Random Walk Theory Proved, once and for all.

You may ask why sometimes Advance:Decline = 5:1 when it should always be 1:1. Is this the proof that the Market is not random?:confused:

No, you can call it Biased Randomness.:cool:
If the rates is up 0.5 what will happen?

I will simulate the condition by increasing the chance of -1 by 5% using formulas below.
RAND() RAND() INT(B1*2*.95)-1 (C1-0.5)*2 D1*A1
RAND() RAND() INT(B1*2*.95)-1 (C2-0.5)*2 D2*A2 SUM(FIRST:E2)
Name E1 as "FIRST"

The chart below shows 9 consecutive charts.
Note, all is down.
 

Attachments

Now you see. Anything that screws the probability of +1 and -1 will have profound effect on the Market.

If I see that all fundamentals, TAs, etc., point to a resistance, but I want the Market to go up and I have some clout, I would create a 2% upward biased randomness by these formulas.

RAND() RAND() INT(B1*2*.98)-1 (C1-0.5)*-2 D1*A1
RAND() RAND() INT(B1*2*.98)-1 (C2-0.5)*-2 D2*A2 SUM(FIRST:E2)
Name E1 as "FIRST"

And I get nine consecutive charts below.
You can see 5 uptrend, 3 sideways and 1 downtrend.

This is a trading strategy.
If you see a bias of less than 2% it is not worth the risk.
If the bias is 5% or more you can get full loaded.
 

Attachments

This is the GREATEST THREAD in ET history. Nearly all of the quant shops, market making firms, etc. ASSUME A RANDOM UNDERLYING AND STILL PRINT MONEY EVERYDAY. Denizens of ET in DENAIL OF REALITY, as usual.
 
ALL OF TA IS UTTERLY USELESS if you code it and back/foward test it. Only in the hands of a VETERAN TRADER WITH A STRONG INTUITIVE/LOGICAL/RATIONAL UNDERSTANDING OF THE MARKET CAN CONSISTANTLY PROFIT FROM IT SO LONG AS HE TOO ASSUMES A RANDOM UNDERLYING.

RANDOM does not mean PATTERNLESS or TRENDLESS it means there is no way to PREDICT the Patterns and Trends that emerge AHEAD OF TIME. BY THAT DEFINITION MUCH OF THE UNIVERSE IS RANDOM, exept for a handful of laws and constants.
 
Quote from mu200411:

The charts produced by RAND() look like some stock charts.
So the Market is random.
So you cannot predict the Market.
You can make money only by your edge, don't try to predict the Market.
More...


You really want to take learn a little about basic logic. None of your statements are related in anyway and certainly the implications you put forward are nonsense. I have nothing more than a mild curiosity whether markets are random, empirically I'd have to say they are not. I do think lazy, sloppy, uninformed thinking is really a waste of every ones time and does the 'thinker' a huge disservice. Sad.

Here's my thesis

Choclate ice cream looks like some bullsh*t.
So Bullsh*t tastes great.
So you can not predict if an ice cream vendor is selling Bulls*t.
So you can only make money by selling chocolate ice cream to Bulls.
 
Quote from dtrader98:


I guarantee you would not be able to accurately distinguish between 50 of these charts, and 50 randomly selected market charts
More...

Wrong.

Market doesn't work like that.
 
Quote from aeliodon:

This is the GREATEST THREAD in ET history. Nearly all of the quant shops, market making firms, etc. ASSUME A RANDOM UNDERLYING AND STILL PRINT MONEY EVERYDAY. Denizens of ET in DENAIL OF REALITY, as usual.
More...

You've got a point.

But how many funds print money in a Bear Market? AND beat the S&P?

As the old saying goes - Dont confuse brains with a bull market...

Quant funds are lauded as genuis for writing DOTM puts in a bull market. Then the bottom falls out.
 
Quote from dtrader98:



I guarantee you would not be able to accurately distinguish between 50 of these charts, and 50 randomly selected market charts
More...

There used to be a website that you could go to and do this very test. I think (from memory) I got about 75%+. Add random volume and I would wager that it would be close to 100%.

Cheers.
 
the fed said the currency markets are not random and published a paper showing how they came to such a conclusion.

Basically if a market is quoted as dollar yen - they saw much more significant bounces off the round figures - then when they looked at yen dollar.
 
All real word financial data have some degree of skew and kurtosis to thier distribution. They do not follow a perfect Gaussian distribution. What causes the skew and kurtosis is due to human psychology and behavior (or more specifically crowd behavior.)

Finding the right entry spot to do the opposite of crowd behavior is the best way to make money in the markets. Having said that, the markets are random enough that most people can't consistently find those entry points.
 
You must log in or register to reply here.
Back
Top