Do you see patterns in Random Walks?

[Samsara]

Quote from atlTrader666:

Academics have tested TA strategies for half a century and they all call it bullsh1t. There is vague proof of short-term momentum.

I don't trade off of visual patterns, but I just wanted to address this.

There's a fundamental line in the sand btwn those who feel price can be anticipated and those think randomness is the sum total of all price change.

From what I've seen, <i>some</i> academics have tested a discrete set of commonly accepted TA hypotheses. I have not seen any test that sufficiently addresses whether price in time[1] correlates to price in time[0].

Academics in the <i>economics</i> profession tend to be the ones testing these hypotheses; unlike academics in the hard sciences, they often rely upon flawed models (assuming log normal distributions, etc.) to define what is and what is not "random". Neo-platonism seems to be A-OK in the economics profession, unlike both the humanities and the sciences.

I can tell you from empirical experience, and from observation of consistent prop traders, that randomness is not sum total of all price fluctuations you encounter. I've seen guys walk in the door every day for years and bang out $1-3k a day, regardless of market conditions (and no, I'm not one of them : I prioritize medium term swing/trend).

Your question indicates you've trained yourself to project classic TA patterns onto everything, including random data. You're basically in the camp of most ETers (note the idiots who call tops with charts every time volatility rises). It doesn't mean there are no paths.

Don't buy into the neo-Platonic "efficient market hypothesis" bullshit. There are rewarding paths of inquiry but they're far more difficult than the one you're on now, which is basically the road to failure. Chart patterns don't cut it, save for super rare situations (e.g., gold basing to $1,000).

 

[traitor786]

hmm interesting, well i vote that random does not exist. espeically when it consists of data generated by peoples habits, trading style ect..

teh fact that you mention that trend lines do work to some degree shows that what little you know about TA is valid yet overly simplified as most tend to do.

What ever your stratagy is it is based on looking at price movement. whether it be the last 9 bars, past 3 bars or just the bar that has been created. Your choise to buy or sell is based on information to the left of the point where your trade goes through.

Saying that the past has no relevance on the future puts all systems in a drawing boat. Even studies like a moving average are based on the past. they are indeed a pattern. only the easy to calculate ones are being used as they offer i quick simple way to look at a pattern

In a given set of numbers if we find the average and price revolves around the average and may even react to the average this by definition is a pattern. things that happen over and over.

all systems work on this premise.

as mentioned above 99% of these types of traders follow the same old make a channel or connect 2 or 3 dots. and it is inconsistent. Some may find that it bares no coloration.

When we stop to think that maybe we can go further with this and actually entertain the idea , we start to see new things that are relevant.

Surprising to every pattern trader is how past price reflects future price.
Why ?

I dont know , why does price react to moving moving averages?

god knows maybe everyones looking at the same thing.

when price goes in to a periode of consolidation for example, we see it hold that pattern for a certain time frame... why ?

if previous highs can act as resistance and people tend to be predictable ( as our QA class taught us) why does price stay in consolidation for a different amount of time.

news. news is actually incorporated in pattern TA. when bad news comes out it eventually finds some resistance. why at that point ?

is it random ?

or is saying it is random just easier then investigating for hours ?

why is it that when a bar forms 99% of the time it forms where the previous bar was? why dont we see one bar at 20$ and the next bar at 40$ and the next at 5$.

why do people tend to keep price steady. randomness suggest random numbers. Not charts that may look random but all have a bar close to the previous bar.

the charts presented above maybe some guy just frawing a line and assuming that his brain is capable of producing randomness.
but in actuality i see a pattern. every point on the line is very close to the point before it, randomness would have random dots. with no line.

even the numbers in the lottery tend to come out teh same amount of times. some may not come as often as others, but they tend to catch up.

bars stay close together because people have tendencies. they tend to like to buy where price is or around where price is alot of sellers like to sell over price and many like to sell under price.
these are all patterns, orders being filled. buyers being greedy and sellers being greedy and the negotiating. we always buy and sell relative to the last bar we saw. We do not sell 20% lower then where price is on a long.

we let the last bar influence us. as we let the last 2 bars influence us

Show me an example of randomness? it does not exist. you think that you walk a random amount of steps a day ? get one of those things that measures how many steps you take and see a pattern .

here is a chart the lines were drawn before hand as some on here may be able to attest to. I can always post another . these lines were drawn a day before and not moved. we look at connecting points to find resistance. but we dont go further. we would beve imagine that time could also be predicted. how many of the people that were studied for the survey of TA/pattern have lines that intersect and look forward in price and time.


YOu feel free to use the simplest form of connecting pivots to find resistance and assume the rest doesnt work. Why then do you take the simplest form of our science and use it... Cause its easy , and in our science even the easy works a bit.
Do you even know what you are doing when you connect pivots..


you are saying not only that people will react as they did in the past but that they may do so on a slope.

how crazy is that? its like a horizontal resistance line says that people will stop buying or selling at a given price..
a diagonal line indicates that people are so predictable that not only can we judge there buy and sell point but we can judge how they will increase their buy and sell point over a given time frame.


you use that and then you come and give me study saying that its all B.S ?

Look if you dont like it dont use it.

but dont use it improperly like one of your overly simplified stochastics and say its not that good.

people that trade this way have a deep understanding of things. all the studies used are based on patterns and math. you take from us the easy and then complain about its presision.

its like me selling eveytime i get an over bought signal on my study and complaining to you.

do a study on a moving average alone and your results will be the same as a study on connecting highs.

it is talked down even though everything (besides level 2) is based on history. yours are simple and easy, ours take time, we work all night and trade the day. jsut cause you cant do such a thing you cant say it doesnt work.

like any system. if we look on the web it is 99% B.S. actually i find that lines and channels are way more precise indicators even in their simplest form then any other system (besides level 2 )

so go ahead and argue. but we know that you dont have teh computing power to handle suce systems (and no, im not talking about your P.C)

the chart i have included i one of many systems i use, but again it is only one and it was written the day before. no new lines were added after. This is hard to do. look at how many pivot points hit horizontal lines and how many points of resistance hit more verticle lines. we see that we can time in's and outs better with just this one system.. imagine if it was incorporated with your system.

Also i am told that at 2:30 i think it was the news that brought price down... I am man enough to say probably, but what degree did the news effect it was predicted by the lines.


listen i read a book about your system. it was my intention to go down that road. it was not long till i saw that the systems on studies on there own do not correlate with price enough. My 1 system here has a much better coloration and looks out ahead instead of up to the present. sure maybe finding the right studies and combining them may increase coloration, but is that smart ? Is'nt it just trial and error? i there are 50 studies and we need 3 to get the magic combo. the odds of finding it is 50 X 50 X 50

that is 1 in 125,000. and each one would have to be looked at carefully as one that doesn't seem to work when looked at deeper may work.

Why go down that path? as soon as i noticed the chances are slim and i didnt like what i saw right away i stoped reading these damn books. Why did you choose to continue .. did you not realize that the odds were so bad of geting the right combo..

or ...
perhaps
did you decide to connect some pivot points to increase your odds 10 fold of being on the right side of things?

thats fine borrow our useless lines.
but dont come with studies telling me how often you fail at something you dont understand.

 

[traitor786]

lol sorry didn't realize you posted on here, really. I mean i saw the post but didnt read the name. should of guessed though. Just to be clear I wasn't directing my post to you. Or any one. just upset about the negative outlook on a science.

But as for your charts..
I choose A,B,and C have similarities.

there is a pattern. not only is there a pattern that shows similarities with the beginning of each chart and the end of each chart. but there is a pattern when we compare each chart to one another.

They are all black on a white background ! ... and,,,, once again, presented by the same poster lol.

did you conduct that study above by any chance ?

Quote from atlTrader666:

Here are three charts. Please reply answering whether each letter corresponds to a random walk or stock

A: http://www.teamten.com/lawrence/writings/are_stocks_a_random_walk/I.png

B: http://www.teamten.com/lawrence/writings/are_stocks_a_random_walk/F.png

C: http://www.teamten.com/lawrence/writings/are_stocks_a_random_walk/K.png

A: ?
B: ?
C: ?

No cheating please... I appreciate it. Sorry as I also only found line charts

 

[wrbtrader]

Quote from atlTrader666:

Here are three charts. Please reply answering whether each letter corresponds to a random walk or stock...

No cheating please...I appreciate it. Sorry as I also only found line charts

Hey, that's not fair in your use of line charts...you may as well posted dotted charts, histogram charts, 3D charts, pie charts, area charts and so on....I've seen them all used by academia in their 'random walk" theory. That's my point, the reason why those of academia use such charts is so that you (the trader) can not determine the difference because they know that the typical trader does not use line charts or the others I mention for trade decisions.

This is what you need to do, use a typical trading software (e.g. Tradestation) that allows you to import your random walk data and then generate your charts (candlestick or bar) and include them amongst the charts (candlestick or bar) of real trading instruments.

Geeesh...the only time I see line charts, pie charts, histogram charts or whatever are on financial TV networks or your typical investment website...something those that don't trade would think its OK to use for chart analysis...it's NOT ok.

My point is that the exercise is extremely flawed as I noted considering you are asking "traders" to differentiate charts for TA purposes while knowing these are charts that "traders" typically don't use for TA purposes. The same is true when I read these weird or strange trade management rules being used by academia to test the merits of TA...it's usually flawed and designed to fail...trade management rules a profitable trader using TA wouldn't imagine using.

Mark

 

[SteveNYC]

Quote from atlTrader666:

I'm interested in the more esoteric technical analysis and why people believe it (against all evidence)... Aside support and resistance and some momentum patterns, the rest of TA seems like nonsense. Academics have tested TA strategies for half a century and they all call it bullsh1t. There is vague proof of short-term momentum. Only Benoit Mandelbrot discovered something valid: volatility tends to cluster. You can't make money of that though since traders have intuitively known and incorporate higher premiums in their options trading when volatility increases.

My question: If you were to create a random walk in Excel do you think you would differentiate the chart from say a stock market chart?

Seriously guys Google image a random walk chart or create one in Excel and you will be amazed at the amount of double tops/bottoms, bull/bear flags, breakouts from consolidation areas, etc. that you will discover. Even Fibonacci lines will look like viable entry & exit points.

How are you defining random in "Random Walk"?

 

[traitor786]

Quote from SteveNYC:

How are you defining random in "Random Walk"?

I wonder if one does a study (ema,bollinger,stochastics) with a random chart what would the results be ?

Maybe all is random but we have found a way to predict randomness?

Anybody have the capability to make a random chart and try a study on it ?

 

[atlTrader666]

If someone can post a candlestick random walk then that would be great. I don't use Tradestation.

I think the gaps will give it away on the candlestick chart.

 

[atlTrader666]

Quote from SteveNYC:

How are you defining random in "Random Walk"?

Simple coin-flip model will suffice.

Please don't get too philosophical and say that a number generator is not truly random... it's random enough.

 

[traitor786]

Quote from atlTrader666:

Simple coin-flip model will suffice.

Please don't get too philosophical and say that a number generator is not truly random... it's random enough.

True its random enough, but a coin toss isn't try to take some random nubers like 2 48 003 84 or use a upc codes

 

[SteveNYC]

Quote from atlTrader666:

I'm interested in the more esoteric technical analysis and why people believe it (against all evidence)... Aside support and resistance and some momentum patterns, the rest of TA seems like nonsense. Academics have tested TA strategies for half a century and they all call it bullsh1t. There is vague proof of short-term momentum. Only Benoit Mandelbrot discovered something valid: volatility tends to cluster. You can't make money of that though since traders have intuitively known and incorporate higher premiums in their options trading when volatility increases.

My question: If you were to create a random walk in Excel do you think you would differentiate the chart from say a stock market chart?

Seriously guys Google image a random walk chart or create one in Excel and you will be amazed at the amount of double tops/bottoms, bull/bear flags, breakouts from consolidation areas, etc. that you will discover. Even Fibonacci lines will look like viable entry & exit points.

Yes, I see patterns in random walk.

A chart generated by a coin flip would be similar to a stock chart but not exactly the same. I believe there are subtle differences.