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Is random really random?

  • #101
  • Jul 24, 2014 7:29pm Jul 24, 2014 7:29pm
Quoting iDoubleStoch
{image} Last update before heading to my doctor's appointment. You can see here the example I mentioned above where price needs to clear the tip of the B2i Projection point. It is like turning a car around a corner. You can't drive through the corner as you might hit a building or run over a pedestrian, so you have to make sure the front of your car is clear of the apex before you fully commit. Well, we see market doing that now as price has now returned back to the 21:00 extended B2i Fall Line. What is now needed is follow through to the 11 pip...
wish you health and wealth
have a nice day sir
focus while relaxed to see better
  • #102
  • Jul 24, 2014 8:31pm Jul 24, 2014 8:31pm
Quoting PipMeUp
{quote} I wonder why no more people play Russian Roulette. You can play as many times as you want you will never lose more than once. Probabilities look very good!
Pip you make these threads worth the read!

My 2 cents...

Getting back to the original question "Is random really random?"

The definition depends on how you look at the world.

In statistics a random variable is any variable (something you can measure) that is subject to change (variance) due to chance. Statistical models, for example linear regression, are used to explain relationships in sets of data (random variables). A great example of this is the body mass index (BMI) its derived from a model that simply looks at the relationship between height, body weight and body fat percentage. I'm 178 cm tall, weigh 86 kilograms and have a measured body fat of 11.8%, still the BMI index classifies me as morbidly obese. BMI doesn't take into account other, random, variables e.g body composition - this does make the model ineffective when you step outside the dynamics (or to the extremes) of the population used to derive the BMI model. Its not that BMI is a useless model it just needs to be interpreted properly and with context. That context was simply that BMI was a model developed to allows people to assess there body weight with easy to take measurements. So how does this all fit into trading?

Technical analysis is simply a model. It may not have all the bells and whistles you'd expect of a full blown statistical or numerical model used to forecast the weather but it is still, albeit very simple, a model and just like BMI it needs to interpreted with context.

The video in first post does make one very important point - the concept of a random variable, or more colloquially a "random", is used to describe something that we don't fully understand or have means to completely study - this is one of key motivations of why statistical analysis came to exist. The concept that statistical analysis, like technical analysis, only takes into account the data its has and doesn't paint a complete picture was embraced by one of the fathers of modern statistics, Ronald Alymer Fischer. Fischer rejected the statistical arguments suggesting that tobacco smoking was likely a causal agent of lung cancer - a view which we widely accept today. He wasn't right in his conclusion but he was right in the manner he reached it. Did I mention he loved smoking his pipe?

So from a statistical perspective, if you don't have access to every bit of information, then the bid and offer are random variables.

ninety47
  • #103
  • Jul 24, 2014 9:27pm Jul 24, 2014 9:27pm
Quoting PipMeUp
{quote} But isn't the money flow changing itself in a pretty random fashion? When will be the next worldwide recession? When will the FED decide a new QE? What time of the day will the next BoJ intervention on the Dragon? ...
Nope its pretty much in cycles, there are economic cycles for a whole country or even for the whole world.Just look at the interest rates, it was high about in 2003-2004 for the EU and US, that period will come now again after 12 years maybe not this year but next year surely as the FED is eager to raise rates again, and later the EU will too (once they resolve some unemployment problem)

Besides the news always come before the flow.Only long term investors (private or institutional like pension or long term HF) have that kind of money to make big trends, and long term investors always follow the economy.

A pension fund for example wont scalp M5 candles , they look for 1-5 year long investments maybe.Also i dont think more than 5% of the market is retail, so 95% of the 5 trillion market is actually professionals (including leveraged CB or IB funds), so there are pretty big boys moving the markets.
"There's a sucker born every minute" - P.T. Barnum
  • #104
  • Jul 24, 2014 9:42pm Jul 24, 2014 9:42pm
whist i agree with most that say the markets are nt random,
some is,
and if it was nt in some part random we would ALL be millionaires sitting on a huge yacht somewhere, with a large harem of ladies

maybe some of you are?
  • #105
  • Jul 24, 2014 10:13pm Jul 24, 2014 10:13pm
This is an updated pic of the D1 B2i shown on an H1 Chart. Remember, I said that if price exits the B2i Box below its Fall Line then the trade is Long. If price exits the B2i Box above the Fall Line then the trade is Short. Entry is determined by profit requirement and distance away from the Fall Line.

When you look at this D1 B2i Box, you can now see that after several hours on today's trading session that price exited the B2i boundary below its Fall Line. That indicates a Long trade back towards the Fall Line. However, the other thing you notice is that price is relative close to the Fall Line, lacking distance away from the Fall Line after exiting the box. This retards the signal somewhat (a sort of downgraded Long signal if I was trading and holding for a full day). However, the D1 movement, even while having relatively close proximity to the Fall Line on the D1 box, will be very pronounced in the H1 B2i structure shown on the M1 chart at the bottom:

D1 B2i shown on an H1 Chart
http://i62.tinypic.com/oa7w9g.jpg


Here on the H1 B2i shown using the M1 chart data, you can see that once again, during a period of relative low market Volatility that the movement back towards the 00:00 H1 B2i Fall Line was respected after making 5.2 pips of the 11 pip estimated historical range for H1 B2i, which is a 47% completion rate on low volatility (again, B2i type trades require volatility to strike historical targets). So, these "tendencies" are all confirming that the Pattern does exist and that the market respects the Pattern and its associated price behavior:

H1 B2i shown on M1 Chart
http://i60.tinypic.com/125q42v.jpg

So, why do I fee comfortable holding this Long trade from the end of the last session? Because, the higher time frame in the D1 dimension indicates that the fail safe is to the upside through to a price level that exceeds the original target from the H1 00:00 B2i Pattern. So, while trading the lower time frame, I am using input from a larger time frame (multidimensional analysis) to guide my trading decisions. Of course, I'm just doing this with two time frames, hand calculations and no system. My actual trading system is not involved - this just demonstrates what one good indicator/algorithm can do, if appropriated and used in creative ways. It also demonstrates continuously that the so-called "randomness" of the market has enough structural consistency to yield predictable outcomes.
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
  • #106
  • Jul 24, 2014 10:22pm Jul 24, 2014 10:22pm
The beautiful thing about B2i is that it remains consistent in all time frames. So, this smallish 11 pip range for the H1 gets bigger for H2, H3, H4, etc., for those that have non-standard time frame indicators for MT4. My production trading system generates a number of different signal types with B2i V5 being just one of them. It then selects the best signal based on historical target achievement performance. It also calculates B2i in all standard MT4 time frames - additional trade logic is added and the final B2i signal is rendered inside the system.

Patterns exist if you know how to fine them. If you don't then they literally do not exist for you.
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
  • #107
  • Jul 24, 2014 10:48pm Jul 24, 2014 10:48pm
Quoting 60minuteman
{quote} rubbish, why can't you trade fundamentals each day? - fundamentals doesn't just mean trading news releases.
Rubbish would be trying to trade fundamentals in the CURRENCY markets each day. Try it and then let me know how it works out for you. I've done it and it comes nowhere as effective as trading technicals each day. You need markets to move and in Forex, fundamentals alone do not provide you with enough decisive synergy. You may catch a hot period where both News and Economic Indicators collide during a stretch of time that seems like you always have decisive synergy, but keep trading each day and you will find that to not be the case on a continuous 24 hour cycle.

CPI won't always be enough to move the needle and there are plenty of days when all of the Economic Indicators combined for a currency are not enough to move price in any concrete direction long enough to profit from without getting whipsawed to death. In addition (had you actually read the statement) you will also have to account for counter-indications in the Economic Indicator of the Counter Currency as well. We trade pairs in Forex, not single sided Equities.

I have a Trading Model (system) that takes nothing but Fundamental and News inputs to produce a trade signal for the day. That system is nowhere near as effective as my Technical Model (system). Where will CPI, PPI, Housing Permits and Empire State move things on a particular day, will need to be algorithmically matched and paired with different Economic Indicators from the Counter Currency (or, Base Currency, depending on which side you take).

If fundamental analysis based models were more effective for me personally, I'd be trading them. With a technical model, I have a lot more predictability and I do not have to get into the heads of other people to try and figure out how they interpret the same exact economic information.

Here is a snapshot of the Weekly Inputs for the Fundamental Model:
http://i60.tinypic.com/2ut15yb.jpg

It takes Daily Inputs from multiple economic indicator sources to produce a daily trade signal with weekly influence. It uses 100% economic data as input to produce one trade signal per day. One directional trade per 24 hours with a specified target. That system runs at 72% accuracy right now, but I don't trade it. That is well below the historical accuracy averages of my Technical System. If 72% accuracy to a specified target is of use to you, then so be it. However, I have not traded with that low an accuracy rating in years and I do not intend on going back to such low levels of performance.

I like the system today and consider it a Novelty, in the larger body of work that I have produced over the years. Here is a snap of what one of the Daily input engines looks like:

http://i61.tinypic.com/2vdpf79.jpghttp://i61.tinypic.com/2vdpf79.jpg

It goes on like that from Monday through Friday, grinding away on algorithmically finding the Directional Bias among economic data inputs from multiple sources.
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
  • #108
  • Jul 24, 2014 11:03pm Jul 24, 2014 11:03pm
Quoting iDoubleStoch
{quote} Rubbish would be trying to trade fundamentals in the CURRENCY markets each day. Try it and then let me know how it works out for you. I've done it and it comes nowhere as effective as trading technicals each day. You need markets to move and in Forex, fundamentals alone do not provide you with enough decisive synergy. You may catch a hot period where both News and Economic Indicators collide during a stretch of time that seems like you always have decisive synergy, but keep trading each day and you will find that to not be the case on a...
Thats nonsense what you posted.Fundamental analysis doesnt mean to trade every shitty news like Empire State index,House permits or whatever, or trade better than or worse than expected outcomes.It more complicated than that and it actually works day by day.But its better to combine technical and fundamental, and additional tools, like i do and it works out like a charm.
"There's a sucker born every minute" - P.T. Barnum
  • #109
  • Jul 24, 2014 11:11pm Jul 24, 2014 11:11pm
http://i57.tinypic.com/2qtdcag.jpg

D1 B2i plotted on H1 chart shows that the first H1 bar of the B2i structure is now free and clear of the Intersection Point. This puts the Fall Line in full view and basically opens the door for the upside move to commence. Keep in mind, this is an H1 chart showing movement for the entire daily session. So, that "move" could take place anytime before the next D1 B2i Pattern is completed, which is approximately 15-16 hours from now. This D1 B2i simply provides the Directional Bias for the H1 B2i trade.
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
  • #110
  • Jul 24, 2014 11:14pm Jul 24, 2014 11:14pm
Quoting Proximus
{quote} Thats nonsense what you posted.Fundamental analysis doesnt mean to trade every shitty news like Empire State index,House permits or whatever, or trade better than or worse than expected outcomes.It more complicated than that and it actually works day by day.But its better to combine technical and fundamental, and additional tools, like i do and it works out like a charm.
That's got to be the most uninformed statement you've made thus far in this thread regarding what Fundamental Trading is and what it is not. It speaks volumes about where you are as a Trader. I think I'll let it stand on its own and only highlight the most telling component:

Quote
Fundamental analysis doesnt mean to trade every shitty news like Empire State index,House permits or whatever, or trade better than or worse than expected outcomes.

Which is precisely what the system does not do, but since you know the algorithms behind the system which were not posted and not shown in the pic, I guess you know my system better than me and I should be listening to you about how best to use it.

Have a good day. You've pretty much told me everything I need to know. You are looking at structures repeat themselves over and over and over again, yet still arguing against the fact that such structures exist. That's also somewhat very telling. How many more H1 B2i structures do you need to see before you realize that Markets are not purely random.
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
  • #111
  • Jul 24, 2014 11:21pm Jul 24, 2014 11:21pm
Quoting PipMeUp
{quote} But isn't the money flow changing itself in a pretty random fashion? When will be the next worldwide recession? When will the FED decide a new QE? What time of the day will the next BoJ intervention on the Dragon? ...
Also these market flow cycles can be associated with economic cycles, after all its all economy.

Read more about it here:
http://en.wikipedia.org/wiki/Kuznets_swing
and here:
http://en.wikipedia.org/wiki/Business_cycle

I tell you it is more interesting to study and research econometrics rather than looking at historical data from a silly price chart.It has more predicting capability.

Those lousy economists who say that nobody can predict the market prices are simply lying, and they know it just needs more effort and economic understanding to predict price flows.
"There's a sucker born every minute" - P.T. Barnum
  • #112
  • Jul 24, 2014 11:31pm Jul 24, 2014 11:31pm
Quoting Proximus
{quote} No its not, get over it already guys.
Proximus is right, and I know he will argue you to death on this point... but it is only because he is right.

The market is NOT random.

If you think it is, you need to learn more.
Please check out my blog at https://from-zero-to-hero . net
  • #113
  • Jul 24, 2014 11:37pm Jul 24, 2014 11:37pm
Quoting iDoubleStoch
{quote} That's got to be the most uninformed statement you've made thus far in this thread regarding what Fundamental Trading is and what it is not. It speaks volumes about where you are as a Trader. I think I'll let it stand on its own and only highlight the most telling component: {quote} Which is precisely what the system does not do, but since you know the algorithms behind the system which were not posted and not shown in the pic, I guess you know my system better than me and I should be listening to you about how best to use it. Have a good...
Ok maybe i wrote my thoughts too fast and didnt elaborated enough, but looking at the economic data you have i came to that conclusion.

First of all

Quote
How many more H1 B2i structures do you need to see before you realize that Markets are not purely random

Chill, i never said that its purely random, where you see that me saying its pure random, i said in my prev posts in this thread that only congestion periods seem to be random noise, as there the big investors dont participate actively (maybe some passive orders are in for the long term).
Big investors only look at the economy and base their trading decisions off that.Retail traders dont really influence the price much, so fib zones, MACD and stuff is only an illusion, as the big "smart money" doesnt really care about them, some times it coincides with price some time it doesnt, but its irrelevant.So it doesnt matter what "holy grail" indicator the technical guys use, it wont affect the markets too much.Some times it will work sometimes it wont, but its relevancy is 0 really.

But if you get some nasty news, they will move the market more than any technical tool you described so far.

Even if you find a technical indicator which could be a holy grail to say,it wont affect the money flow in any way, so its better that that indicator to be tuned into the money flow instead of looking at lagging moving averages.

Secondly

Your economic indicators that you have there like 80% of those are also irrelevant to the markets.
I mean WTF Italian PPI and Chicago PMI is that major news to you ? The italian PPI maybe influences a few italian stocks or indices, but you dont expect serious effects on the EUR off that news do you?

If you do then you have no clue about Fundamentals, and i say again Fundamental analysis is not only looking at better/worse then expected data and jump quickly to trade it.

Like you can see the NZD interest rate hike which is clearly bullish, but yet the market fell 60 pips right after , how do you explain that without additional analysis? The NZD was already overbought and investors went short after they knew that those levels were unsustainable for NZ's economy.

It needs additional analysis, not only looking at actual data and jump right after to trade it.
"There's a sucker born every minute" - P.T. Barnum
  • #114
  • Jul 24, 2014 11:50pm Jul 24, 2014 11:50pm
Keeping the last chart posted in mind, I will go to sleep on this little trade. I think the pics lay to rest the fundamental question. I also think that your belief in randomness or structure is predicated on the type and kind of research and analysis you've done, along with the degree and amount of creativity you brought to your work. In my experience, the absolute best patterns I have ever uncovered for myself were those that did not easily jump out at me or pop off the chart screaming its lungs out. It took creative analysis techniques and equally creative technical tools to see that which was hidden underneath the common and the routine.

Goodnight and may all your dreams come true. I'll check back in one more time tomorrow on this thread to comment on the developments of the D1 B2i as the guiding light for sticking with the 7/24/14 21:00 B2i entry. My system would not have allowed an entry with such low volatility by design, but I wanted to show the tendency and structure of the B2i, so that it could easily been seen that the right patterns are repeatable. Simply expand the size of the box to increase profit potential - - sort of like "just add water and mix to taste."

Trading is not about ego, myopia, close mindedness or one sided belief systems. It is about the willingness to do the hard work of research and the ability to accept whatever that research tells you is true about the markets. It is also about stepping outside the confines of conventional wisdom and routine thinking. It is about getting as creative as you can, but taking responsibility for the things you create, good or bad.

The currency markets are random. Yet, within that randomness resides an entire universe of structure just waiting to be explored. Be like the Kepler Space Probe. Dare to explore new planets, solar systems and galaxies. Dare to make the discovery that everyone else says is impossible to make and are too afraid to try. Dare to be different and you will find a whole new way of trading that you never dreamed could or would exist.
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
  • #115
  • Jul 25, 2014 12:00am Jul 25, 2014 12:00am
I have only read the last few responses on this thread, but I've gotta side with Proximus. I don't know a ton about what his experience is with trading, but for some reason, I can't help but agree with him.

Then again, I know NOTHING about you either, iDoubleStoch (in fact, I am a huuuuuuuuuuge advocate of Stochastics... judging by your name), but I do know that you are going to have to pull some massive weight if you want to beat Proximus in an argument.

Good luck to the both of you.

Proximus, I'm still in love....
Please check out my blog at https://from-zero-to-hero . net
  • #116
  • Edited 12:20am Jul 25, 2014 12:04am | Edited 12:20am
Quoting iDoubleStoch
How many more H1 B2i structures do you need to see before you realize that Markets are not purely random.
Quoting iDoubleStoch
The currency markets are random.
Dude you are contradicting yourself

Ok lemme tell you another example of technical vs fundamental to understand the difference:

Suppose a trade balance report in lets say Japan came out negative -100 bn JPY vs last month, and the reason is because lets say Japan decreased it's custom tariffs.

So imports actually became more encouraged than exports, which means that all businesses in the future will concentrate more on import than export.And by -100bn decrease means that you have to convert the JPY into the importing country's currency so actually -100bn JPY was sold troughout the world.

Now this was the initial shock, which may caused a spike or not on JPY pairs, but we are not interested in the immediate news reaction of the markets rather in a longer picture.But since we are good economists we know that the USA is Japan's 2nd biggest exporter, so a trade balance of -100bn JPY actually strengtens the USD more than other currencies.

So a trade balance negative in JPY is clearly a bullish signal in USD/JPY , on the long term of course.

Also since Japan imports: machinery, food, manufactured goods and chemicals you might wanna go long on those japanese stocks aswell if this would happen and if you trade stocks

This is a proper fundamental analyisis example, not the "looking at economic calendar data to trade better/worse than expected" type of fundamental analysis

Now suppose you trade the weekly charts, and you got exactly this news a -100bn JPY trade balance, a bullish sign on weekly USD/JPY, BUT your MACD(12,26,9) shows bearish

Which one will be more reliable, the economic analysis showing bullish or a rubbish technical tool showing bearish ?
"There's a sucker born every minute" - P.T. Barnum
  • #117
  • Jul 25, 2014 12:40am Jul 25, 2014 12:40am
Hello!

Guys... I understand that this is quickly becoming a very heated debate, in which case, I would suggest that it should remain friendly.

I will assume, until proven otherwise, that all of us here are good traders with good intentions. We do not mean to hurt each other and we are ALL here to learn, and improve our trading.

Let us never take that for granted, Rule #1.

I personally do not believe that the markets are random, and I would love to eventually prove so, but it is going to take some time and it is not exactly a priority of mine. I am trying to concentrate on my EA.

Please remember to remain friendly at all times. Thanks!
Please check out my blog at https://from-zero-to-hero . net
  • #118
  • Jul 25, 2014 12:52am Jul 25, 2014 12:52am
Quoting Proximus
{quote} {quote} Dude you are contradicting yourself Ok lemme tell you another example of technical vs fundamental to understand the difference: Suppose a trade balance report in lets say Japan came out negative -100 bn JPY vs last month, and the reason is because lets say Japan decreased it's custom tariffs. So imports actually became more encouraged than exports, which means that all businesses in the future will concentrate more on import than export.And by -100bn decrease means that you have to convert the JPY into the importing...
Proximus, I will keep saying this again and again, I love you dude.

I will even admit (as I have done before, it is NOT the first time lol) that I am a total n00b when it comes to fundamental analysis, even though I have a degree in economics. I just don't like that stuff. Sorry, but I don't have the patience for it. I just... don't.

I do appreciate your expert opinion though, as I am always interested in furthering my understanding of the fundamentals, but I know it's not going to be easy, lol.

I would much, much, much, much, much, much, much rather trade the charts. As in... technical analysis. I believe I am approaching the level of almost expert technician, at least I hope so!
Please check out my blog at https://from-zero-to-hero . net
  • #119
  • Jul 25, 2014 2:34am Jul 25, 2014 2:34am
Quoting smash1820
{quote} Proximus, I will keep saying this again and again, I love you dude. I will even admit (as I have done before, it is NOT the first time lol) that I am a total n00b when it comes to fundamental analysis, even though I have a degree in economics. I just don't like that stuff. Sorry, but I don't have the patience for it. I just... don't. I do appreciate your expert opinion though, as I am always interested in furthering my understanding of the fundamentals, but I know it's not going to be easy, lol. I would much, much, much, much, much,...
I did 1 year economics but it was just so boring and confusing so i quit, i tell you its 1000x easier and quicker to learn economics on your own than in a university ,thats for sure

The wonderful thing about the internet is that you find almost everything free, especially knowledge you just have to look out for it.
"There's a sucker born every minute" - P.T. Barnum
  • #120
  • Jul 25, 2014 2:35am Jul 25, 2014 2:35am
Quoting mzvega
{quote} Auction Market Value Theory is about an objective, scientific approach, and scientific use of the data. We identify balances and generally require that the data we use in our analyses are valid for their application. This is admittedly more restrictive than reading patterns, but it is repeatable and not biased by the observer. The starting point is 'data validity' for the job at hand, whatever it might be. The approach is empirical. Observables are identified, cataloged and interpreted to provide a structurally sound market description that...
if the results are not the same everytime with exactly the same conditions then there is randomness.
tradewith60
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