are markets truly random?
- Thread starter wildknights
- Start date
none. at least, no one i know of has ever defined the curve with any level of specificity.
if i or anyone knew the curve, we would in essence be able to predict the market.
one thing is for sure, it is NOT a normal distribution. a number of events such as black monday 1987 have proved this already.
The market can indeed form a normal distribution curve. It depends on the data you choose to analyze. The market can also form a skewed curve, which can also be analyzed using statistics, and depends on the data sample you choose. The markets movements are largely explained by randomness and randomness DOES form patterns. The attached is a sample of a random output. Tell me this doesn't look like the stock market. There are patterns in there, support and resistance, trends, trendline breaks, false breakouts. It's all in there. Those who do not believe this don't have a chance at trading because, contrary to popular belief, randomness can be traded!
Black Monday 1987 is an outlier and can be discarded. The markets most commonly form an F-distribution with normal distributions within the F-distribution. I went to the pain staking task of actually plotting this out.
I'm sure everyone has heard of Edward Thorp, the MIT mathematics professor who beat Las Vegas at the game of black jack....he was eventually banned from Vegas. Where did he venture? Off to the stock market of course. And his method of choice? Well.....the mathematics of randomness of course. He made an absolute fortune. Just because someone has a PhD in mathematics and makes 30k per year instead of $10M per year doesn't mean the markets aren't random. They are very random and I'm glad that no one believes it.
http://en.wikipedia.org/wiki/Edward_O._Thorp
http://en.wikipedia.org/wiki/Edward_O._Thorp
Correct on the last statement. Markets fit power law curve. http://en.wikipedia.org/wiki/Power_law
Which in essense, is just as unpredictable as a normal gaussian distribution, yet worse. Know anyone that can predict earthquakes well? Information rules, not charts. Sad but true fact.
however, this does not preclude making money off the markets using money mgmt. as someone pointed out using thorp as an example. Moral of the story is you can just as well use a coin to predict, compared to charts IF this is your only tool.
There is only 1 type of consistently profitable trader: the ones who "go with the flow, trade what happens, believe anything can happen, know how to manage risk, actively take profits," and the list goes on. Why on earth do successful traders all posses these unique characteristics? Because they know they can't predict future prices and they are smart enough to know, <b>they don't have to.</b>
You guys are freaking blinded by the damn light. You can't see the forest for the trees. The answer to the damn puzzle is right there before your eyes and you piss on it. Get your heads of the sand and study randomness and you'll be freaking amazed that the behavior of random price matches the movement of the stock market <b>EXACTLY.</b> Just open your minds for a minute and give it a fleeting chance. You just might be amazed, might be, but probably not. Why is it that people just can't let go of their convictions, even while their accounts get drained? Everyone believes the market is technical, they blow up their accounts because of that belief, and the come back for more of a technical ass whipping.
Even wild animals will stop a behavior that causes them pain and look for another way but human being will not. That just amazes me. 95% lose and 95% of that 95% still believe the market is not random. And people wonder why this is so hard. It really isn't, you simply won't accept a simple answer for why your failing and that's the very thing that ensures you'll fail.
You guys are freaking blinded by the damn light. You can't see the forest for the trees. The answer to the damn puzzle is right there before your eyes and you piss on it. Get your heads of the sand and study randomness and you'll be freaking amazed that the behavior of random price matches the movement of the stock market <b>EXACTLY.</b> Just open your minds for a minute and give it a fleeting chance. You just might be amazed, might be, but probably not. Why is it that people just can't let go of their convictions, even while their accounts get drained? Everyone believes the market is technical, they blow up their accounts because of that belief, and the come back for more of a technical ass whipping.
Even wild animals will stop a behavior that causes them pain and look for another way but human being will not. That just amazes me. 95% lose and 95% of that 95% still believe the market is not random. And people wonder why this is so hard. It really isn't, you simply won't accept a simple answer for why your failing and that's the very thing that ensures you'll fail.