are markets truly random?

Quote from fearless9:

Have you got what is takes to be a trader?

regards
f9
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That's something I am still figuring out to some extent. However, I think I do, based on the following:

- I have the aptitude - an intuitive grasp of numbers, statistics, probabilities, and data analysis
- I have the attitude - the outcome of any trade I place, whether positive or negative, is my responsibility; the market or market makers did not gang up on me
- I have an appetite for risk and a desire for the rewards
- I have an appreciation of what it truly means to take a risk in the markets; that is, that certainty is an illusion
- I have the technological skills: as a professional programmer I have written my own backtesting and Monte Carlo suite to come up with workable systems and a custom trading platform (that interfaces to IB)

-AB
 
Quote from andrewbee:

That's something I am still figuring out to some extent. However, I think I do, based on the following:

- I have the aptitude - an intuitive grasp of numbers, statistics, probabilities, and data analysis
- I have the attitude - the outcome of any trade I place, whether positive or negative, is my responsibility; the market or market makers did not gang up on me
- I have an appetite for risk and a desire for the rewards
- I have an appreciation of what it truly means to take a risk in the markets; that is, that certainty is an illusion
- I have the technological skills: as a professional programmer I have written my own backtesting and Monte Carlo suite to come up with workable systems and a custom trading platform (that interfaces to IB)

-AB
More...

good for you.
enjoy the journey.

regards
f9
 
Quote from andrewbee:

That's something I am still figuring out to some extent. However, I think I do, based on the following:

- I have the aptitude - an intuitive grasp of numbers, statistics, probabilities, and data analysis
- I have the attitude - the outcome of any trade I place, whether positive or negative, is my responsibility; the market or market makers did not gang up on me
- I have an appetite for risk and a desire for the rewards
- I have an appreciation of what it truly means to take a risk in the markets; that is, that certainty is an illusion
- I have the technological skills: as a professional programmer I have written my own backtesting and Monte Carlo suite to come up with workable systems and a custom trading platform (that interfaces to IB)

-AB
More...
Who doesn't think they know or have all or most of the above? Not many. But between thinking it and making a fortune from the market is a gap you and almost all others at ET cannot and will not be able to bridge.

Simple.No offence intended.
 
Random as lightning. You can tell the general area where it will hit, but you cannot predict exact area. Same in markets, you can tell which way the security will drift but you will not be able to tell exact points.

Of course, you can cheat. Use a meal rod to attract lightning, in order to make your chances better. In securities it is the same, and it is called inside trading.

Got to love my metaphors.:)
 
I read the thread.

There is an interesting array of thoughts and some ideas.

Many applications of the crayola courses as well.

Personally I try to not comment until at least 10 pages (5 posts per page scaling) have accumulated.


For individuals to take a stance on anything is an important modus. It is especially important to have a position on important aspects of trading to make money.

The hierarchy of crayola courses are the same as the college hierarchies in the respective catalogues. 1xx's are freshmen, 2XX's are sophomore.

Here we saw the interjection of the Power Law and even a reference showing the 80/20 stuff. This is crayola 3XX stuff it turns out.

The junior year, for me, is devoted to "how much money can be made". naturally the power law relates to making money since money is at the bottom of the "power structure" of the human population of the globe. The three elements are money, power and information. Money at the bottom and information at the top.

Crayola courses are informational.

Crayola 301

Take a sheet of paper from the top of 708 sheets. This is a weekend assignment.

Draw an ordinate and an abscissa on the landscape oriented sheet. Divide the abscissa into seven portions wherein a column will be drawn. choose seven fractals for charting price and name them from fastest to slowest going form the origin to the tail.

The ordinate is three orders of magnitude tall and can be expressed logarithmically or linearly. Label it with just marks for now.

Lay out 7 sheets and label them individually one for each named fractal. Use these to tab 100 entries each to sum to the total of each fractal column as yet to be drawn on the landscape scaled chart first drawn.

Assemble the data for the "work" of crayola 301. You need 100 charts for the slowest fractal. Best to just go back in time. replicate each of the 100 original charts as graphics representing each of the remaining six fractals. This will use up the 700 sheets and on the fastest fractal the representative bars will be quite close together to get all of them on one sheet.

Pick seven colors of crayolas. These will be used thrice each. First to do crayola 101 on each of the seven hundred sheets. Second to transfer the hundred sums (lower left corner) to the appropriate tab sheet Add the individual results to get a final column sum. And third, to shading in the respective fractal total sum column on the landscaped scaled original sheet.

Use a black crayola to add your column of your performance on the correct fractal right on top of the previously colored column Take into consideration the time representation and use an appropriate adjustment.

Write a paragraph that explains how many times your performance may be improved to match the market's offering.

This is a junior year project so you are expected to follow the first calculation with an explanation for the technique and strategy you will use to induce each additional multiple to get your present level of performance to the market's offering (the colored column height).

Self grading: A line connecting the tops of the columns must resemble the Power Law. The minimum requirement is a four degree polynomial shape in the first quadrant only.

Since a freshman crayola course (101) was used, it is not possible to achieve much significance. Repeat the "work" using at least arithmetic on a computer to get the points on the graph. then use Algebra I to jot down the segments equations of the graph. Finally, combine the points to derive the polynomial.

NB: There is no prediction nor statistics involved (the sums are done with arithmetic it turns out).

Crayola courses are designed to promote critical thinking and to do this they are stories in themselves. Most of all they have a drill component that explains to the reader that he is lazy and the reason he is not understanding anything much at all about trading is because his mind is yet to start to think and place knowledge in it. It is always possible to google the crayola results and most of the time there are additional annotations on the presented results. In this case there is a superposition of several levels of skills that show how a person moves along the operating point of the power law curve. This also shows how human limitations come into play along the Power Law curve.

Personally, I feel adding humor to posts is a necessity because mostly all readers have such a long distance to go to even get in the ball park.

many posts in this thread amply demonstrates why and how so many people leave so much on the table because they have gone a little ways up the learning tree;promptly stepp onto a low hangin branch of some sort and gone out to a dead end of the branch. Now the branch continues to wave in the breeze and they cannot struggle to get back to the trunk any longer because they are stuck and hanging on for dear life.

The market offers continually and the trader extracts continually. Get it?
 
Quote from Champion:

Who doesn't think they know or have all or most of the above? Not many. But between thinking it and making a fortune from the market is a gap you and almost all others at ET cannot and will not be able to bridge.

Simple.No offence intended.
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Yeah.....You gotta be a real "Champion", huh? ;-)
 
Quote from Champion:

Who doesn't think they know or have all or most of the above? Not many. But between thinking it and making a fortune from the market is a gap you and almost all others cannot and will not be able to bridge.

Simple.No offence intended.
More...

Quite. I am under no illusions that it will be easy. However, I do understand that psychology and the human emotions of greed and fear are by far my biggest enemies. My weaknesses are as great as those of the next guy. I don't actually know if I can do it or not. But, the prospect of a life wasted in a cubicle is a pretty good motivation to try.

I should also mention that I've paid some of my dues, in the form of blown accounts. There's no other form of learning that even comes close to that. I say some of my dues, because there may be more to go before I reached the required level of maturity.
 
Quote from rateesquad:

Random as lightning. You can tell the general area where it will hit, but you cannot predict exact area. Same in markets, you can tell which way the security will drift but you will not be able to tell exact points.

Of course, you can cheat. Use a meal rod to attract lightning, in order to make your chances better. In securities it is the same, and it is called inside trading.

Got to love my metaphors.:)
More...

Just to let you know, when your broker calls to let you know they have received a citation on your behave from the SEC, it does feel like more than just static electricity in the air. The broker is definitely NOT on your side for the moment.

My record is 5 in one year.

I regard this as a definitive compliment on my TA trading methods and executions and is a direct evaluation of whether markets are random. The SEC simply believes that NO ONE can trade what the market makes available. Why did they get to this place in the information space? It is definitely through deep and abiding ignorance which is common in the financial industry.
 
andrewbee, absolutely right! If you haven't read this book you will never understand the forces that drive the market. Fearless9, made another great point. There are players out there executing trades for reasons that are completely unknown to us. They may be closing a short hedge at an extremely elevated price, which sends the price even more elevated, and creates one of those WTF moves! That is 100% random and 100% exploitable.

For the guy who thinks 1987 black monday ensures the markets are not random think about it......1987, 1998, 2001, 200?.....here we are talking about 3 events that happened over a span of 20 years. So, 20 years x 240 trading days per year = 4800 trading opportunities with three freakout days. And you don't think these are outliers because........? I would love to hear how 3 extreme data points within a sample of 4800 data samples do not qualify as outliers?

To the guy who said, if the markets were 100% random they would be easy to exploit because they would be perfectly normal and all you'd have to do is look for the tails. I couldn't agree more, however, randomness can form abnormal curves and the markets are not 100% random. Randomness just explains the majority of the movement. Technical forces are at work as well. Trading is an art, not a science but the science of trading is awfully useful.


Quote from andrewbee:

For a thorough discussion of this topic, see "Trading in the Zone" by Mark Douglas. After I read it, my eyes were opened as to the true nature of the markets and what it takes to make it as a successful trader.
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