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Is random really random?

  • #41
  • Jul 24, 2014 5:01am Jul 24, 2014 5:01am
Hmm... "Is random really random?"

Well this is a question and a half :-D Personally i think it is.... There are what, 7 billion people on Earth? And from these 7 billion people there are a lot of traders, investors, speculators and blah-blah-blah - all those who use the finantial markets, follow them, watch them.

As someone previously said - one person does one thing, others do a different thing. Different people interpret things differently. There are people that view things in a similar or in absolutely the same way, but i don't think they are that many (which doesn't mean they are not big enough to have infuence).

Why i think random is random? You can not predict how every single "player" is going to react to something - yes you can probably predict what the big players will do in a given situation, but there is always a chance that they will do exactly the opposite thing - heck some do the opposite thing on purpose x-D.

So to sum up... I guess i don't think it is entirely random... To some extent it is, but if the big guys become or are predictable then it is not as random as it convinces people to be :-)

Maybe if there weren't big players that could infuence and affect the market it would be different...
I don't know :-D I used to use semafor and one time it gave me 3 consecutive buy signals (confirmed 3 different ways) and price still went down all 3 times and dumped quite a big chunk of my account :-) Technicall analysis sucks most of the time, but to use fundamentals you need deeper knowledge in this sphere. :-)
  • #42
  • Jul 24, 2014 5:05am Jul 24, 2014 5:05am
Quoting Proximus
{quote} Man you clearly didnt read my post.......
OK, I think I understand you a little better now.
  • #43
  • Jul 24, 2014 5:17am Jul 24, 2014 5:17am
Quoting 60minuteman
{quote} makes an interesting point though - future price has nothing to do with what happened before and everything to do with what is happening right now.... where does that leave technical analysis?
If the market is completely random then follow the trend!

Why? Because if you assume that the market is a random walk then the probability of UP and DOWN moves has to be the same.
Proof: if there is a skewness in the probability distribution a systematic drift emerges and you gain an edge thanks to something which is not random. This is opposite to the assumption of completely random market.

For any buyer a seller and vice versa so the market distribution shall be symmetric about the mean [1]. Whatever the distribution might look like.

The expected movement of the market is zero but it will randomly wander away and this will generate a (spurious) trend. The trend is the slope of the overall movement of the market. If we assume that the trend is a straight line the probability distribution of its slope is the 1st derivative of the distribution of the market returns. It will be centered on zero and will also be symmetric about its mean. This means that the most probable trend is horizontal (a sideway market).

Since it is the derivative of a random walk the trend is a random walk too and will change randomly over the time. How fast does it changes is defined by its curvature. The curvature of the slope is the 1st derivative of the slope and this is the 2nd derivative of the price returns. Again and for the same reasons the probability distribution of the curvature will be centered on zero and will be symmetric about this mean. This implies that the most probable change in the slope of the trend is no change. That is a straight line indeed.

The derivative of sampled data is the first finite difference approximation X[n] - X[n-1]. If two values have a small absolute value they have high probability of being close of each other. Their difference has a high probability of being of even smaller absolute value. For instance 2.4 - 2.3 = 0.1 which is an order of magnitude smaller. The 1st derivative of the probability distribution of the market returns is expected to be narrower than the returns distribution [2]. Unfortunately it is also expected to have fatter tails (2.3 - -2.4 = 4.7). The distribution of the curvature is very narrow around zero; the slope of the trend is small and changes very slowly [3]. Therefore Random trends are persistant as if there was an ephemeral drift. This implies that holding a position in the direction of a sloping trend creates a small edge as long as the trend stays stable. Also swinging in a range also makes sense since the range is the most probable trend and is expected to stay stable.

Since we can statistically simplify a trend with a straight line the break out of a TA trend line or S/R range is an evidence of a potential change in the trend.

--------------
NOTE 1: Statistically the distribution of the FX market returns is indeed zero mean. Stocks and indexes seem to trend positively but this is mainly due to the devaluation of their currency and the gains simply compensate the inflation.
NOTE 2: This is statistically indeed the case.
NOTE 3: Because the trends have small curvature they are made of low frequencies and because they are persistent we can expect more power in the lower frequencies. This implies we can expect pink noise and/or fractal behaviour in the market (1/F^a noise).
No greed. No fear. Just maths.
  • #44
  • Edited 6:00am Jul 24, 2014 5:48am | Edited 6:00am
Hi all i like the subject i wish i had a document file but it was erased i think that looking at a circle will provide us with some clues . i looked at circle from edges that it bounds in logic i know that two things give us identity one negative one positive i know that circle is one as a unique thing . now lets try to see what does it bound looking at it from inside it can bound a symmetrical triangle like in photo or a two identical even angel triangle or a two triangle that gives us a square so from this i got my numbers five is the number of shapes 4 is the end result and three is the number of steps i used as i said a numerical pure analysis and i got a numerical rule it says zero = t3-4t

or t3-4t=0 or five the end result from a numerical view i think this is a very complicated subject but i think that we have three variables one of them carries another fourth with two sides in the end we have five as a result and three and four are the basic i will add some pictures now
all have a nice day and aid Mubarak
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  • #45
  • Jul 24, 2014 5:57am Jul 24, 2014 5:57am
Quoting PipMeUp
{quote} If the market is completely random then follow the trend! Why? Because if you assume that the market is a random walk then the probability of UP and DOWN moves has to be the same. Proof: if there is a skewness in the probability distribution a systematic drift emerges and you gain an edge thanks to something which is not random. This is opposite to the assumption of completely random market. For any buyer a seller and vice versa so the market distribution shall be symmetric about the mean [1]. Whatever the distribution might look like. The...
OK, but how do we know it is random? People do things on the market in some order or for a reason. They do different things, but i doubt someone will start burping sell and buy orders just for the heck of it....It looks random because you can not know what will every single trader or investor do... But it isn't because they don't do it randomly :-) It is like trying to hack a 256kb password that changes every 30 seconds... Pointless and effort consuming... At least i think it's the same with forex.
  • #46
  • Jul 24, 2014 6:11am Jul 24, 2014 6:11am
Quoting 60minuteman
{quote} makes an interesting point though - future price has nothing to do with what happened before and everything to do with what is happening right now.... where does that leave technical analysis?
Lol. If only you knew!
The road to pipland is arduous and fraught with challenge.
  • #47
  • Jul 24, 2014 6:12am Jul 24, 2014 6:12am
Quoting phdmonster
{quote} OK, but how do we know it is random? People do things on the market in some order or for a reason. They do different things, but i doubt someone will start burping sell and buy orders just for the heck of it....It looks random because you can not know what will every single trader or investor do... But it isn't because they don't do it randomly :-) It is like trying to hack a 256kb password that changes every 30 seconds... Pointless and effort consuming... At least i think it's the same with forex.
We don't care and it isn't the purpose of my post. I said IF the market is random. Moreover I showed here http://www.forexfactory.com/showthre...22#post7464822 that trends in the markets are even more stable than trends in a random walk generated from the same distribution as the one of the market. So if you trade according to a pure random assumption you should make better results if the market isn't. The fact that market are or not random is then of lesser importance; especially because you no longer need to extract the non-random part.
No greed. No fear. Just maths.
  • #48
  • Jul 24, 2014 6:16am Jul 24, 2014 6:16am
Quoting traider
{quote} Lol. If only you knew!
Is that a lame boast? still not realized there is no secret?
tradewith60
  • #49
  • Jul 24, 2014 6:19am Jul 24, 2014 6:19am
There is nothing random about the market. It either has direction, is drifting or is in the hands of those who should not be trading.
The road to pipland is arduous and fraught with challenge.
  • #50
  • Jul 24, 2014 6:20am Jul 24, 2014 6:20am
Quoting phdmonster
{quote}It looks random because you can not know what will every single trader or investor do... But it isn't because they don't do it randomly :-) It is like trying to hack a 256kb password that changes every 30 seconds... Pointless and effort consuming... At least i think it's the same with forex.
Funny you should said that, I am surprised actually because this is getting more down into the belly of what goes on in the market. It is hard but it's not impossible to figure out once you know how the market works. This is what I am trying to turn to code right now, although I have it in my head and do it live trading with a custom indicator getting it into code and automating is my main goal. And trust me it is not pointless, effort consuming for sure, but pointless? not by a longshot.
Being a trader is lonely, but being a great trader is lonelier still
  • #51
  • Jul 24, 2014 6:26am Jul 24, 2014 6:26am
Quoting PipMeUp
{quote} If the market is completely random then follow the trend! Why? Because if you assume that the market is a random walk then the probability of UP and DOWN moves has to be the same. Proof: if there is a skewness in the probability distribution a systematic drift emerges and you gain an edge thanks to something which is not random. This is opposite to the assumption of completely random market. For any buyer a seller and vice versa so the market distribution shall be symmetric about the mean [1]. Whatever the distribution might look like. The...
A little more scientific talk finally

Let me give you an economist perspective:

After a few weeks learning a few interesting stuff, i dont think the market is zero sum anymore.It is too big and complexly linked with every financial-economic mechanism that it cannot be zero sum.

My veiw is that its about 40-45% large investors on the buy side, and 40-45% market makers on the sell side, and the rest 1-5% are retailers.
So the liquidity doesnt really come from "evil banks hunting retail stoplosses", but rather from market makers.

And in my view the market makers also hedge and borrow from central banks, so the CB is filling all gaps of profit in the MM's business.And the CB's role is to distribute money to wherever is needed.

Sort of like the cause of the 2008 crisis was the FED's inability to lend money quickly enough, which caused the collapse of the house bubble, since the MM got scared and pulled out their money as the FED didnt lended quickly enough.

So you see the CB links the ouside economy with the market, and sends cash where its needed, in every sector of the economy, all dominated by SUPPLY & DEMAND laws.

Thus this mechanism allows some growth in the markets and not just pure speculative money tossing between banks and brokers, this is how most of the trends are formed though.So it cannot be pure unpredictable, watch the huge money flow and you got the edge.
"There's a sucker born every minute" - P.T. Barnum
  • #52
  • Jul 24, 2014 6:27am Jul 24, 2014 6:27am
People, you only go about blah blah nonsense....
No one can solve this? Except from blah blah thing?
http://www.forexfactory.com/showthre...13#post7463913

And what do you think about this bit of information?
http://en.wikipedia.org/wiki/Philip_E._Tetlock

(The more I live the more I believe that Einstein was right.
It is about 100% or more closely about infinitely larger than 100%.
Even science can’t probably figure it out. )

And to be no mistake I can even conclude for myself that I am probably maybe only slightly better.
And that is IF ONLY.

Sure I still believe that probably there has to be ‘’maybe’’ something.
But so far I KNOW that there is not.

No Crucial Point inconsistent lies and promoting his obscure site with buxto or whatever commercials..., Darkstar selling his book after he can make FU*KTON of money ...and so on.
So brave and smart. So correct. Gosh...
(I could be wrong but I say so far - All rubbish... anyone sane enough can conclude it is lies and why.)

And even people with 30 years in markets with all the good and famous friends in banks around the globe/connections...can’t make enough by trading...that they will teach YOU how to trade...
They even admit it....

Wasn’t that the biggest jokes you have ever heard in your entire life?
(please do not decapitate yourself)
  • #53
  • Jul 24, 2014 6:27am Jul 24, 2014 6:27am
Quoting traider
There is nothing random about the market.
Greatest news ever! What will be the price EUR/USD 28th of August 2014 10:00:00am GMT please?
No greed. No fear. Just maths.
  • #54
  • Jul 24, 2014 6:29am Jul 24, 2014 6:29am
The market is invariably a competition between good and bad market makers...we are inconspicious small fry....and there are pretty useless biggies in that mix.
The road to pipland is arduous and fraught with challenge.
  • #55
  • Jul 24, 2014 6:30am Jul 24, 2014 6:30am
Quoting PipMeUp
{quote} Greatest news ever! What will be the price EUR/USD 28th of August 2014 10:00:00am GMT please?
with 80% chance we can say its gonna be between 1,2830 and 1,3980
  • #56
  • Jul 24, 2014 6:30am Jul 24, 2014 6:30am
Quoting traider
The market is invariably a competition between good and bad market makers...we are inconspicious small fry....and there are pretty useless biggies in that mix.
do you really believe this?
  • #57
  • Jul 24, 2014 6:32am Jul 24, 2014 6:32am
Quoting 21vs7
{quote} with 80% chance we can say its gonna be between 1,2830 and 1,3980
No the guy said NOTHING random. His quote will be 100% acurate to the very pipette.
EDIT: but I think he won't post and keep the $4 trillions for himself.
No greed. No fear. Just maths.
  • #58
  • Jul 24, 2014 6:37am Jul 24, 2014 6:37am
Quoting PipMeUp
{quote} No the guy said NOTHING random. His quote will be 100% acurate to the very pipette. EDIT: but I think he won't post and keep the $4 trillions for himself.
  • #59
  • Jul 24, 2014 6:38am Jul 24, 2014 6:38am
Quoting Proximus
After a few weeks learning a few interesting stuff, i dont think the market is zero sum anymore.It is too big and complexly linked with every financial-economic mechanism that it cannot be zero sum.
Overall it is but locally in time I agree it can't. All the speculators and stop hunters in the world can't go against a world wide recession.
No greed. No fear. Just maths.
  • #60
  • Jul 24, 2014 6:46am Jul 24, 2014 6:46am
Quoting PipMeUp
{quote} Overall it is but locally in time I agree it can't. All the speculators and stop hunters in the world can't go against a world wide recession.
Well depends, the global world economy is a zero sum game, but the FX market alone isn't.Like the FX markets are only 5-6 trillion while the global economy is measured in the quadrillions without even counting the natural resources.

The burden of speculation is obviously carried by the taxpayer & average consumer, but don't forget that wealth also can be created, people working in 3rd world countries paid less than they deserve will obviously create inflation-free money and more money supply for the rich so they can make more jobs and businesses and keep economy rolling.

There is absolutely no reason for a global recession, recession is only local.

Even in the crisis, while EU and US struggled for a 0.25 GDP growth, China and some developed parts of Africa made 10-12% GDP growth, where do you think that money came from ?

As Gekko would say:
Quote
Money itself isn't lost or made, it's simply transferred from one perception to another.
In this case from one country to another
"There's a sucker born every minute" - P.T. Barnum
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