. It seems you do not really believe in absolute randomness - because you apply rules to the market for enormous possible profit
1.Will attach once again
2.I belive in profitability of trading

Troikaone1
I do dig deep - this thread is an examle. If you open thread perfect order in FX I'd love to hear and participate

I do my trading and decided to share my general philosophical thoughts that I hope you enjoy .

Now why SR lines doom you
What I'll preset is quite a newbie lesson, but it comes out from previous thoughts, so prsent it here. I realise that breakout traders ussually need to take rofit fast insted of keeping trades for eternity...

Firstly I'd lie to ad that I do place trades around SR levels if there is reason for it, so don't treat me like a newbie. What I'm saing is ore like free thoughts ovr technical analysys...

To make long thing short.
buing breakouts is like trading tops and bottoms in wrong direction. "God-trader" have just sold below level breakout trader picked for buing.
For myself I have backtested selling if price reach prev day high and buig when price reach prev day bottom, ad result were similar as in zipped xls I've attached

her's a picture of what I meen.
thiner lines are for breakout traders and those thiker are for "immortal-trader"

First observation is that immortal trader placed buy oder below sell order, but breakouter proabily closd his trades so far.

Another thought is that immortal-trader trades are closer to the mean price what gives him advantage over breakout trader in ranging market and imho that's the secret of his succes.
Attached File(s)
File Type: zip copy Randomnes proof.zip   842 KB | 406 downloads
  • #35
  • Feb 16, 2009 6:37am Feb 16, 2009 6:37am
Hope springs eternal in the human breast.

When viewing the calendar, I'm drawn to threads like these like eyes are to a train wreck.

If you've found something too good to be true, ask yourself why Goldman Sachs doesn't do it. If you can't, it probably isn't them missing something.
  • #36
  • Feb 16, 2009 8:07am Feb 16, 2009 8:07am
Quoting mbusigin
Hope springs eternal in the human breast.

When viewing the calendar, I'm drawn to threads like these like eyes are to a train wreck.

If you've found something too good to be true, ask yourself why Goldman Sachs doesn't do it. If you can't, it probably isn't them missing something.
I love these threads too. I'm interested in hearing that GS doesn't use a Buy-Low-Sell-High strategy. Please tell us more about how GS operates in the FX market.
  • #37
  • Feb 16, 2009 8:29am Feb 16, 2009 8:29am
Quoting euclid
I love these threads too. I'm interested in hearing that GS doesn't use a Buy-Low-Sell-High strategy. Please tell us more about how GS operates in the FX market.
SAME IDEA CHECK THIS OUT
http://www.forexfactory.com/showthread.php?t=149598
PROFITABLE TRADERS ARE NOT LUCKY BUT ARE WELL PREPARED
  • #38
  • Feb 16, 2009 8:38am Feb 16, 2009 8:38am
Quoting Kaligula
1.Will attach once again
Your results based on Close-Open were:

Two bar samples:
DD. DU. UD. UU.
506 517 517 497

Three bar samples:
DDD DDU DUD DUU UDD UDU UUD UUU
254 252 244 273 254 263 264 233

These show a remarkably even distribution, which is not surprising given that the Open and Close times of a bar are at arbitrary points within price oscillations. I did a quick modification to your spreadsheet to us High+Low vs High+Low of previous bar. Using the exact same sample data, I got a slightly less even distribution.

DD. DU. UD. UU.
596 415 415 619

DDD DDU DUD DUU UDD UDU UUD UUU
342 254 149 266 256 159 264 355


Hope this helps.
  • #39
  • Feb 16, 2009 11:30am Feb 16, 2009 11:30am
Quoting euclid
I'm interested in hearing that GS doesn't use a Buy-Low-Sell-High strategy. Please tell us more about how GS operates in the FX market.
He uses buy-high-sell-low then som sell-on-three after that he toss the coin... It's an advisor, whatever gains his costumer made he's always plus


Quoting euclid
I did a quick modification to your spreadsheet to us High+Low vs High+Low of previous bar. Using the exact same sample data, I got a slightly less even distribution.

DD. DU. UD. UU.
596 415 415 619

DDD DDU DUD DUU UDD UDU UUD UUU
342 254 149 266 256 159 264 355


Hope this helps.
Nt sure what exactly have you modified and what do you mesure. do you meen median price (H+L)/2 of two consecutive bars, could you clarify please?
  • #40
  • Feb 18, 2009 10:09am Feb 18, 2009 10:09am
Zamanib,
In spite of all randomness i wouldn't take countertrade, what your idea seems to do.

But you brought my eyes to scalping near SR leveles, actually i started to like PA near those points, additionally concept of randomness direct to wait for extreams after touch of support or resistant.
Will add more after some live research and maybe couple of green
0 traders viewing now