Is Daytrading a Random Event?

The whole concept of "random" is an illusion in the first place. It is a rule of thumb word used to express the idea that "no one knows what will happen."

There are no truly random events, only events with undiscovered reasons behind them or multiple variables that create feedback patterns too complex to predict.

Successful traders don't care about predicting the future anyway. They focus on probability and expectation within the paramaters of the system.

Probability is an illusion as well, of course.

But acting on reasonable if/then propositions is the only way for unenlightened beings to move forward.

To those who say that short term daytrading is impossible: you are indulging in incredible, incredible arrogance to make such a sweeping statement of what others can or cannot do, with no mathematical or even empirical leg to stand on.
 
SicilianTM, given your assumptions you make valid points. There is still time to edit your post and append "Checkmate".
 
To those that are discouraged and feel that profitable daytrading can't be done because stock price action is totally random.... take heart!

Intraday stock price action is not totally random. There I've said it.

First an analogy.........
Ocean waves have areas in them that are chaotic. The wave itself is an organized system. Elements of external input(wind), momentum(the water's motion), support(the ocean floor) and resistance(gravity), come together to form a predictable effect, the wave. The wave form is easier to predict in the closer time period. It is easier to tell how high the wave will be after it has started to form than when it is only a swell on the horizon. Just ask any surfer. Traders are surfers, or at least they try to be.
Of course there are also Tradewinds, Gulf streams and Labrador currents for those taking longer journeys. However they may be more subject to more meandering and course changes than the breaking wave.

Second,as far as the question of it being gambling, I went to the Webster's....def 1. to play games of chance for money or other stake 2. to take a risk in order to gain some advantage.....O.K. I'm a gambler. But a distinction should be made, and has been made before, between the roulette player, and the blackjack player who counts cards. roulette players can't win in long run but card counters do. That's why the casinos know who counts cards and they keep them out and/or the dealer uses so many cards that it is difficult. Good traders are card counters.

Third is; How many times do prices bounce off resistance and support levels or run up or down for hours/days after a news item comes out or support/resistance is broken? Lots of times. People are people. They buy at a certain level watch it drop, get scared for a while and then, if it comes back up, they sell at the level they bought to stop the pain. Good traders use psychology.

Lastly I'm here to say, not to brag or make those struggling envious or feel bad, but to encourage them. I've had a profitable intraday(flat at end of day) system for two years now. Since November when I started trading it, it's been profitable, and since May 1st when I started trading full time with full buying power (ie. more than 25K)it has made me more than enough to live on. More than I made at my previous career. It's taken me five years and a lot of work. And don't ask me how I do it, I'm not saying, sorry. You might rightfully say that it is short time period. You're right, but I've made probably about three hundred trades during that period and have made money on up days and down days, up weeks and down weeks. I have something figured out, even if it is perhaps temporary(I don't think so). Again, not bragging but hopefully encouraging.... The market is not totally random.

There is consistency within the chaos. The market waves can be surfed. If you're not surfing yet I say keep paddling, catch a wave, and try to stand up!


Please excuse the long post. Just had to get this off my chest.
 
Originally posted by cmz1
poker is definitely more random in my eyes than the market; but, daytrading still sucks
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Does daytrading suck? Or does "YOUR" daytrading suck?...LOL


(Just kidding dude, I couldn't help myself):D
 
Certainly short term daytrading involves risk. But the odds are favorable to those who know what they're doing. It's not like pulling the arm of a slot machine. People who think it's just pure luck are ignorant.
 
Market forces at work: A seller believes that the price of the stock is going down... a buyer believes that the price of the stock is going to go up. How can you call this random?

If the markets were truly random then individual equities would not move (for the most part) in unison, trending up or down- they would each be going their own way all day long.

Fear and greed are the main drivers in the market. Can we easily quantify fear and greed? No, but because we cannot we cannot chalk it up to randomness.

Mr. Toad
 
Originally posted by futurecurrents

Lastly I'm here to say, not to brag or make those struggling envious or feel bad, but to encourage them. I've had a profitable intraday(flat at end of day) system for two years now. Since November when I started trading it, it's been profitable, and since May 1st when I started trading full time with full buying power (ie. more than 25K)it has made me more than enough to live on. More than I made at my previous career. It's taken me five years and a lot of work. And don't ask me how I do it, I'm not saying, sorry. You might rightfully say that it is short time period. You're right, but I've made probably about three hundred trades during that period and have made money on up days and down days, up weeks and down weeks. I have something figured out, even if it is perhaps temporary(I don't think so). Again, not bragging but hopefully encouraging.... The market is not totally random.

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Futurecurrents my experience is similar to yours (success after long struggle), and it highlights a few key observations:

1) Profits talk, BS walks. The only true measure of a theory is whether or not it makes money.

2) Trading is a long, hard road and the learning curve is measured in months or years.

3) Truly successful traders are very tight lipped about what they do because they worked hard and spilled a lot of blood, and they are not about to give away truly important information that it almost killed them to uncover.

4) Folks who openly give advice are immediately suspect, because if they were successful their mouths would be shut (I'm talking specific 'proprietary' advice, not general discussion of markets/theories/basic strategies etc.)

5) Most of those who dismiss markets as random never even really got their hands dirty. They may have tried for a few months at most and quit in disgust, or they may have been tainted by some other outside pessimistic influence.
 
Originally posted by SicilianTM


One thing that would still be possible, is to play a game of "russian roulette" in the markets, a strategy that yields many small winning trades but which carries a possibility of a huge loss which balances out the many small winners, keeping the overall expectancy at zero.
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two words: Victor Niederhoffer
 
- the randomness in the market can be seen as perceived value

- the organization in the market can be seen as how the perceived value adjusts to real value (when its revealed)

sometimes perceived value is way off sometimes it's right on.

why did the naz go to 5000? because that was it's perceived value by the public. why is it hovering over 1000 right now? because thats it's perceived value.

what causes this randomness? inefficencies in the market. Perceived value is different from real value because someone wants it to be. In the end, when the money gets taken off the table, prices always go back to real value.

if there were no inefficiencies, there would be no market.
 
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