There is order in the markets. That said, there is also, some randomness. Not all setups work all the time because various factors could affect that trade. That is random and beyond everyone's control. At the same time, those setups will work a number of times to make it worth your while, because there is order in the markets. Our job as retail traders is to play the percentages. Even casinos which have percentages of advantages over all their games over the gambler, will from time to time lose to the gambler. That is part of the gaming experience and randomness. Still, in the end, casinos win out. The same with the best hedge funds out there run by the best traders. Yes, they have years where they lose monies but, overall, they have more winning years and larger winning years than the losing years. That is how they make their monies. You want to make monies? Focus on the process and the results will follow.
Randomness And Trading
- Thread starter Tall Mike
- Start date
Yes, and already discussed on ET many times.
Without any clear conclusion.
Except that there will never be a single conclusion.
Price movements are not random. I would say 90-99 percent of the time, if a stock goes up/down big there’s always a reason. Sometimes it’s obvious and sometimes it’s not. if u do some research u will know why it’s moving.
I would say That say That If stock move 2x atr in a given day there’s almost always a reason.
I believe, based upon observation, that the markets have a principle of organization.
I believe the markets form patterns because of a reason and that these patterns are graphical manifestations of the inherent pressures in the market, created by market participants.
I believe whatever happens in the markets is not without method.
I believe the markets only APPEARS to be random.
I believe that "noise" in the market is a myth. It is a traders mechanism or way of explaining movements in price that he does not understand, or cannot seem to get a handle on.
I believe if the market moves 1 tick or 40 points it is not without reason.
I believe there is a measure of predictability to the markets but that predictability is limited because I cannot know with complete certainty, the reasons why a movement took place or will take place, as they are at times known and at times are simply unknowable. But that uncertainly does not make the markets random. There is still a reason whether I know it, am aware of it, or not.
I believe I do not have to know every single individual reason for a movement in the market to be able to assign probability to future movement. But by looking at the context and patterns that appear, as a result of pressures in the market, I can assign probability. Because these pressures are created in large part by market participants that have the ability to move the markets, they thus leave footprints in the form of individual bar patterns, and aggregate bar patterns, and those gives me a window to some clarity. In other words, institutions cannot hide what they are doing. Sooner or later their actions leave footprints. Footprints lead to directional movement. Just like footprints on the beach do.
I believe the principle of price aggregation build from smaller to the larger (which is obvious by definition). That is, monthly is basically aggregate of weekly, weekly of daily, daily of hourly, and hourly of by the minute, by the minute of by the second...etc.
I believe that collectively price aggregation has some predictive value. In other words, monthly aggregation of weekly and daily data displayed as a chart of graphical nature has some predictive value. On a much shorter term 15 minute charts are an aggregate of 5 minute (as an example) and taken together the 5 minute bars have some predictive value. Likewise the 5 minute is composed of data points that can be displayed as a 1 minute chart. That is, a 5 minute candle is a composite or aggregate (of sorts) of five 1 minute bars. So, in a 5 min chart there are 5 one minute elements. The aggregation of those one minute bars have predictive value just like the aggregation of weekly bars have predictive value or monthly and monthly for yearly.
I believe, at least for a manual discretionary trader, that it is very difficult to arrive at probability on anything less than 1 minute. HFT's can do it on sub-second..etc but less than 1 minute is too fast for a manual trader.
I believe in the principle of causation.
I believe the markets form patterns because of a reason and that these patterns are graphical manifestations of the inherent pressures in the market, created by market participants.
I believe whatever happens in the markets is not without method.
I believe the markets only APPEARS to be random.
I believe that "noise" in the market is a myth. It is a traders mechanism or way of explaining movements in price that he does not understand, or cannot seem to get a handle on.
I believe if the market moves 1 tick or 40 points it is not without reason.
I believe there is a measure of predictability to the markets but that predictability is limited because I cannot know with complete certainty, the reasons why a movement took place or will take place, as they are at times known and at times are simply unknowable. But that uncertainly does not make the markets random. There is still a reason whether I know it, am aware of it, or not.
I believe I do not have to know every single individual reason for a movement in the market to be able to assign probability to future movement. But by looking at the context and patterns that appear, as a result of pressures in the market, I can assign probability. Because these pressures are created in large part by market participants that have the ability to move the markets, they thus leave footprints in the form of individual bar patterns, and aggregate bar patterns, and those gives me a window to some clarity. In other words, institutions cannot hide what they are doing. Sooner or later their actions leave footprints. Footprints lead to directional movement. Just like footprints on the beach do.
I believe the principle of price aggregation build from smaller to the larger (which is obvious by definition). That is, monthly is basically aggregate of weekly, weekly of daily, daily of hourly, and hourly of by the minute, by the minute of by the second...etc.
I believe that collectively price aggregation has some predictive value. In other words, monthly aggregation of weekly and daily data displayed as a chart of graphical nature has some predictive value. On a much shorter term 15 minute charts are an aggregate of 5 minute (as an example) and taken together the 5 minute bars have some predictive value. Likewise the 5 minute is composed of data points that can be displayed as a 1 minute chart. That is, a 5 minute candle is a composite or aggregate (of sorts) of five 1 minute bars. So, in a 5 min chart there are 5 one minute elements. The aggregation of those one minute bars have predictive value just like the aggregation of weekly bars have predictive value or monthly and monthly for yearly.
I believe, at least for a manual discretionary trader, that it is very difficult to arrive at probability on anything less than 1 minute. HFT's can do it on sub-second..etc but less than 1 minute is too fast for a manual trader.
I believe in the principle of causation.
%%
Problems included, but not limited to;
difficulty is not exactly the same as random. [2] A rich trend follower said ''what you call luck= I call a small sample...''…………………………………………………………………………………………………………………………………………………………………….
Actually once I thought I found a random market pattern/for a day. But really she just liked to shop; so she seldom moved in logic/like a man/LOL.She enjoyed the Bible, but that did not cause the somewhat random shopping; its a female shopping pattern LOL[Not a sexist remark/ if any thought that, simply wrong analysis]…………………………………………………………………………………………..
From my understanding, they have so few losing days because the trading they do is now just purely agency, not prop anymore since 2008. So when you see an SEC report showing how much trading revenue they had, and how many winning trading days they had, its because they are agency trading, which is much different than how we are looking at trading.
Am I correct in my thinking? I think somebody tried to make the argument with me one time that they were trading on insider information and showed me these in the SEC report and I was like I think you are wrong about how you are understanding trading revenue in the 10k filing.
Really great, explanation. I enjoyed reading this.
So if I understand this correctly, you think that every tick that happens in the market is for reason and nothing is random?
When financial instruments start trending (up or down), they automatically lose their "randomness".
This has been proven over and over again, from a mathematical point of view.
That's why simple trend-following systems are profitable.
Real pro's use things that are so dependable, statements like this are a total joke. Markets are not random at all.
There are algo trading firms that do the same shit all day every day. Even the prime brokers (GS, JPM, UBS, etc.) do the same shit all the time. Some of it is totally obvious.
One of the most common ones is getting ahead of the action in rate futures using the ICS market and detrending the rate fly (yield curve). The big banks are so spread its ridiculous.
Another obvious trade is in sector and index spreads to get ahead of institutional allocation and rebalancing. This is essentially leveraged, risk controlled front running.
Sometimes it seems like this is all the hedge funds do is trade this shit. Not sure if it is just a part of their core business or what (they could be using the spread as a risk layoff for making markets elsewhere).
There are algo trading firms that do the same shit all day every day. Even the prime brokers (GS, JPM, UBS, etc.) do the same shit all the time. Some of it is totally obvious.
One of the most common ones is getting ahead of the action in rate futures using the ICS market and detrending the rate fly (yield curve). The big banks are so spread its ridiculous.
Another obvious trade is in sector and index spreads to get ahead of institutional allocation and rebalancing. This is essentially leveraged, risk controlled front running.
Sometimes it seems like this is all the hedge funds do is trade this shit. Not sure if it is just a part of their core business or what (they could be using the spread as a risk layoff for making markets elsewhere).