Do you see patterns in Random Walks?

off topic a bit,, did i see right ? no more short selling in europe? and only for financial companies?

what the hell. we run the economy. I hope all European traders pull their money and run to another market. Adn what does stock price have to do with anything ? they are our stocks not theres?


how about we ban printing money for a change maybe then their will be a use for banks as opposed to a photocopier, prey for a higher then average drop in Europe !
 
Quote from SrRuthenate:

There is a universe of difference between saying that the market is random versus saying the market is a non-stationary stochastic chaotic process. The first is completely unpredictable, the second is predictable a good portion of the time.

If you see "random", put the magnifying glass on and you will see trends, and fat tails again. The same effect will happen if you see "random" and look from a longer term perspective.

When you see "random" in your selected timeframe, it is a symptom that what you are really looking at an "strange attractor in price". There are time attractors, price attractors, and volume attractors.

When you look at your hand and see a hand, what you are really looking at (mostly) is a bunch of electrons vibrating "randomly" in a pattern. The market is almost the same thing.:eek:
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Your explanation sounds very scientific.

So, how does one determine these "attractors'?

If one can't determine these attractors, then does knowing your explanation matter?
 
Quote from traitor786:

off topic a bit,, did i see right ? no more short selling in europe? and only for financial companies?

what the hell. we run the economy. I hope all European traders pull their money and run to another market. Adn what does stock price have to do with anything ? they are our stocks not theres?


how about we ban printing money for a change maybe then their will be a use for banks as opposed to a photocopier, prey for a higher then average drop in Europe !
More...

US did the same thing in fall of 2008... this is not unusual.

Short selling has a bad reputation. It's very difficult to short Chinese stocks since the market's infancy.

Actually I believe the prime minister of Pakistan forbade stock prices to trade below their yearly lows the same year... Google it. I'm 75% sure it was Pakistan.
 
Quote from SrRuthenate:

There is a universe of difference between saying that the market is random versus saying the market is a non-stationary stochastic chaotic process. The first is completely unpredictable, the second is predictable a good portion of the time.

If you see "random", put the magnifying glass on and you will see trends, and fat tails again. The same effect will happen if you see "random" and look from a longer term perspective.

When you see "random" in your selected timeframe, it is a symptom that what you are really looking at an "strange attractor in price". There are time attractors, price attractors, and volume attractors.

When you look at your hand and see a hand, what you are really looking at (mostly) is a bunch of electrons vibrating "randomly" in a pattern. The market is almost the same thing.:eek:
More...

This sounds like it relates to quant strategies derived from the bell curve... bad news!
 
Havn't read the entire thread but to answer the original question, YES I do see patterns in random data but umm... who cares? Sometimes I'll look at a cloud and it resembles an elephant, that doesn't mean I can conlude that elephants arent real.
 
Now that's something I would agree with. The market is nothing more than data. When I began trading I fought the Random Walk Theory tooth and nail because I thought if the markets really were random they couldn't be traded but the opposite is actually true. Another poster noted there is a big difference between randomness and a non-stationary stochastic time series and to that I completely agree. Statistical analysis works quite well on both but I would have to agree the markets are a stochastic process and that's how I analyze them. Stochastic Calculus is a requirement of every quant program for a reason. It's tremendously useful!

My trading improved 10-fold when I began viewing the market as nothing more than an infinite data set. IMO....quantitative (statistical) analysis is the best type of analysis to trade the markets with but that opinion stems from my training. Technical analysis has its place as well and it's a tool I also use. I have a MACD histogram on every chart I look at (except 1-min charts) because I've found it's a valuable tool. At the end of the day, however, trading results will depend on the skill of the trader, not the sophistication level of the strategy. There are times you have to throw your models to the side and trade contrary to what they are telling you. Trading is more art than science but science is certainly needed to tackle this beast.

Random? Non-random? Stochastic Process? Patterns? Yes, yes, yes, and yes. Good trading.

Quote from traitor786:

TA is not just about drawing simple trend lines its about developing ideas and getting in the bare bones of data.
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Yes that is a perfect analogy. I didnt think of it that way... the bit with the elephants cant be overlooked.

Quote from ChkitOut:

Havn't read the entire thread but to answer the original question, YES I do see patterns in random data but umm... who cares? Sometimes I'll look at a cloud and it resembles an elephant, that doesn't mean I can conlude that elephants arent real.
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I think alot of what we do may be similar. We may focus on one thinng more then others. but i know for myself, I do have in intrest in adding just a few studies maybe a MA, If the chart with the news is accuratly in the middle i will be intrested in listening to the news. also if i had the time i would not mind learing world economics and politics. using different ideas together only increase ones chances.

In essence i think we all use patterns to some degree maybe without noticing it. maybe our definition of patterns is different as the previous poster said stochastics.

what it boils down to is that we all analyze and based on analyzing we choose an entry. this means either we are really lucky or we are really smart. Me i choose smart. I know some will second guess me on that.
 
Quote from wrbtrader:

My point is that there's more to the price action than just double tops/bottoms, swing points, reaction points, flags, breakouts or whatever. Simply, these are not trade signals all by themselves. They are just price areas of interest that should prompt a trader to take a closer look. In contrast, the trade signals is what's occurring within those patterns you and I have mentioned and that's something my buddies can't understand...including most academics.
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Yes.


My guess is that pure charts are indeed more or less random.

Appears to me that people who find an edge do so in watching the patterns develop and consider other sources of information (volume, DOM, news, watching the market environment).
That's also the reason why it is so difficult to tell others how to trade (you can't show it directly).

In short: Conventional charts only show a part of the real important information.
 
Quote from SteveNYC:

Your explanation sounds very scientific.

So, how does one determine these "attractors'?

If one can't determine these attractors, then does knowing your explanation matter?
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It is obvious what they are once you know what to look for.

Without giving away too much, a time and often also a high volume attactor that happens every day is the 16:00 EST for the ES. All the other attractors are that simple, but much harder to find, unless you are looking at the right spot.:eek:
 
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