You also need to factor in the fact that something can be completely predictable in the market and you still can't make a dime off it unless the rest of the market is somehow all unaware of this predictable feature. If, for example it was a proven fact that volatility spiked at 9:45 every morning and you could trade a volatility product (that doesn't exist) which gave you the spot volatility price, the known spike at 9:45 would simply be priced in and no-one could exploit it. On a more real world example, you know the price of a stock will drop by exactly the amount of the dividend when it goes ex. That's absolutely known price action that's entirely predictable. And not something you can profit from despite it's predicability.
If markets were random why then does volatiliy spike at certains of the day (illustration inside)
- Thread starter Heydrrich
- Start date
very true
what the hell are markets?
they are places where business men go to make transactions.
transaction is what causes market movements.
Market movements result in transactions.
so to say market is random means that business men transact randomly.
I do not think they do that.
it is only 50/50...... if markets go up or down........markets can do something else: price can remain the same.
and that is something which happens very often or most of the time.
and traders get impatient and close positions......which is why traders in the long term tend to lose....
if it was 50-50 no one should lose.........and the only losses may be brokerage or slippage
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yes what the graph does not show is slippage.
If a direction of the market is certain, then, no one is going to take the opposite side of the transaction.....UNTIL THE DIRECTION IS NO LONGER CERTAIN.
so if the market is certainly going up, then the sellers will disappear and only offer at a price, that the seller thinks market may go down.....and the buyer who knows market is certainly going up, cannot buy until that rate,..... where the seller is offering to sell.
so in other words no trade is ever certain. unless the seller is an idiot
so while markets are not random, they are not and cannot ever be, certain.
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Yes, the statement, "markets are random," without qualifying it, makes no sense whatsoever.
Okay, so i'm not sure what you just said.
"Price exists of tiny micro decisions on micro timeframe" ? I think price exists everywhere, on every period, with decisions based on strategies across the board. but ok, leave that be atm.
Let me ask you this: Do you think it's possible for SP500 to trade at 1 and 6400 within the next, say, 24 hours, 1 hour, 1min ? I don't think you do. So, how can prices be random, if you already KNOW that certain things are NOT possible ?
or you think that randomness is defined by the idea that you need to know what the next TICK is going to be ?
So, your problem is really in your inability to define or understand randomness in the first place.
Exactly.
