I'm not going to read this pathetic excuse of a thread because I know exactly why some individuals think the Stock Market is random. It is because they look, and look, and look, and look, day in, day out, day in, day out, waiting for something, anything, to jump out and tell them whether to Buy or Sell, but that something never comes. Ultimately, because the Person views himself as perfect in his own eyes, he isn't wrong, the Market is wrong, and therefore the Market must be random! I mean after all, if the individual cannot ascertain the direction of Price no one can! The only âlogicalâ conclusion is that the Market has to be random.
Predicting randomness
- Thread starter oddiduro
- Start date
I think the word to use is "spontaneous" rather than random.
John
I have a little empirical experiment that anyone can try, and I have performed the test myself, many times. The test clearly demonstrates the nonrandom nature of the market.
In order to conduct this experiment, you need a reasonably healthy margin account, and a broker who gives you reasonable access to the markets, such as IB TWS.
You also need to have not traded INTC stock in the past on any sort of regular basis, although an occasional buy of the stock for investment purposes will not affect the outcome of the experiment.
Some background: INTC is "the" most heavily program traded stock in the market. As a result, it is extremely subject to some very interesting, non-random behavior, because those black boxes out there are just DROOLING to find new money to try to grab.
The test is as follows: wait until after the first hour of trading has completed, and when volume has calmed down a bit. Then place an order to buy about 4,000 shares around $0.30 below the current price.
Within the next 15-30 minutes, the price of INTC will fall and if you don't cancel your order, you will own 4,000 shares.
The first time that you do this test, if you actually allow the order to complete, you may get a bounce by the end of the day, and make a little money. But, if you sell out your 4,000 shares on the same day, those black boxes will register you as a daytrader, and the second time you try this experiment, the price of INTC will crash through your fill price and fall by at least $1.00 and you will be a very unhappy camper.
This experiment demonstrates two things: (1) the market is not random on an intraday basis, and (2) blind adherence to the predictions of technical analysis tools is a recipe for insolvency.
In order to conduct this experiment, you need a reasonably healthy margin account, and a broker who gives you reasonable access to the markets, such as IB TWS.
You also need to have not traded INTC stock in the past on any sort of regular basis, although an occasional buy of the stock for investment purposes will not affect the outcome of the experiment.
Some background: INTC is "the" most heavily program traded stock in the market. As a result, it is extremely subject to some very interesting, non-random behavior, because those black boxes out there are just DROOLING to find new money to try to grab.
The test is as follows: wait until after the first hour of trading has completed, and when volume has calmed down a bit. Then place an order to buy about 4,000 shares around $0.30 below the current price.
Within the next 15-30 minutes, the price of INTC will fall and if you don't cancel your order, you will own 4,000 shares.
The first time that you do this test, if you actually allow the order to complete, you may get a bounce by the end of the day, and make a little money. But, if you sell out your 4,000 shares on the same day, those black boxes will register you as a daytrader, and the second time you try this experiment, the price of INTC will crash through your fill price and fall by at least $1.00 and you will be a very unhappy camper.
This experiment demonstrates two things: (1) the market is not random on an intraday basis, and (2) blind adherence to the predictions of technical analysis tools is a recipe for insolvency.
It is interesting that you bothered to post to this pathetic thread, which means that it must attack one of your sacred cows.
The intent of the thread is for traders to weigh in on the subject.
Thus far, it has been a fascinating read.
Have you played kjents game, or tried the experiments?
Why do traders have such a need to predict markets?
Indeed, outrageously witty and profound. Perhaps you can enlighten us all with your definition of noise as it applies to price trajectories in the financial markets...
On a somewhat related note, a CDMA/W-CDMA signal appears to be narrowband noise on a spectrum analyzer... yet it allows for effective communication... of course you need the base and mobile stations to have synch'ed their pseudorandom generators with the same seed in order to modulate/demodulate the original signal..., and power control, and...etc etc. Hmm...