Trading is no different than any other serious endeavor in life - preparation is key. Plan your work and work your plan. Nothing 'random' about that. It would be incredibly naive to think that a random approach (like a coin-flip for entry bias, and an equally random timing mechanism for position entry and exit) would yield a consistently positive result. It would work if the market stayed relatively static in terms of net change and rangebound in it's 'random' walk - but it does not. And that is the problem for you.
Random buying and selling, and day trading
- Thread starter planttime
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My read on OP's question was that he was contending that random entries/exits would yield a roughly 50/50 (breakeven) result in the long run (minus commission and minor slippage). I don't think a "consistently positive result" was even considered as a possibility.
What I'm contending is that a random strategy will yield a consistently negative result.
Spearhead, thank for your comments, you seem to understand what I'm asking about. I'm not advocating using this strategy to make money, just to understand how and why prices move.
The question remains, however. Why is it a negative result over the long run if you play my proposed game? The reason in a casino is obvious. For example, if you play roulette, and always bet black, you would break even in the long run, except for the 0 and 00 spots, that slightly skew the odds in the house's favor.
What causes the slightly negative skew in market (assuming there is one), if you play randomly?
Let's say that banks and other players really do control prices, so that the price is not *entirely* random. Fine, but even then, if I enter and exit randomly, one might argue that I will on average both gain and lose equally from the action of the price, since it can be manipulated either up or down, and I have no knowledge of which state I'm in at the moment I randomly buy or sell.
Anyway, it's still not clear to me why the strategy would result in anything worse than the long term movement, even though that may well be true in reality.
The question remains, however. Why is it a negative result over the long run if you play my proposed game? The reason in a casino is obvious. For example, if you play roulette, and always bet black, you would break even in the long run, except for the 0 and 00 spots, that slightly skew the odds in the house's favor.
What causes the slightly negative skew in market (assuming there is one), if you play randomly?
Let's say that banks and other players really do control prices, so that the price is not *entirely* random. Fine, but even then, if I enter and exit randomly, one might argue that I will on average both gain and lose equally from the action of the price, since it can be manipulated either up or down, and I have no knowledge of which state I'm in at the moment I randomly buy or sell.
Anyway, it's still not clear to me why the strategy would result in anything worse than the long term movement, even though that may well be true in reality.
And imagine trading this, while having targets identified â that price will hit
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Market is most certainly uncertain⦠market is not random
Truth be known, there is a lot of deliberate effort exerted in the market â but identifying it, for some, is near impossibleâ¦
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OP,
Price does not move randomly - that, unfortunately, is your first incorrect presumption
And for the record - don't take what I posted as meaning I know the out come of my next trade - I don't, and never will know the outcome(uncertain - yes... random - not even close)
RN
How can price move randomly unless major buyers and sellers operate at random?
Most people are indeed "surprisingly skilled at doing poorly" in trading. This is because most people's instincts tell them to do the opposite of what is required. Most people have the desire to go against a strong trend and most have a hard time cutting losses, but an easy time cutting profits.
They do. The market is inherently irrational and random, it doesn't even have to react to "good news" by moving up, and vice versa.
The traders who trade price action or TA usually die by a thousand cuts from their stop losses (which includes commissions and slippage), because markets frequently generate false breakouts, reversals and failed patterns. The ones who choose to martingale or down average into losers usually net small wins, but they always get wiped out by a huge loss in the end.
Traders who have no real edge will never make any money in the long run.