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Pro Traders in a Random Market

  • #1
  • First Post: Aug 30, 2010 2:18pm Aug 30, 2010 2:18pm
I open this thread in the hope that we all can gain a better insight into how and what moves Forex - the Global Currency market.

My opinion for what it is worth, is that the market is totally random and all indicators, EA's and other systems are totally useless at predicting any future price movements.

Bring up any chart and place any indicator on it, with the totally random movement of price, you can clearly see that
Moving averages,
Fib points,
Pitchforks,
Channels,
Support and resistance,
Candle formations and
anything else you can think of ...

are respected at some points but not others.

The way I see it, the best any trader can hope for is to be on the higher probability side of price movement whenever they can.

I know a number of institutional traders and they too often scratch their heads at price movement.

I am interested to hear from experienced traders and their thoughts on this matter.
  • #2
  • Edited 2:43pm Aug 30, 2010 2:27pm | Edited 2:43pm
People tend to look at the concept of prediction with great derision, because as we all know precise prediction of market movements is about as likely as seeing a unicorn.

However, people tend to look more favorably upon probability, possibly because they hear other people speak more favorably about it. Secondly, probability does not have as rigid requirements
as prediction (i.e. you can have a probable event with less than 100% certainty). Thirdly, you are allowed to have some predictions fail, and still come out ahead in the aggregate sense.

The reality, IMO, is that probability is simply a different form of prediction.
You are inferring that a certain relationship with a favorable outcome will hold in the unknown future. There is no guarantee that it will continue to into the future; however, this is where our experience comes into play. Until we are shown otherwise, we can reasonably (predict) expect our observational relationships to continue over the near future.

The key is to be rigorous about defining probabilities, not just using intuition.
I know there are others who only rely on pure intuition, but for me personally, most of the time, the only type of rational intuition that has worked reliably is backwards. Therefore I prefer to use probabilities and rigorous empirical tests based on historical behavior to make inferences about the future.
  • #3
  • Aug 30, 2010 2:38pm Aug 30, 2010 2:38pm
Quoting FX Compass
My opinion for what it is worth, is that the market is totally random ...


The way I see it, the best any trader can hope for is to be on the higher probability side of price movement whenever they can.

If the market is totally random, as you believe, there can be no higher probability side of price movement.
  • #4
  • Aug 30, 2010 3:09pm Aug 30, 2010 3:09pm
NOTHING is 100% thats why we use stop losses and MM.....but your post smells of a newbie that is getting his ass kicked.....the market is far from random and reads like a roadmap. there are times that roadmap is plain as day and that is when it is time to trade, there are other times the picture is muddy and price is random and those are the times to sit on the sidelines and let others lose thier money...BTW, those are usually the same times I read about the market is random and any trade is 50/50.. work your can off til you figure it out or get lucky enough for someone to get you going in the right direction
  • #5
  • Aug 30, 2010 3:32pm Aug 30, 2010 3:32pm
It's never random. It's either going up, down or sideways. Buy when it's going up, sell when it's going down. Sit on the side when it goes sideways
  • #6
  • Aug 30, 2010 3:43pm Aug 30, 2010 3:43pm
Quoting waves
NOTHING is 100% thats why we use stop losses and MM.....but your post smells of a newbie that is getting his ass kicked.....the market is far from random and reads like a roadmap. there are times that roadmap is plain as day and that is when it is time to trade, there are other times the picture is muddy and price is random and those are the times to sit on the sidelines and let others lose thier money...BTW, those are usually the same times I read about the market is random and any trade is 50/50.. work your can off til you figure it out or...

Well said Waves.

The market is not random. Most traders approach to the market is usually random. A lot of us come to decisions based on nothing more than intuition as I see a lot of traders 'predicting' the market. Any trader 'predicting' the market is about as random as a being hit my lightning. Prediction by definition is a hunch, a statement of what somebody thinks will happen in the future. A personal opinion of future occurrences. Prediction making, even with solid reasoning and backing is still considered RANDOM.

Whats not random and what I don't see a lot of traders doing is, reacting to what is occurring in the market as it happens. Traders need to give up their jobs of being psychic, fortune tellers, and weather men.
  • #7
  • Edited 4:22pm Aug 30, 2010 3:54pm | Edited 4:22pm
Quoting Jhig

Whats not random and what I don't see a lot of traders doing is, reacting to what is occurring in the market as it happens. Traders need to give up their jobs of being psychic, fortune tellers, and weather men.
You know, I find the last comment particularly interesting. I've seen so many traders hurtle zen like statements regarding markets; a particular one that relates to your last paragraph is that, 'slaves predict, kings react.'

Now I find it hard to see how reacting itself is not a form of prediction.
Let me give an example, the markets suddenly tumble as bad news hits the wire; you the trader utilizes your superior method of reacting to what is happening:
How exactly is your reaction any different than prediction?
A perfect example is FED rate news gets released, it looks good but market tanks, so your reaction might be to go short (not fighting the market), but isn't that a prediction (expecting the direction to continue over some time frame)? Or you might go long expecting reversion (considering the market overreacted, etc.. etc..), is that not also prediction?

Not trying to be contentious here, I just never really understood how that 'slaves predict, kings react' statement made any practical sense. And although you didn't use the exact catchphrase, I hope you agree that your comment is basically the same concept. If you agree, could you elaborate with some illustrations, so I might better understand the meaning in context? thanks.

Don't get me wrong, because I do use a similar 'reactive' approach,' but I still philosophically confine it to the realm of probability and hence, prediction (as defined in my earlier post).

IMO, everything comes down to making a decision based upon current real time input stimulus; hopefully our method of making that decision is more reliable, than one based on pure intuition (which often isn't too reliable for lizard brains like myself), but as I see it, all decisions are ultimately a form of prediction in that we 'predict' historical behavior will continue as we expect it to.
Of course we also should anticipate that black swans might surface every now and then; in which case we have hopefully planned for it in advance.
  • #8
  • Edited 4:43pm Aug 30, 2010 4:22pm | Edited 4:43pm
Quoting jamjamjam
Now I find it hard to see how reacting itself is not a form of prediction.

Let me give an example, the markets suddenly tumble as bad news hits the wire; you the trader utilizes your superior method of reacting to what is happening.
I agree with what you are saying. Even if price is going swiftly in one direction that action to trade, no matter how sure you are, is still a leap of faith. But at some point you have to decide whether you are getting on the roller-coaster or not.
  • #9
  • Aug 30, 2010 4:25pm Aug 30, 2010 4:25pm
personally I took random out when I began trading med to long term...no 1 announcement ever concerns me
  • #10
  • Aug 30, 2010 4:59pm Aug 30, 2010 4:59pm
Quoting willf
I agree with what you are saying. Even if price is going swiftly in one direction that action to trade, no matter how sure you are, is still a leap of faith. But at some point you have to whether you are getting on the roller-coaster or not.
And THAT'S where probability comes into play. Trading and actually investment in large is really a study of Probability.

Each time when we are analyzing the market and contemplating whether to trade and how much, we are really doing a probability study:

Based on the best know information I have (including but not restricted to charts, news, what Auntie Agnes told me what she heard on the street), what is the probability for the $1 that I invest now (at t0) to turn into > $1, stay at $1 or < $1 after a certain duration of time (t1), be it, 1 tick, 5 min., 30 min., 1 hr or a 1 day? And then based on that probability number, we decide to trade or not to trade. And our success depends on whether that probability matches the actual % of chance of occurance that event.

And our trading aspect of our trading system is basically a probability calculation machine, the better its calculation, the more successful we are. Risk management is basically the flipside of it.

But having said that, the market itself, I believe is random, BUT only to certain extent and at a specific given time because you at t0 will never know for sure with 100% certainty what will happen in t1. But it does exhibit behaviours with certain causalities that one can rationally expect and thus be able to take advantage of it for financial gains otherwise there will be no point of investing.

I might have repeated some of the points that have already been said before but there it is.
Make your losses in demo. Earn your profits live.
  • #11
  • Aug 30, 2010 6:35pm Aug 30, 2010 6:35pm
My trading is fairly mechanical , its based on price-action and is about being on the right side of the money flow enough of the time to make money at the end of the month.
I also have a way to know if my strat requires some tweaking for shifting market "regimes"

So your conssideration is:
"I open this thread in the hope that we all can gain a better insight into how and what moves Forex"

I say.....who cares........because as long as i'm on it when it moves and i manage my trades appropriately i make money.
  • #12
  • Edited 7:17pm Aug 30, 2010 6:53pm | Edited 7:17pm
Quoting FX Compass
Moving averages,
Fib points,
Pitchforks,
Channels,
Support and resistance,
Candle formations and
anything else you can think of ...
I prefer to measure and summarize multiple trend angles and compare their and temporary patterns' symmetry and breadth;
this leads to a continuous, if difficult, notion of the price-time line.
Trend angles and pattern symmetry, which candles support from within,
define an area and thus help select what TL('s) to use.

A TL highlights patterns along its line of sight to relate to each other and/or bigger areas' patterns.
An incomplete, drawing-device slanted list of TL sets:
Pitchforks, channels, support and resistance, Gann Fans (left off), and fib retraces (if that's what 'fib points' means); moving averages also, in a way or sometimes.

Candle formations: In the traditional idea of what a pattern is good for, one isolates a pattern and thus ignores how that pattern relates to others around it, or even if it's appropriate to consider that set of candles as the traditional pattern it resembles.
So 'learn and forget' is my motto, only borrowing from their parts on occasion, and concentrating on temporary patterns as relates to angles, symmetry and the TL's.

While I still lose on this and catastrophically, the approach always finds a way afterward to explain why on the chart.
And of course, it's just my method. There's plenty of others. What I'm saying, is that one can make sense of the chart.
  • #13
  • Aug 30, 2010 7:25pm Aug 30, 2010 7:25pm
Interesting to see all you guys talking this topic!
I guess someone is laughing !

The market is not random at all ,
But someone is not only random,but also mad & ill !
They made the market random to kill guys like you !!!!!

It's all about psychology !!!

They themself call this part of mechanic of forex market !!!

Before you start this thread , you should read market profile ,price action,
who drive it ,especially in short term.....!!!


Btw, i am not pro, it's just a rookie's reply !!!!
  • #14
  • Aug 30, 2010 7:45pm Aug 30, 2010 7:45pm
I've been involved in this debate many times before... I think many of us have. What have I learned from all of this nonsensical BS? Well, first we must define the word "random" cause otherwise we'll fill up the first 20 pages of the thread with semantics. And whom shall we use to define that word...

Let's use Merriam-Webster... cause they're way old school England, and way old school England is super sopchistaceted and stuff

random: without definite aim, direction, rule, or method <subjects chosen at random>

Let's break it down, shall we.

without...definite aim: sometimes obvious price zones are hit, sometimes they are not.

without...direction: sometimes the market trends in a single direction, and at other times it does not.

without...rule: sometimes S/R, price patterns, candle formations play by the rules and at other times they do not.

without...method: sometimes there is a "method" to the madness (in terms of market behavior/price movement), and at other times there is only madness.

I guess what I'm trying to say is that... we're all right! And it really doesn't matter, because it does NOTHING to change trading performance...regardless of which side of the fence you happen to be standing on.

Ironically, what's not random are a trader's bad habits. Matter of fact, bad habits are extremely consistent and predictable - if we could only make money trading bad habits.

Oh, wait... we can!
  • #15
  • Aug 30, 2010 7:56pm Aug 30, 2010 7:56pm
I was going to say.....................I DO!!!!! lol
  • #16
  • Aug 30, 2010 7:56pm Aug 30, 2010 7:56pm
Find and edge that has no ambiguity -- example trendline is ambiguity there is some manyways to draw a trend lines the problem which one is correct which one will hold which one price will bounce off which one price break
this is one example
PROFITABLE TRADERS ARE NOT LUCKY BUT ARE WELL PREPARED
  • #17
  • Aug 31, 2010 1:59pm Aug 31, 2010 1:59pm
jamjamjam

"The key is to be rigorous about defining probabilities, not just using intuition.
I know there are others who only rely on pure intuition, but for me personally, most of the time, the only type of rational intuition that has worked reliably is backwards. Therefore I prefer to use probabilities and rigorous empirical tests based on historical behavior to make inferences about the future. "

Interesting concept, can you give some examples.

Waves

"personally I took random out when I began trading med to long term...no 1 announcement ever concerns me "

I tend to agree, longer time frames appear far easier to trade.

Forexia,

" But having said that, the market itself, I believe is random, BUT only to certain extent and at a specific given time because you at t0 will never know for sure with 100% certainty what will happen in t1. But it does exhibit behaviours with certain causalities that one can rationally expect and thus be able to take advantage of it for financial gains otherwise there will be no point of investing."

Very well put - now can you elaborate on the behaviours ?

ha-pattern,
"I prefer to measure and summarize multiple trend angles and compare their and temporary patterns' symmetry and breadth;
this leads to a continuous, if difficult, notion of the price-time line.
Trend angles and pattern symmetry, which candles support from within,
define an area and thus help select what TL('s) to use."

Do you factor in momentum and velocity in your calculations ?

mr.marketz,
"Ironically, what's not random are a trader's bad habits. Matter of fact, bad habits are extremely consistent and predictable - if we could only make money trading bad habits.http://cdn.forexfactory.com/images/s...m/thinking.gif"

Interesting that Mike Baghdady (Spyglass Trading / FxStreet) believes the same thing. The only predictable part of the market is that humans will react the same way everytime.

Care to elaborate on the Traders bad habits you refer to ?
  • #18
  • Aug 31, 2010 2:14pm Aug 31, 2010 2:14pm
Quoting FX Compass
jamjamjam

mr.marketz,
"Ironically, what's not random are a trader's bad habits. Matter of fact, bad habits are extremely consistent and predictable - if we could only make money trading bad habits.http://cdn.forexfactory.com/images/s...m/thinking.gif"

Interesting that Mike Baghdady (Spyglass Trading / FxStreet) believes the same thing. The only predictable part of the market is that humans will react the same way everytime.

Care to elaborate on the Traders bad habits you refer to ?
I hope he doesn't.............
  • #19
  • Aug 31, 2010 2:37pm Aug 31, 2010 2:37pm
Waves,

Is your purpose to hijack this thread with negative posts ?

If you can't post something constructive, then don't post at all.
  • #20
  • Edited Sep 1, 2010 3:30am Aug 31, 2010 2:41pm | Edited Sep 1, 2010 3:30am
"Do you factor in momentum and velocity in your calculations ?"

This would be fairly obvious, if you looked at any of my charts. "Pairs" implies an evenness, a compromise exactly between two points. Momentum and velocity would be the reaction to this, of which there are many.
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