Random Walk Theory Proved, once and for all.

[dtrader98]

Quote from BlowFish:

There used to be a website that you could go to and do this very test. I think (from memory) I got about 75%+.

Cheers.

Yes, I've seen it. Thanks for backing up the statement. When you can 100% distinguish between 50 real and 50 random charts of my choice, I'll be happy to sign up to your cult.

I won't hold my breath waiting.

Looks like there is a lot of contention on the board, which is great.

Firstly, I am not backing up the original posters claims that markets are random, go back and re-read all the posts to grasp this. I've already said they are chaotic, and thus unpredictable in the short run.

Big difference between that and random, however in terms of chart distinction, random is close enough compared to deterministic in terms of visual recognition.

Whatever method you employ, if you are successful it is due to an edge in money mgmt. and ultimately probability of a greater likelihood of events in your favor (edge), NOT because you are an artistic genius who "sees" the harmony of markets better than others.

 

[BSAM]

Anyone else here, besides me, who believes the market is random yet often predictable?

 

[timbo]

Quote from BSAM:

Anyone else here, besides me, who believes the market is random yet often predictable?

I once knew this girl who was a little bit pregnant, but it was predictable.

 

[FanOfFridays]

Quote from dtrader98:

Big difference between that and random, however in terms of chart distinction, random is close enough compared to deterministic in terms of visual recognition.

Whatever method you employ, if you are successful it is due to an edge in money mgmt. and ultimately probability of a greater likelihood of events in your favor (edge), NOT because you are an artistic genius who "sees" the harmony of markets better than others.

Not sure I fully understand the first sentence above, but surely you don't believe that there do not exist traders whose 'edge' is in whole or in part based on the fact that they have thousands of hours of screen time and can interpret the visual information coming from the charts or the DOM or the tape and find entry points that give them a good R/R ?

 

[BSAM]

Quote from traderNik:

Not sure I fully understand the first sentence above, but surely you don't believe that there do not exist traders whose 'edge' is in whole or in part based on the fact that they have thousands of hours of screen time and can interpret the visual information coming from the charts or the DOM or the tape and find entry points that give them a good R/R ?

Nik, the answer to your question is, of course, yes. But, these same traders might have three good trades in a row. Then, they use their "visual information" skills and have three bad trades in a row. However, they still make lots of money because their winners outperformed their losers.....(money management).

Therefore, could one not conclude that the market is random?

 

[FanOfFridays]

Quote from BSAM:

Nik, the answer to your question is, of course, yes. But, these same traders might have three good trades in a row. Then, they use their "visual information" skills and have three bad trades in a row. However, they still make lots of money because their winners outperformed their losers.....(money management).

Therefore, could one not conclude that the market is random?

I suppose, if the vats majority had a 50/50 win/loss ratio. I know I don't.

 

[dtrader98]

Quote from traderNik:

Not sure I fully understand the first sentence above, but surely you don't believe that there do not exist traders whose 'edge' is in whole or in part based on the fact that they have thousands of hours of screen time and can interpret the visual information coming from the charts or the DOM or the tape and find entry points that give them a good R/R ?

I have no argument there. And I strongly agree with it. My original intent in joining this thread is simply to let others who are learning, save a lot of time by trying to unmold themselves from "believing" chart patterns will always repeat and unfold if they just memorize them and learn them enough. That is simple bogus. This excercise helps to undo a lot of the damage that TA books like IBD does IMO.

There are entire books (bulkowski) devoted to studying patterns and taking a look at the probability of success/failures on patterns (note -probability = tool of randomness).
And like those you mentioned with experience, I"m all for reading patterns and TA. I just don't buy, no I know that it's not about having the artistic genius that supposedly others don't have to "see" the markets. I'm trying to save a lot from bunk. It's about recognizing patterns, which without studying their history is simply somewhere to start and determine how good the pattern and your edge could be, but the outcome trajectory is always chaotic i.e. for all intents and purposes random (i.e. pattern unfolds or doesn't).

Here's a good example. Paul thomas jones looked at 87 and 29 markets and 'saw' a pattern match and they unfolded the same way. People will always reference this as the pinnacle of TA achievement. I've done the exact pattern overlay he has, and I've also seen the strong correlation he saw.

But Guess what, there are literally hundreds if not thousands of patterns that are strongly correlated over windows of time (there's a site on this as well), that do not unfold the same way. More often than not, they do the opposite. Which is why without sound money mgmt. and risk mgmt, you will quickly go broke thinking they are the holy grail patterns.

Again, they are useful and I don't knock TA. But I'm just trying to show noobies that there are other helpful ways to look at ta and patterns, contrary to what most of the TA books teach.

 

[syswizard]

Quote from dtrader98:

Again, they are useful and I don't knock TA. But I'm just trying to show noobies that there are other helpful ways to look at ta and patterns, contrary to what most of the TA books teach.

Amen. It comes down to sound RISK MANAGEMENT....and it SOUNDS simple, like use a small STOP LOSS, but guess what ? The market will CUT YOU TO PIECES...."death by a thousand cuts". So it's much, MUCH more complicated than THAT.

 

[dtrader98]

Quote from dtrader98:


Here's a good example. Paul thomas jones looked at 87 and 29 markets and 'saw' a pattern match and they unfolded the same way. People will always reference this as the pinnacle of TA achievement. I've done the exact pattern overlay he has, and I've also seen the strong correlation he saw.

[/B]

Paul Tudor Jones. Sigh, time to hit the sack.

 

[IluvVol]

for scalping yes, for anything longer term a CLEAR NO!!!
No charting, price depth, or tape reading helps with anything beyond a trading time frame of minutes. I know I will be attacked and some will say "just because it does not work for you does not mean it wont work for anyone else". Well, thats the same as saying that I need to prove that it works for nobody at all in order to say it is useless. For me it is very logical and makes complete sense to conclude that charts, market depth and what have you in regards to past prices will not give the slightest hint of where the asset will be going beyond a very short period of time. I mean, if you claim it does could you give me any logical explanation why it should?

Quote from traderNik:

Not sure I fully understand the first sentence above, but surely you don't believe that there do not exist traders whose 'edge' is in whole or in part based on the fact that they have thousands of hours of screen time and can interpret the visual information coming from the charts or the DOM or the tape and find entry points that give them a good R/R ?