Because most studies counted net results, after commissions and bid/ask spreads.
Is price movement really random and unpredictable?
- Thread starter schizo
- Start date
Large number of whales + large number of automations => randomness???
1 whale > *
I have always wondered at what point does one action in the market prevent an algo from not doing what it is programmed to do.
We all have our own reasons for why we exit a trade perhaps. For some it might be one big red bar, bigger than the green bars going up, or perhaps once price breaks a certain level. Likewise, I imagine that algos are also programmed to stop executing for any number of reasons. Maybe they don't get their fill at a specific price and then their R:R would not be good if they pay higher prices, so they stop buying. And this loss of momentum might stop other algos from buying. Yes, its one of those ideas where a butterfly flaps its wings, and a hurricane is born on the other side of the world.
But I'm sure that for all the times where a setup was perfect, but it didn't result in a win, its perhaps because all those people expected to show up and keep buying just didn't show up. Could it be as simple as a guy was late coming back from lunch and didn't put in his huge buy order at 1pm? Then when he starts it at 2pm, the other algos don't participate to push price up because they think its too late in the day. Most of us will probably not want to enter a swing trade at 3pm because we figure if there isn't a trend by that point, it ain't happening, or perhaps even because there is no more time to dig out of a hole if it goes against us. So what perhaps was shaping up to be a trend going into the close just doesn't happen because some guy is late coming back from lunch!
I am of course just speculating, but I have always thought that the so called noise can have a profound impact when everything is so inter-connected. And I really do think that if some trader "steals" a fill from an algo, that algo will not turn off, and this action might prevent a move from happening, or perhaps even set off a chain reaction in the opposite direction.
Hello Frederick Foresight,
I bought Al Brooks video course a few years ago.
No, I never read a book on trading before and I never will. Just never saw the advantage of reading trading books.
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If markets are random then setups are useless. Attempts at prediction are useless. So pick any stock or future at any price and buy or sell at any time. And then hope for the best. No need to study the markets, discern pressures, devise setups, no need to read books, watch videos, study stats, no need to do anything but open a brokers account and pick any instrument any time at any price and go long or short at any moment. Because it is all random!
But by virtue of the fact that we don’t actually do that but we ALL do at least some of the other things mentioned above then that in itself is proof enough that we are trying to learn to predict the markets. We would not even be on ET if that were not so.
Some traders hate the word predict and soften it to anticipate or react but the truth of the matter we are all trying to decide where the market will go to next. So, that we can take what we hope is an informed position that will result in a profit. By the very virtue of going long or going short is, in itself, proof we are trying to predict the direction.
Trading has always been filled with uncertainty. We trade in a gray fog trying to navigate a positive outcome. That uncertainty is always there because it is impossible to know all the variables or when they will exert pressure. But that in no ways means random.
I used to run the Mississippi and Ohio rivers taking heating oil up north. Sometime we were fogged in and could not even see the point barge. And we had to make locks and could not even see the gate but had to be guided in by an actual person on the point relaying via speaker back to the captain when to cut back on the engines so has not to ram the gates bringing tons of river water on us...etc. We were not just a random boat on a random river we were a specific boat heading in a specific direction on a specific river. Nevertheless, we had to navigate the variables (fog sandbars..currents..locks) thrown at us. As we made our journey I could reasonably predict we would arrive at say St Louis by such and such a day taking into account the known or knowable variables. However, that prediction could change if we blew an engine (read a heavy hitter coming into the market). Or say a deep fog descending for many miles. However none of that mean’t all things were random. A random trip on a random boat going to a random destination and arriving to it at a random time frame to keep random people from randomly freezing to death in a random winter!
Trading is not a game of randomness. Citadel foolishly spends millions hiring people to discern market and devise setups if it is purely random. A big waste of time and money!
Car auctions are not random but instead they are purposeful. They may sound chaotic but they are not. They are probing to find the best price. The markets are like a big auction. Price is probing to find a fair price yet move as far as it can to create the most transactions. Yet maintain order. Prices CANNOT go straight up or down and keep doing so forever. Markets look for place where agreements on price take place. When that happens transactions happen. If no or few transactions are happening price will move to where transactions happen. It is the nature of the beast. Every strong trend is like an auctioneer raising price up and up and bidders riding the wave. At some point the bids will slow and things will top out.
We see trends …consolidation..continuations…or reversals. A big big auction driven by buyers and sellers. Pressures created by buyers and sellers. The thing is those pressures create inertia. Inertia is what makes prediction possible, to some degree. Not perfect prediction but reasonable prediction. Not perfect because we cannot know all the variables that can affect the market at any time.
TRADING IS NOT A GAME IN RANDOMNESS. FURTHERMORE THEY (institutions) are not out hunting our little piker stop-losses. The sooner we as traders can jettison that idea that the market is out to “get” us then the sooner we will be on the road to profitability. Our pipsqueak stop losses just happened to be in their way as one institution is trying to take money from another institution. A correctly placed SL has to be institutionalized LOL or it is going to get hit as deep pockets move the market against each other. These deep pickets will creat inertia. That inertia moves the markets usually a little further. Usually. When I see it I quickly take a position. If I already have a position on and suddenly an a unknowable variable enters the picture putting pressure against my position then the best action I can take IMO is immediately take the loss and perhaps double or triple up betting NOW on inertia and quickly …very quickly …getting my loss back and subsequently printing money. All terminating with sending the wife to Dillards vs Walmarts thus achieving equanimity in life and home! But then I am a scalper of 1 to 8 points who gets to sleep at night not twisting and wringing my hands and fingers in knots being deprived up sleep because I got some longterm position on in the futures markets. I am ALWAYS flat at the end of a day session unless I goofed up. Win or lose but flat. Always. No hope. No begging. No pleading. Just reality. Finally no getting chased out of the house with a broom.
But by virtue of the fact that we don’t actually do that but we ALL do at least some of the other things mentioned above then that in itself is proof enough that we are trying to learn to predict the markets. We would not even be on ET if that were not so.
Some traders hate the word predict and soften it to anticipate or react but the truth of the matter we are all trying to decide where the market will go to next. So, that we can take what we hope is an informed position that will result in a profit. By the very virtue of going long or going short is, in itself, proof we are trying to predict the direction.
Trading has always been filled with uncertainty. We trade in a gray fog trying to navigate a positive outcome. That uncertainty is always there because it is impossible to know all the variables or when they will exert pressure. But that in no ways means random.
I used to run the Mississippi and Ohio rivers taking heating oil up north. Sometime we were fogged in and could not even see the point barge. And we had to make locks and could not even see the gate but had to be guided in by an actual person on the point relaying via speaker back to the captain when to cut back on the engines so has not to ram the gates bringing tons of river water on us...etc. We were not just a random boat on a random river we were a specific boat heading in a specific direction on a specific river. Nevertheless, we had to navigate the variables (fog sandbars..currents..locks) thrown at us. As we made our journey I could reasonably predict we would arrive at say St Louis by such and such a day taking into account the known or knowable variables. However, that prediction could change if we blew an engine (read a heavy hitter coming into the market). Or say a deep fog descending for many miles. However none of that mean’t all things were random. A random trip on a random boat going to a random destination and arriving to it at a random time frame to keep random people from randomly freezing to death in a random winter!
Trading is not a game of randomness. Citadel foolishly spends millions hiring people to discern market and devise setups if it is purely random. A big waste of time and money!
Car auctions are not random but instead they are purposeful. They may sound chaotic but they are not. They are probing to find the best price. The markets are like a big auction. Price is probing to find a fair price yet move as far as it can to create the most transactions. Yet maintain order. Prices CANNOT go straight up or down and keep doing so forever. Markets look for place where agreements on price take place. When that happens transactions happen. If no or few transactions are happening price will move to where transactions happen. It is the nature of the beast. Every strong trend is like an auctioneer raising price up and up and bidders riding the wave. At some point the bids will slow and things will top out.
We see trends …consolidation..continuations…or reversals. A big big auction driven by buyers and sellers. Pressures created by buyers and sellers. The thing is those pressures create inertia. Inertia is what makes prediction possible, to some degree. Not perfect prediction but reasonable prediction. Not perfect because we cannot know all the variables that can affect the market at any time.
TRADING IS NOT A GAME IN RANDOMNESS. FURTHERMORE THEY (institutions) are not out hunting our little piker stop-losses. The sooner we as traders can jettison that idea that the market is out to “get” us then the sooner we will be on the road to profitability. Our pipsqueak stop losses just happened to be in their way as one institution is trying to take money from another institution. A correctly placed SL has to be institutionalized LOL or it is going to get hit as deep pockets move the market against each other. These deep pickets will creat inertia. That inertia moves the markets usually a little further. Usually. When I see it I quickly take a position. If I already have a position on and suddenly an a unknowable variable enters the picture putting pressure against my position then the best action I can take IMO is immediately take the loss and perhaps double or triple up betting NOW on inertia and quickly …very quickly …getting my loss back and subsequently printing money. All terminating with sending the wife to Dillards vs Walmarts thus achieving equanimity in life and home! But then I am a scalper of 1 to 8 points who gets to sleep at night not twisting and wringing my hands and fingers in knots being deprived up sleep because I got some longterm position on in the futures markets. I am ALWAYS flat at the end of a day session unless I goofed up. Win or lose but flat. Always. No hope. No begging. No pleading. Just reality. Finally no getting chased out of the house with a broom.
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price moves because two sides are transacting to create a "market", such as equity futures. people are happy to just trade stocks and mutual funds, until options and etfs, and for example, bitcoin, created out of thin air.