Oh, don't say that to some folk! They'll get *very* excited:
.(As I think you've seen recently? Yeah -- them folk.....)
is market random?
- Thread starter padutrader
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Oh, don't say that to some folk! They'll get *very* excited:
.(As I think you've seen recently? Yeah -- them folk.....)
Actually yes.
The thing is if you look at SPY over 25 years, there is a slightly higher % of up vs down, i.e., like Mr. turtle said, there is an up bias. However, if you don't have a method to do further filtering (an edge), the slight up bias won't get us small mom and pop retails rich. Buy & Hold beats mechanically day trade SPY.
Well, it is a prediction. Just one dimensional. The quality of which is dependent on the products associated volatility. The problem is using the word prediction misrepresents to about 99.9% of people what the market is trying to tell you about how it perceives the future, by ignoring the second dimension of that prediction. Only layering the histogram over the mean tells you that. Two products with the same price, one at 20 vol and the other at 100 are two very different predictions. That histogram also allows one to understand that all other prices surrounding the mean are predictions as well. Delta is a good representation of that.
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As this thread is about randomness, 'predicting' will produce random results.
The future is random, the past is fact.
If you trade not on "What may happen" and more on "What did happen", this will unlock some potential.
"What did happen" is the collective belief of the crowd and most often this belief continues into the future, (until there is a mood shift, most often gradual rather than sudden.)
I like to catch some fat tails.
On OP: It's a bit of a philosophical debate. On the most fundamental macroscopic level, everything happens for a reason - on the quantum level, that's however not so (in our current understanding), which leads to interesting implications on macroscopic randomness depending on interpretation.
Assuming determinism: There are comparatively simple computer algorithms that generate number sequences that are pseudo random. The resulting apparent noise has the same properties as truly randomly generated noise (e.g. sampled from the atmosphere or whatever) but if you happen to know the exact algorithm it is 100% predictable. For anyone else it is only possible to characterize the next random value as a particular distribution of possible random values.
So basically, for practical purposes the markets are random noise despite being generated from non-random phenomena (that is, as long as we interpret what happens in the macroscopic world as deterministic independent of underlying quantum randomness). There are occasional clear signals in that noise caused by macroeconomic factors/events such as Trump's tweets etc, and you can trade those with a great degree of certainty without any sophisticated statistical analysis of noise distributions being necessary.
Then there's also the fact that if you can make decisions faster than anyone else, the world will be almost frozen in your perspective, and your analysis will be vastly more simple. Hence HFT.
Disclaimer: I am not a mathematician, just a coding monkey.
Assuming determinism: There are comparatively simple computer algorithms that generate number sequences that are pseudo random. The resulting apparent noise has the same properties as truly randomly generated noise (e.g. sampled from the atmosphere or whatever) but if you happen to know the exact algorithm it is 100% predictable. For anyone else it is only possible to characterize the next random value as a particular distribution of possible random values.
So basically, for practical purposes the markets are random noise despite being generated from non-random phenomena (that is, as long as we interpret what happens in the macroscopic world as deterministic independent of underlying quantum randomness). There are occasional clear signals in that noise caused by macroeconomic factors/events such as Trump's tweets etc, and you can trade those with a great degree of certainty without any sophisticated statistical analysis of noise distributions being necessary.
Then there's also the fact that if you can make decisions faster than anyone else, the world will be almost frozen in your perspective, and your analysis will be vastly more simple. Hence HFT.
Disclaimer: I am not a mathematician, just a coding monkey.
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WHEN starting out, like most traders/investors- my results were FAR WORSE than random
,And even those were the days of high commissions, the point is still the same.In theory no[0] commissions should make it easier to profit???I think we are in agreement. My struggle is how to profit from this slight up trend doing day trading?