Do you see patterns in Random Walks?

[MAESTRO]

Quote from ronblack:

Some people, especially university theorists, believe randomness means you can't make any profits. This is totally wrong...

Well, "randomness" is not equal to 50/50 chance fair games. It has other properties that are very exploitable.

 

[The_Tourist]

Quote from Optionpro007:
If I may, how short is short?

Daytrading.
Also, probability of Streaks itself is Not a binomial distribution like coin toss probability.
Consecutive heads or tails requires Markov chain analysis and is Not an independent event scenerio.

 

[jimbojim]

Quote from MAESTRO:

This is an exceptionally wrong statement; it illustrates a very common mistake of mixing the cause and effect. Not a first time I have seen it. Theory of Random Walks is by far different than majority of people here imagine it. The above link to an article by a novice researcher from Bulgaria is a good illustration of it.

Excuse us Sir. You are making many serious statements here without any argument in their support. I never talked about cause and effect and I have no idea how it related to what I said.

The market is not a RNG. Traders remember their actions and base subsequent actions on previous actions. Investors remember when they bought and know the levels they will buy more or sell. If you think the market has no memory it is only because you think the market is something more than the traders and the instruments involved.

You tell us how different is the theory of RW than people imagine it otherwise you are just making a lot of white noise with no substance.

Markets and RW are two unrelated concepts. Universities mixed them because they had to publish papers. No university professor has ever made money trading. Trading is for people with a plan and discipline and that is all it takes.

 

[Optionpro007]

Quote from The_Tourist:

Daytrading.
.

If price memory is seen at the daily level, then it is evident in smaller time frames as well.

 

[ssrrkk]

Stock Market Prices
Do Not Follow Random Walks :
Evidence from a Simple
Specification Test

http://press.princeton.edu/books/lo/chapt2.pdf

 

[MAESTRO]

Quote from jimbojim:

Excuse us Sir. You are making many serious statements here without any argument in their support...

There are countless articles on this subject. It has been shown beyond any doubt that the stock market prices have no memory.

http://press.princeton.edu/books/lo/chapt6.pdf

Here is one of these articles. You can skip to the conclusions page to get the idea of it.

In our firm we have also conducted quite a thorough research on this subject involving prices for more than 1000 securities (stocks, futures, etc.) We have come up with the similar conclusions.

I shall not argue about academics not making any money; who do you think runs all of the successful QUANT Funds?

 

[MAESTRO]

Quote from ssrrkk:

Stock Market Prices
Do Not Follow Random Walks :
Evidence from a Simple
Specification Test

http://press.princeton.edu/books/lo/chapt2.pdf

Wrong interpretation of the article.

 

[ssrrkk]

Quote from MAESTRO:

Wrong interpretation of the article.

There is no interpretation in my post. I have merely cut and paste the title of the article above the URL.

 

[MAESTRO]

Quote from ssrrkk:

There is no interpretation in my post. I have merely cut and paste the title of the article above the URL.

I thought you implied that you agree with the title of the article. My apologies.

 

[The_Tourist]

Quote from Runningbear:
If you flip a thousand coins, you will get long runs of consecutive heads or tails. These would appear to be trends, but they are in fact random and they do not change the odds of the next throw. With is 50/50.
The market is the same.

From a Mathematician view, if you flip 10 thousand times, you will get even longer stochastic type 'trend' of consecutive heads or tails...
Maybe the difference between deterministic and stochastic trends is just a matter of perspective. Similarly, from a behaviourial science view, price has memory long term because more people & consortiums are involved as timeframe gets bigger whereas intraday is like 'the next throw'. The next throw is binomial but a "streak" is markov chain in nature.