Is Daytrading a Random Event?

Originally posted by tntneo
this thread has so many pages it's hard not to repeat things.
I don't care to know if markets are random or not. I do believe they are chaotic, which is not the same. Regardless, it is possible to make money in them, and I think that's the point, isn't it ?

It is very possible to deal with this chaotic nature. I find it specially true for NYSE stocks. Maybe because a guy, the specialist, is paid to deal with it, so of course it's possible.

Indices are more chaotic I think. But they have trends too, for those who like trends. And they have trendless periods too (which I like better).

they are so many examples of chaotic systems we can deal with. The better known is the weather, as mentioned earlier.
Planets orbits are chaotic too. In both case, we can make short term predictions about where they are going even though they are not 'intelligent' systems.
I don't understand why so many have difficulties to accept you can do the same with the markets, random, chaotic or not.

It does take knowledge, method and discipline and as little 'intelligence' as possible. To me, the more you analyze, the less likely you will make it. This is also why trading methods should be kept as simple as possible imho.

tntneo
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one might argue that the specialist creates a little chaos once in a while for his own benefit.
 
LOL I do think they can create their own chaos indeed. But they don't do it so often, unless you are referring to gaps.

However, the big force is the cascade effect of outside volume coming in.

And still, it's possible to be on the side the specialist would be. That's what I do at least. Then often, I benefit chaotic moves..

and yes, sometimes (fewer times hopefully) I am caught off balance.

tntneo
 
reading over the last 24 hrs of posts... you certainly can't apply 50/50 coinflip instance logic to daytrading because for each trade there is an entry and an exit, often a gain or loss is based on timing: two trades started at the same instant, same stock, one is a ended after 'x' seconds and the other after '2*x' seconds.

In this instance, one trader loses again and is convinced the the market is random and unwinnable, the other trader smiles as they complete yet another profitable transaction.

Mr. Toad
 
Originally posted by FasterPussycat
perhaps a bad choice of words, but my point is that i am astonished that anyone (even our esteemed member dark) would attempt to quantify this. to put it in dark's words, that is pretty arrogant (and presumptuous). i mean holy cow where did these come from? why not 2 to 6%. or 1/2 to 3%? :-/
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Faster do you just like the taste of shoe leather or what. I pulled those numbers out of the air because the exact number is not important, it is the broad concept that is important. False precision is the sin of pedants, as demonstrated by our beloved Uncle Sam every time he puts out an economic statistic with decimal points attached.

Pinning down chaos is impossible. Since a monkey trying to eat spaghetti with boxing gloves would have more luck, I assumed folks would see I was offering up a guesstimate. I have to wonder at your feigned density, faster: more specifically I wonder if you act this way on purpose, or if it is a defect in your personality that you simply cannot overcome.

Regarding some of the esoterica we've gotten into in this thread: let's not lose sight of the fact that the halls of academia are filled with useless people. More is not necessarily better when it comes to knowledge, because useful information can be obscured by overkill information. Concepts have a maximum utility function in application to the real world, and going beyond that maximum generally results in little more than wasted time. If we had all the time in the world, we could pursue ideas to the ends of the earth. But since our time is limited, utility maximization has to be respected imho. Which is why I won't bother getting into the nitty gritty of chaos until I decide to become a Los Alamos physicist. As for the books written to rip off a sexy sounding scientific idea, anyone who has tried to use chaos theory to predict the future has obviously missed the point in the first place. Understanding and foresight are not the same thing. Like the dog that did not bark, chaos helps us know what we do not know.

p.s. Dan M I know that systems can be profitable w/ less than 50% wins, I just figured that expectation is such a basic concept that this need not be pointed out. The possibility of being right more than wrong- i.e. winning percentage above 50%- is a gauntlet thrown specifically at the feet of random walkers.
 
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