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why have you accepted the price-predictability assumption?

  • #2,021
  • May 13, 2014 8:40am May 13, 2014 8:40am
OMG unbelievable, it has been a few months and u guys are still talking about this , instead of making some money
Since my last post here i`ve aquired tremendous experience in the markets, so i can say the following for a fact:

1) The market is not random at all, but nor easy to predict (sometimes easy,sometimes hard)
2) It is only random for those who cant trade (because they are either approach it from a gambler's perspective/ or have no f***ing clue how the market works and/or how to trade it)

Now that being said, i probably wont respond again here,so if you believe my words then its time to make money, or if you cant make money yet, then go and learn how to trade first!

Or if you dont believe me, then just continue discussing this nonsense, while i just go and make some money in that time. It's just simple as that!

Now Good Luck to you all !
"There's a sucker born every minute" - P.T. Barnum
  • #2,022
  • May 13, 2014 8:45am May 13, 2014 8:45am
Proved to me the price-predictability Because of Past
Past is Everything
You Must Love CandleSticks
  • #2,023
  • May 13, 2014 9:14am May 13, 2014 9:14am
Quoting Proximus
the following for a fact: 1) The market is not random at all, but nor easy to predict (sometimes easy,sometimes hard)
Did you read the pdf I linked? Determinism does NOT imply predictability. Randomness does NOT reject predictability, it only decreases the acuracy of the forecast over time.
No greed. No fear. Just maths.
  • #2,024
  • May 13, 2014 9:16am May 13, 2014 9:16am
Quoting PipMeUp
{quote} Did you read the pdf I linked? Determinism does NOT imply predictability. Randomness does NOT reject predictability, it only decreases the acuracy of the forecast over time.
I think most are referring to the other definition of random i.e. random sampling when they reject the market is random.
Build good relationships with others.
  • #2,025
  • May 13, 2014 9:36am May 13, 2014 9:36am
Quoting ForexFury
In 2013, the Nobel prizes in Economics went to three individuals. Two of them based on their analysis of asset pricing. Out of the two one argued for efficient markets and the other for inefficient markets; both won Nobel prizes. There is no cut and dry here. The markets are neither always efficient nor inefficient. The word "predict" does not belong in speculative trading. You are guessing plain and simple. Sometimes you are going to be correct and sometimes you wont. In my opinion, there are two ways to trade. One is such as GEfx described where...
excellent post
tradewith60
  • #2,026
  • May 13, 2014 9:43am May 13, 2014 9:43am
Quoting shellsnail
{quote} I think most are referring to the other definition of random i.e. random sampling when they reject the market is random.
You must be right. I found 7 translations (!) of the word random in French...
This excel file is an example of something I consider random, despite the fact that the line will always enter the circle.
Attached File(s)
File Type: xlsx rndwlkdrft.xlsx   27 KB | 327 downloads
No greed. No fear. Just maths.
  • #2,027
  • May 13, 2014 9:49am May 13, 2014 9:49am
Quoting PipMeUp
{quote} You must be right. I found 7 translations (!) of the word random in French... This excel file is an example of something I consider random, despite the fact that the line will always enter the circle. {file}
You see what you have started !!!!!!!!
  • #2,028
  • May 13, 2014 9:52am May 13, 2014 9:52am
Quoting PipMeUp
{quote} Did you read the pdf I linked? Determinism does NOT imply predictability. Randomness does NOT reject predictability, it only decreases the acuracy of the forecast over time.
Quote
Did you read the pdf I linked?

Sorry i didnt read it, but i dont think its relevant to the market.I tryed the "scientific way" in the past too, but came to the conclusion that no scientific analysis can reveal the true nature of the market.

It is like scientifically trying to determine the movement of a school of fish, you can draw a probability distribution chart and do all sorts of analysis, but the fundamental cause still remains survival = gathering food and running from the large predators.The same is true in the market for retailers, they try to gather money, and avoid being hunted by big players.Ignoring the cause will get you nowhere...

Quote
it only decreases the acuracy of the forecast over time.

I`m sorry but this just doesnt work like that,TIME is irrelevant for the market, traders make money on all timeframes, from the 1 milisecond HIGH FREQUENCY TRADERS to the scalper/daytraders to the 10 year timeframe pension funds to the 25 yr + timeframe Mr. Buffetts.

The market has many cycles, so it is possible to make profit on any of them, the accuracy of forecasts, neither decreases nor increases overtime (the generic excuse from novices who say that "noise" in lower timeframe decrease their accuracy is total BS,i could personally trade on any TF where the spread & slippage doesnt eat more than 2-3% of the profit, but since retail brokers are not perfect i usually trade on M30/H1)
"There's a sucker born every minute" - P.T. Barnum
  • #2,029
  • May 13, 2014 11:17pm May 13, 2014 11:17pm
Quoting Proximus
OMG unbelievable, it has been a few months and u guys are still talking about this , instead of making some money Since my last post here i`ve aquired tremendous experience in the markets, so i can say the following for a fact: 1) The market is not random at all, but nor easy to predict (sometimes easy,sometimes hard) 2) It is only random for those who cant trade (because they are either approach it from a gambler's perspective/ or have no f***ing clue how the market works and/or how to trade it) Now that being said, i probably wont respond...
Lol
  • #2,030
  • Edited 12:45am May 14, 2014 12:24am | Edited 12:45am
Quoting PipMeUp
{quote} You must be right. I found 7 translations (!) of the word random in French... This excel file is an example of something I consider random, despite the fact that the line will always enter the circle. {file}
Hmm... from the formula you used, this looks like a deterministic trend with a stochastic positive error component.

Xt = t + e

i.e.memoryless property.

Random walk with drift is more like

Xt = a + Xt-1 + e

i.e. shocks persist infinitely...

see attached.
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 44 KB
Attached File(s)
File Type: xlsx randomwalkwithdraft.xlsx   27 KB | 398 downloads
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  • #2,031
  • May 14, 2014 1:49am May 14, 2014 1:49am
When trading, if by random you mean something you have not the means to predict or reliably influence, then you are correct to the extent that it is difficult to hit a moving, jinking target. You are not correct to the extent that the target does not cease to exist, turn invisible, split into two, etc.

May I suggest that, when trying to tee up a golf ball and drive it, to use something other than a baseball bat?
  • #2,032
  • May 14, 2014 3:41am May 14, 2014 3:41am
Quoting shellsnail
Hmm... from the formula you used, this looks like a deterministic trend with a stochastic positive error component.
Correct and exactly my point. Despite the purely deterministic trend this serie is still random. You cannot predict the next move. But you can predict the future range; very easily in this simple case. It wasn't intended to model the market. I model the market more in this way

P[t+1] = P[t] + T[t] + n
T[t+1] = T[t] + C[t] + v
C[t+1] = C[t] + w

Where n, v and w are zero mean noises. If you rewrite P[t+1] = P[t-6] + T[t] + z, I show here that for constant range bar charts all those z, v and w are not only zero mean but gaussian too.
No greed. No fear. Just maths.
  • #2,033
  • May 14, 2014 3:48am May 14, 2014 3:48am
Quoting Rap Skallion
May I suggest that, when trying to tee up a golf ball and drive it, to use something other than a baseball bat?
When a golfer swings the ball with his brand new perfect club he still doesn't know (and has no control on) the velocity of the wind 2 seconds after the ball took off. The velocity of the wind is a random variable which influences the trajectory of the ball.
No greed. No fear. Just maths.
  • #2,034
  • May 14, 2014 3:50am May 14, 2014 3:50am
Quoting PipMeUp
{quote} When a golfer swings the ball with his brand new perfect club he still doesn't know (and has no control on) the velocity of the wind 2 seconds after the ball took off. The velocity of the wind is a random variable which influences the trajectory of the ball.

Lol don't even try that. You're not going to compare a golf swing to forex, the swing has so many variables it's unreal. Even if Tiger woods is the golfer.
Being a trader is lonely, but being a great trader is lonelier still
  • #2,035
  • May 14, 2014 5:26am May 14, 2014 5:26am
Pipmeup and Saneblane:

Two people both of whose posts I read with interest and delight: Both to accentuate the randomness of the market:

Trust me on this: You could bet real money that Tiger Woods would beat my golf score any day of the week: But if I had a set of clubs, and he just a baseball bat, it might be a different story.

People enjoy golf because within randomness there is still progress. Few people give up unless they are no good at it.

At my age, it is questionable whether I could even walk an 18 hole course.

Almost all golf courses are beautiful. That's not random.

If there were no randomness in the forex it would be boring ( not to mention that everyone would be rich and money worthless).

So choose your club carefully, rehearse the shot in your mind, take you best shot, and enjoy the random results. And thank you for your posts.
Dang it Pipme up, now I've got to take a good look at range bars charts ( that's a thank you).
  • #2,036
  • May 14, 2014 6:31am May 14, 2014 6:31am
Quoting Rap Skallion
You could bet real money that Tiger Woods would beat my golf score any day of the week: But if I had a set of clubs, and he just a baseball bat, it might be a different story.
excellent
like totally failure brah
  • #2,037
  • May 14, 2014 6:34am May 14, 2014 6:34am
Quoting ForexFury
In 2013, the Nobel prizes in Economics went to three individuals. Two of them based on their analysis of asset pricing. Out of the two one argued for efficient markets and the other for inefficient markets; both won Nobel prizes. There is no cut and dry here. The markets are neither always efficient nor inefficient. The word "predict" does not belong in speculative trading. You are guessing plain and simple. Sometimes you are going to be correct and sometimes you wont. In my opinion, there are two ways to trade. One is such as GEfx described where...
Yes sir
like totally failure brah
  • #2,038
  • May 14, 2014 1:55pm May 14, 2014 1:55pm
Quoting Rap Skallion
Pipmeup and Saneblane: Two people both of whose posts I read with interest and delight: Both to accentuate the randomness of the market: Trust me on this: You could bet real money that Tiger Woods would beat my golf score any day of the week: But if I had a set of clubs, and he just a baseball bat, it might be a different story. People enjoy golf because within randomness there is still progress. Few people give up unless they are no good at it. At my age, it is questionable whether I could even walk an 18 hole course. Almost all golf courses are...

You might be right about that. I think what is fueling this thread Is people's definition of the "Random". If the question was "do you understand what is going on in the market sometimes", then this thread wouldn't be so long Lol. But no one ever brought out the definition of the word so we can all agree on the definition, we are all arguing about our own definition, but it is still an amusement ahahah.
Being a trader is lonely, but being a great trader is lonelier still
  • #2,039
  • Edited 2:45pm May 14, 2014 2:19pm | Edited 2:45pm
Quoting jmn5611
{quote} It has nothing to do with potential. I just do what the market tells me to do. As far as making 2000 or 20000 just as easily, that is true, but that takes time enough to build a position that is making 10 dollars or 100 dollars per pip. I do care where I put my trades. I do not trade against the trend at any time. The way that I trade works on any kind of market, because in reality I am not a trader, in reality I am a money manager. Trading techniques are only a tool to help us manage our money. Once you understand the power of the long...
Power of the long tail. Yes, I am inclined to think that no matter what time frame there's an edge in this. It is to forget about 1:2 or 1:3 and only go for the trades that have potential of 1:7 and above at least because these events while rare are almost guaranteed to happen in a large enough sample of outcomes. Think Poisson distribution.

In other words, the hypothesis of

if I place 1:1RR trades in the markets randomly, then I will lose 50% of my trades
implies that
if I set 1:7, I will lose 7/8 of my trades

is not true... the scaling up is not proportional..

i.e. if you set 1:7 maybe you will only lose 13/16.

In this sense, money management becomes an edge in itself; at lower RR, the transaction costs outweigh the edge, and the edge increases as the RR increases.

It would be interesting if someone can write an EA that opens trades completely randomly (random buy/sell; random time of the day), open up 20 demo accounts and do a test from 1:1 to 1:20RR and see what results we get over say a 1 year period. We want to test the hypothesis that the higher RR accounts outperforms the lower RR accounts; also the hypothesis that there is a statistically valid edge against the null hypothesis that they all perform equally badly/well and also the null hypothesis that there is no edge. In fact, this would be a really interesting experiment if it can be conducted on all different time frames i.e. 5 min to daily charts, with different trade parameters for each time frame and also across all pairs.

and then a follow-up would be to apply timing constraints such as trading only during say 7-9AM GMT or 1pm-4pm GMT and see if it makes a significant difference to the results;
one could also consider fixing SL:TP using a dynamic average daily range versus just using a fixed number like 10 pips.
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  • #2,040
  • May 14, 2014 2:59pm May 14, 2014 2:59pm
Quoting shellsnail
{quote} Power of the long tail. Yes, I am inclined to think that no matter what time frame there's an edge in this. It is to forget about 1:2 or 1:3 and only go for the trades that have potential of 1:7 and above at least because these events while rare are almost guaranteed to happen in a large enough sample of outcomes. Think Poisson distribution. In other words, the hypothesis of if I place 1:1RR trades in the markets randomly, then I will lose 50% of my trades implies that if I set 1:7, I will lose 7/8 of my trades is not true... the scaling...
Friend you're still looking for the holy grail in an EA. It doesn't exist, and the edge you believe exists here....well, it doesn't. The only way you're ever going to make consistent money in the markets is by knowing with good probability where highs and lows are on your charts.
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