Do you believe this market is random? | Page 36 | Forex Factory

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  • #701
  • Jul 19, 2014 1:38am Jul 19, 2014 1:38am
Quoting Proximus
{quote} {quote} Yes, that question is irrelevant, the big question is wheather it is possible to make money or not, to which the answer is: yes. Fund managers and professional traders do that for like 200 years, every market is made to make money, its not just a random phenomena of nature that just popped out.It was meant to make money.
The Smithsonian Agreement was the birth certificate of the modern forex markets, this agreement gave birth to the modern floating exchange rate system, weather before everything was pegged to the gold or silver.

When stuff is pegged you cant make money from the rate difference, if you let it float then everyone will trade it and try to make money.Try make money on EUR/DKK, you will need some pretty good timing.Whereas on EUR/USD which is free to trade is very easy to trade.
"There's a sucker born every minute" - P.T. Barnum
  • #702
  • Jul 19, 2014 5:20am Jul 19, 2014 5:20am
I'm glad the debate stayed friendly even though there are some different opinions...

After all the hours I have put into trading the greatest lesson I have learned is that there are no rules. We can not say that a particular technique will fail because everything is market dependent. Every approach to trading will have it's own flavour of pain and it is accepting that pain and dealing with it that is important.

For a long time I believed that traders had to adopt certain approaches to make profit and now I can see that this is a myth. In fact I believe it is the 'rule book' that may lead to many traders struggling or failing.

The clearest example of this is taking a simple strategy and running tests time and time again with varying SL and TP - Instinctively traders look for the win rate to be the answer but other factors are easier to control.

Last point on randomness, all the research done does seem to point to the higher timeframes displaying less random behaviour. So, if I wanted to trade a purely technical approach then they would be a good choice. I presume the fundamentals show more clearly over longer periods of time....

tradewith60
  • #703
  • Jul 19, 2014 10:29am Jul 19, 2014 10:29am
Quoting 60minuteman
Last point on randomness, all the research done does seem to point to the higher timeframes displaying less random behaviour. So, if I wanted to trade a purely technical approach then they would be a good choice. I presume the fundamentals show more clearly over longer periods of time....
Yes, higher timeframes and the cycles on these sometimes coincide with economic cycles so you can somewhat predict the price based on them.
On lower timeframes it might not be the case, as the noise and random whipsaws are really unpredictable events, so you cannot predict them but you should have a big SL which could encompass them.
"There's a sucker born every minute" - P.T. Barnum
  • #704
  • Jul 19, 2014 10:37am Jul 19, 2014 10:37am
Quoting Proximus
{quote} Yes, higher timeframes and the cycles on these sometimes coincide with economic cycles so you can somewhat predict the price based on them. On lower timeframes it might not be the case, as the noise and random whipsaws are really unpredictable events, so you cannot predict them but you should have a big SL which could encompass them.
indeed, I have seen test results where random entries become profitable when the SL is placed outside the noise.... it is important that there is a distinction between lower and higher TF's. it's fairly subtle but research suggests it is true
tradewith60
  • #705
  • Jul 19, 2014 11:06am Jul 19, 2014 11:06am
Quoting 60minuteman
{quote} indeed, I have seen test results where random entries become profitable when the SL is placed outside the noise.... it is important that there is a distinction between lower and higher TF's. it's fairly subtle but research suggests it is true
I didnt reffered to that, as i also tried that version and it doesnt work.My research showed that if you have an average noise of 5 pips to say on a monthly basis, if you trade with a 5.1 SL and whatever TP, that edge wont overcome the disadvantage caused by the spread.

It gives you a little edge, but not enough to overcome the spread, or atleast not the conventional spread.I think it may work if you have a 0.1 pip spread with an ECN and little nor no slippage, but on retail brokers the least i`ve seen is like 0.6 or so with medium slippage.

I think you need 0.3 or less to use this, however combined with some other edge, it could be profitable.
"There's a sucker born every minute" - P.T. Barnum
  • #706
  • Jul 28, 2014 2:42am Jul 28, 2014 2:42am
I can see where academics are coming from but I've seen too many guys pull out a seriously good living from FX and so whilst most participant's RESULTS are random (worse than random actually) it is possible for a chosen few to display results that would indicate non random markets. Having said that I doubt there is anyone here " sipping martini in their private yachts".... You only have to look at the EUR/USD thread from the start and see who's still around. Out of the traders I have observed with long term positive results they all had different ways of defining the market but without fail all risked 1 to make 3+ return. Last part of my ramble is that there will always be an outlier who in spite of himself, makes a fortune... I don't know why that is except that "time and chance happens to all men"
  • #707
  • Jul 29, 2014 3:30pm Jul 29, 2014 3:30pm
Very interesting topic and replies...

however, i believe that whether the market is random or not, solely depends on the individual trader. If one has a reason behind making a trade, then the market is not random. But, if one makes a trade without reason or in other words without a plan before entering a trade, then at that point, the market becomes random to the trader in question. Nevertheless, since the market is a composition of human psychology/machine decisions, that bring about a certain result; markets cannot be random. If you think about it, randomness entails chaos, in a chaotic environment, there is no order, however, we know that human beings at all levels of life follow some sort of order. The market is no different, because human beings control the market at all levels.
  • #708
  • Jul 29, 2014 4:06pm Jul 29, 2014 4:06pm
Quoting Proximus
{quote} I didnt reffered to that, as i also tried that version and it doesnt work.My research showed that if you have an average noise of 5 pips to say on a monthly basis, if you trade with a 5.1 SL and whatever TP, that edge wont overcome the disadvantage caused by the spread. It gives you a little edge, but not enough to overcome the spread, or atleast not the conventional spread.I think it may work if you have a 0.1 pip spread with an ECN and little nor no slippage, but on retail brokers the least i`ve seen is like 0.6 or so with medium slippage....
the math he posted is very simple, I think perhaps you skimmed his research, if spread is an issue on EU you're not even in the same ballpark... but anyway lets disagree.
tradewith60
  • #709
  • Jul 30, 2014 3:18am Jul 30, 2014 3:18am
Quoting 60minuteman
{quote} the math he posted is very simple, I think perhaps you skimmed his research, if spread is an issue on EU you're not even in the same ballpark... but anyway lets disagree.
I played alot with random numbers and tehniques, here is some proof:

http://www.forexfactory.com/showthre...60#post7634460

Unfortunately it's not enough, only in a quasi-low spread situation might hold, and by low spread i mean really low 0.3 pip, which you hardly find on retail brokers.

But why even bother, i dont really want my strategy to be so spread dependent, if the only edge that a trader has in his small spread, thats really lame.

My method certainly has a so high edge that even if the EUR/USD spread would be 5 pips, it could make money
Now thats a trading strategy, not that random cr*p.
"There's a sucker born every minute" - P.T. Barnum
  • #710
  • Jul 30, 2014 3:50am Jul 30, 2014 3:50am
Quoting Proximus
{quote} I played alot with random numbers and tehniques, here is some proof: http://www.forexfactory.com/showthre...60#post7634460 Unfortunately it's not enough, only in a quasi-low spread situation might hold, and by low spread i mean really low 0.3 pip, which you hardly find on retail brokers. But why even bother, i dont really want my strategy to be so spread dependent, if the only edge that a trader has in his small spread, thats really lame. My method certainly has a so high edge that even if the EUR/USD spread would be...
heheh... ok lets no even go there!!

but remember this 1 point...

a. if you do not know all the elements affecting price then your entry is in effect always random... so, if random entries can not make money, what are you doing here? (unless youre trading with fundi's for bias of course)
tradewith60
  • #711
  • Jul 30, 2014 4:10am Jul 30, 2014 4:10am
Quoting 60minuteman
{quote} heheh... ok lets no even go there!! but remember this 1 point... a. if you do not know all the elements affecting price then your entry is in effect always random... so, if random entries can not make money, what are you doing here? (unless youre trading with fundi's for bias of course)
I am trading with fundamentals for bias

The entry accuracy is not always 100%, so i have to endure a little bit of DD but eventually the price will always go in the direction of the fundamentals.
So i keep a medium sized SL, and just wait until the price goes in that direction.
"There's a sucker born every minute" - P.T. Barnum
  • #712
  • Jul 30, 2014 5:05am Jul 30, 2014 5:05am
I believe the market is what it is and as a trader it's my job to workout how to make money or pips out of it.
  • #713
  • Jul 30, 2014 5:42am Jul 30, 2014 5:42am
Quoting 60minuteman
nobody will accept the randomness because their whole belief system is built on being able to predict the future purely based on price levels in the past. Hence so many failing retail traders...

The reason there are many failing retail traders is this:

quote from David Sklansky, a gambling expert:

“Let me make clear that it is not illogical to believe that a TA tactic can work.... If there is plausibility to this tactic and statistical backtesting shows a stong correlation it is reasonable that it will work. BUT ONLY IF FEW KNOW ABOUT IT. If lots of people know about it it won't. If everybody knows about it you can make money going the other way.”

There are some good TA strategies but most of them are bullshit. Since there are so many TA strategies a beginner won't know which is good and which is bad. 99% he will chose the bullshit ones. If a TA winning strategy would be so obvious that a lot of people would use it it won't be possible to have an edge anymore.
  • #714
  • Jul 30, 2014 5:50am Jul 30, 2014 5:50am
Quoting str8
I think most of the time the market is random and you can't predict where price will go.
I said something stupid here. The market is random ALL THE TIME. A random event is an event where you don't know for sure where price will go. So the market follows a random walk all the time. An exception may be if you have some inside information (in forex that inside information could still be useless, even if you know the result of some news the market can still move in the opposite direction). However for others who don't have this inside information the market is still random.
  • #715
  • Jul 30, 2014 5:58am Jul 30, 2014 5:58am
Quoting str8
{quote} I said something stupid here. The market is random ALL THE TIME. A random event is an event where you don't know for sure where price will go. So the market follows a random walk all the time. An exception may be if you have some inside information (in forex that inside information could still be useless, even if you know the result of some news the market can still move in the opposite direction). However for others who don't have this inside information the market is still random.
That's a rather poor definition for random. Since you're a poker guy, if we're playing a game and I've stacked the deck and know precisely what card is coming down on the river, does that make the river card random just because you don't know what it is? Random is random and not just what you either don't have knowledge of or haven't acquired the knowledge to interpret the data available to you.
  • #716
  • Jul 30, 2014 6:32am Jul 30, 2014 6:32am
Quoting fx_malloc
{quote} That's a rather poor definition for random. Since you're a poker guy, if we're playing a game and I've stacked the deck and know precisely what card is coming down on the river, does that make the river card random just because you don't know what it is? Random is random and not just what you either don't have knowledge of or haven't acquired the knowledge to interpret the data available to you.
I've made yesterday a thread on 2+2 about something similar:

http://forumserver.twoplustwo.com/31...ledge-1463015/

Quote from the book "Gambling theory and other topics" by Mason Malmuth:

“what Caro is actually saying is that in the absence of knowledge, events not only can be considered random, but should be considered equally likely as well. Returning to the card shuffling example, even though we know the shuffle is non-random, since we lose knowledge of the distribution of cards, the first card dealt is equally likely to be any card in the deck…Probability theory will apply as long as the knowledge of the appropriate non-random characteristics is so limited that it cannot be of any aid in the prediction of future events.”
  • #717
  • Jul 30, 2014 4:38pm Jul 30, 2014 4:38pm
I'm of the viewpoint that the market is not random, but chaotic (others stated this in the thread). In my opinion, the market is influenced in a non-random way based on buyer and seller volume. However, the subsequent price changes are extremely difficult to predict because we are not privy to how many people are trading, whether they are buying or selling, how much capital they are risking, etc.

Theoretically, I think if someone knew and could be aware of all the simultaneous trades occurring at once as well as all of the details of those trades (I'm talking in a divine, omniscient way), then that person would technically be able to predict price movement.

But it's impossible to know all of those things, which makes it extremely difficult to predict the market.

I think any successful trading system must factor in the inherent chaos of the market and have extremely good money management principles.
I am NOT an expert. I post to learn from others.
  • #718
  • Jul 30, 2014 5:09pm Jul 30, 2014 5:09pm
I would say it wouldnt matter if the markets were random; but having said so I dont think the markets are random at all.
  • #719
  • Aug 1, 2014 3:15pm Aug 1, 2014 3:15pm
What does predicting the price mean?

Predicting where price will 100% go or predicting where price is likely to go?
  • #720
  • Aug 1, 2014 4:00pm Aug 1, 2014 4:00pm
Quoting str8
What does predicting the price mean? Predicting where price will 100% go or predicting where price is likely to go?
From my perspective "Market Prediction" is defined as an "expected return calculated from history".
Markets are not efficient, rather they are effective - Jones
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