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  • #41
  • Sep 1, 2010 8:09pm Sep 1, 2010 8:09pm
Quote
EUR/USD, 5min, total 65535 bars somewhere begin from 2007.
Indeed, I see your point is made pretty clear with the Q-Q Plot. I made a very strong statement and I was wrong in doing so, definitely there is a strong degree of kurtosis as shown in your chart. However do you believe that the larger time frames follow a distribution closer or further away from a normal distribution ? This is what I was thinking about in the first place, that the deviations from normal distributions are larger in the higher time frames. What do you think ?

Thank you for posting the information

Daniel
  • #42
  • Sep 1, 2010 8:12pm Sep 1, 2010 8:12pm
Quote
The randomness has been discussed in FF many times and always end up with heavy cross fire. http://cdn.forexfactory.com/images/s.../whistling.gif

Well, I don't believe there is such thing as crossfire, there are facts and opinions and if we work on facts we arrive at the truth. I say something, you say I'm wrong, you show me why with evidence and I can rethink, reanalyze what I said and reissue my hypothesis and statements. I just see it as a learning experience for everyone

As long as there is a positive attitude nothing bad can come out of it !

Daniel
  • #43
  • Edited 9:32pm Sep 1, 2010 8:26pm | Edited 9:32pm
Quoting danielfppps
Indeed, I see your point is made pretty clear with the Q-Q Plot. I made a very strong statement and I was wrong in doing so, definitely there is a strong degree of kurtosis as shown in your chart. However do you believe that the larger time frames follow a distribution closer or further away from a normal distribution ? This is what I was thinking about in the first place, that the deviations from normal distributions are larger in the higher time frames. What do you think ?

Thank you for posting the information

Daniel
Not sure about your hypothesis but my research shows no evidence that larger time frames follow a distribution closer or further away from a normal distribution.

IMHO market does have a fractal structure therefore its statistical properties and behaviour will remain unchanged in regardless of timeframe.

Quote
Well, I don't believe there is such thing as crossfire, there are facts and opinions and if we work on facts we arrive at the truth. I say something, you say I'm wrong, you show me why with evidence and I can rethink, reanalyze what I said and reissue my hypothesis and statements. I just see it as a learning experience for everyone

As long as there is a positive attitude nothing bad can come out of it !

Daniel

Not everyone can accept truth. They refuse to accept mathematical evidence and tell you that mathematician is not a good trader, bla bla bla...

But dont make me wrong, I did not mean market is random or not random. In facts it is chaotic, non-deterministic chaotic.
  • #44
  • Sep 1, 2010 8:51pm Sep 1, 2010 8:51pm
Quote
IMHO market does have a fractal structure therefore its statistical properties and behaviour will remain unchanged in regardless of timeframe.

I did this statistical analysis a few months ago but I did see evidence of differences between the different time frames with a tendency of the higher time frames to have a different behavior. However I will repeat this to take into account the information you have just given me.

Quote
Not everyone can accept truth. They refuse to accept mathematical evidence and tell you that mathematician is not a traders, bla bla bla...

Well perhaps my formal education as a scientist makes me very sensitive to evidence and it is more important for me to accept what is right than "to be right". Definitely you can expect me to discuss things through evidence and not through opinion.

Quote
But dont make me wrong, I did not mean market is random or not random. In facts it is chaotic, non-deterministic chaotic.

I understand that you were just discussing what I said about distributions and you were right in the things you said. As I said I will review my results and I will share anything with you here which I might find interesting for us to discuss. I do agree with you however that the market is non-deterministic chaotic.

Thanks again for your inputs

Daniel
  • #45
  • Sep 2, 2010 1:27am Sep 2, 2010 1:27am
Danielfpps and Forexquant.

Very interesting points.

Whilst I think we all acknowledge price behaviour is different on varying timeframes, are you then saying that there is predictability in this behaviour.

Or are we talking about different types of randomness on different time frames ?
  • #46
  • Sep 2, 2010 1:40am Sep 2, 2010 1:40am
Quoting danielfppps
Particularly it comes to the conclusion that the different time frames do behave quite differently. The study can be found here.

I it helps further make the point that the markets aren't indeed totally efficient,

Daniel
A lot of flawed concepts in that report. They haven't even managed to calculate the spread-cost on usd/zar correctly. Also, I've seen research showing that TF doesn't show different behavior on a significant level. If I have time later today, I'll try to dig that up.

Here is a very clever person who have done really good statistic analyses on the fx market for years. Here
Measure twice, cut once
  • #47
  • Sep 2, 2010 3:51am Sep 2, 2010 3:51am
Quoting mr.marketz
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,...
Forget bad habits. The argument against price every being random is the fact that all movement is the result of underlying action by human participants. Humans are not random, so price is not random. That is the method in your definition.
  • #48
  • Sep 2, 2010 4:53am Sep 2, 2010 4:53am
I dont belive that TFs have anything with price randomnes....
Price is price, TFs are graphical presentation of time captured movement of price,i like to call them price containers, the boxes where all of price action is compresed into 4points; aka OHLC.
There is no time, there is just price.....time is relative, price is definite!

Oh, and market is far away from random behaviour.
  • #49
  • Sep 2, 2010 5:17pm Sep 2, 2010 5:17pm
Waves,

My apologies if I came off harsh...I felt you were being aggressive, and I fired back in retaliation... completely unacceptable behavior.
  • #50
  • Sep 2, 2010 9:19pm Sep 2, 2010 9:19pm
BTW, Craig just opened a thread with links to a documentary dealing in markets and randomness... definitely worth a watch.


http://www.forexfactory.com/showthread.php?t=254254
  • #51
  • Sep 20, 2010 8:34am Sep 20, 2010 8:34am
No need to worry about Random ,crazy forex market !
let's me tell you One sure profit ,simple "systerm "!

No need so much technical analysis,
No need too much fundamental research !!
No need things such as phycology,humanity, disipline ,money management......!!!!

Just simply trade against me, !
I long ,you short and crash the market ,
I short ,you long and make forex pair crasy !!!

By following this ,It's sure make profit!

This is "holy grail" !!!!
  • #52
  • Feb 16, 2011 2:34am Feb 16, 2011 2:34am
Quoting FX Compass
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...
The idea of randomness dont mix so easily with probability, not in the way you describe: There cant be a state of total randomness aswell as the same time there is probability. Total randomness would be out of 3 different scenarios, nobody could tell how great a chance either of them would come true. If that is true there is no probability.

But perhaps i misunderstood, maybe you ment that we cant be sure but that some scenarios may seem more probable then others, and that we have no definite and sure way to know which scenario is the one that will come to pass.
My signature is: "Classified".
  • #53
  • Feb 16, 2011 7:04am Feb 16, 2011 7:04am
Yes, market prices have a random distribution. This is a fact. If it weren't "random", it wouldn't work since it would be too predictable and too many of you with your silly EA's would be making money consistently.

The problem however is that your average FF member (including the starter of this thread) will simply see the word "random" in its layman sense (as in "meaningless noise", "absolutely unpredictable") not in its probabilistic/statistical sense (as in "A statistical distribution in which the variates occur with probabilities asymptotically matching their "true" underlying statistical distribution"). Thus, he will usually respond with things like "it's not random because it's beatable and some people win consistently at it", or "it's not random because individual traders don't act randomly", and so forth. Psychologically he wants to make money at this market, which reinforces his bias; and "random" the way he (mistakenly) sees it means he's wasting his time, something which he will focus on refuting instead of trying to comprehend what is really meant by "random" here and what it implies in terms of price distribution.
  • #54
  • Feb 16, 2011 9:29am Feb 16, 2011 9:29am
Quoting FX Compass
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.
I agree with the above. You can use those TA tools to a crack in a wall or some other chart, not necessarily a price chart. They seem to work perfectly somotimes except for candles, I haven't seen those in cracks

Anyway, I don't think the market is random. Just think about how market makers make money - sweeping stops losses, filling orders for spread, writing options and then trying not to let the option go "in the money", etc. For market makers a straight one-way price move is a nightmare because they are on the other side of the trade, that's why the market doesn't move in straight line.

From a retail trader point of view the market may seem completely radnom, because we lack information for the order flow. Where is a huge pile of stop losses on the chart, which is a target for market makers, especially, if there are pending limit orders in the vicinity. We can't learn the market sentiment by calling the dealers in our bank branches around the world. We can't know when the market is thin, we can only guess that it is thin on NFP days, or FED anouncement days or before other major events.

At our level of the food chain we lack a lot of important information, so more or less we are all gambling in what looks like a random market. The ones that achieve success over the long run keep their risk parameters in tune all the time.
  • #55
  • Feb 17, 2011 2:35am Feb 17, 2011 2:35am
Market goes only in 2 directions - up or down.

And not in 3 directions - up, down and sideways.

B,
Tom
  • #56
  • Jul 29, 2012 6:19am Jul 29, 2012 6:19am
I have been reading this post with interest. What strikes me is that there is any debate at all about whether the market is random. it cannot be for two obvious reasons. The market is not some abstract entity, it is merely the collective opinion of a large number of humans and increasingly robots that are programmed by humans. Humans for a large part are predictable, so how could the market not be? To prove that humans are predictable I am happy to predict now that somebody will reply to this post and disagree with me thus proving my point for me.
If the market was random it would also be impossible to devise trading strategies that can beat a buy and hold trading strategy year after year, as we should all be aware, there are countless examples of traders who do beat a buy and hold strategy year after year. There is also a wealth of academic studies that have been done on the topic. Malkiels random walk theory has been tested and disproved by a very large number of these academic studies..check out Brock et al, schulmeister, park and many more.
I have over 5 years trading experience with a prop trading firm and now trade my account for a living, if the market were random this would not be possible. You have to do extensive back testing and forward testing, and you must be able to statistically verify that if you find a profitable trading strategy, it isn't by some mathematical fluke.
  • #57
  • Jul 29, 2012 9:20am Jul 29, 2012 9:20am
Quoting Sweatyslouch
I have been reading this post with interest. What strikes me is that there is any debate at all about whether the market is random. it cannot be for two obvious reasons. The market is not some abstract entity, it is merely the collective opinion of a large number of humans and increasingly robots that are programmed by humans. Humans for a large part are predictable, so how could the market not be? To prove that humans are predictable I am happy to predict now that somebody will reply to this post and disagree with me thus proving my point for me....
have you ever tested your strategy on a chart with random data? i did and found that my systems work the same on the random data and the real charts. my answer to this is this: if we live in a universe governed by laws then it is highly unlikely that a continuous source of data is random.
  • #58
  • Jul 29, 2012 11:34am Jul 29, 2012 11:34am
if anyone is interested in technical analysis on random charts i've written a post with a chart example of some classic by now pin bars. this is the post. and this is the random chart generator
  • #59
  • Jul 29, 2012 1:36pm Jul 29, 2012 1:36pm
Going back to the initial discussion point of this thread - My very humble oppinion would be this:

No. The markets are not random.

They are however, unpredictable. I'm not going to get bogged down in the semantics - but there is a difference.

Pull up a daily chart of EUR/NZD - show it to a child and say 'is the line going up or down?'. That will give you a clear bias and (at this point in time) would give the market direction aka. not random. There are times when the market is 'more predicatble' than others, and those are the times to trade.

It has been said already in this thread - and really, this is all there is to it in trading:

Use a system with an edge (what tells you when the market is currently more predictable) - and apply it with precision - with equal risk/reward (just use 1:1 if you dont have your own criteria) - over time you'll see results. If your edge is correct, your results will not be 'random'.

There we go. Done. Your holy grail. There are so many systems out there that provide an edge. If we had someone looking over our shoulder and slapping us everytime we deviated from the system, it would be easier - but I doubt most of us do.

Another point worth noting is that we shouldn't care too much about entries - because profit is realised when you close the trade. THAT is where you should focus most of your efforts.

I'm not a pro trader - But I do work in the industry. Technically I am an adviser on investments. The traders work on the floor above me - and perhaps a little enlightenment here:

When new traders join, they have a 1 month induction course - in the first week, they sit with experienced traders - and they both open the same positions. 9 times out of 10, the experienced traders close their positions for a net profit at the end of the day - 9 times out of 10, the rookies close them for a loss (or less of a profit).

If you can understand that - you realise that it doesn't matter so much as to weather the market is random or not. This is what makes this business so appealing, exciting and enjoyable to some - and also stressful and impossible to others.

It's all in the way you see it. Free your mind neo.

Regards,

LD
  • #60
  • Jul 29, 2012 1:58pm Jul 29, 2012 1:58pm
the market is not random.
as a hint...the best traders I've ever met did a lot of self-study in the psych field...like cognitive etc. You'd be surprised at what you can anticipate for the wants and needs of other market participants.
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