Randomness And Trading

[Tall Mike]

TallMike:

I saw the title of the post and I knew it came from you.

What "gurus" are you talking about? I assume Tom from TastyTrade is one of them?

assume any question that is posted just comes from me from now on haha.

And yes, it was TastyTrade.

This logic doesn't make any sense to me. I've seen proof somebody laid out that if something is random you can't make money from it.

I used to enjoy their content, then I started realizing there is no edge in just blatantly selling premiums like they do. Personally, all these successful traders that come on their show, I truthfully don't think they understand the actual underlying risk of the strategy and how they are really exposed.

 

[Tall Mike]

“The random walk model of price change has been so durable because it’s nearly correct. The difference between futures prices and certain random walks is too small to detect using traditional time series analysis. Incredibly, this difference is detectable using trading systems.”

— William Eckhardt

interesting...

 

[themickey]

All the "fundamentals" are already on the charts, so we do NOT need them for trading purposes, total waste of time and energy.....

Welp I disagree with this statement.
Many traders are clueless. Many traders ignore fundamentals. Many traders trade via seat of pants, are leemings, they are financially illiterate.
Most or many traders move price but they ignore or do zero research into fundamentals.
I use some fundamentals and continue to find an edge with this info.
It's not my only edge, but it complements it.
In my opinion price often doesn't factor in price potential due to traders ignorance.
Traders who are fundamentally ignorant would not know what they are missing.
Which is all another reason why so many traders fail.

 

[userque]

In my opinion price often doesn't factor in price potential due to traders ignorance.

I'd say that often price does factors in price potential ... irrationally, and especially due to trader ignorance. This is how bubbles form.

This also causes the daily ebb and flow.

 

[athlonmank8]

Most aspiring traders gravitate towards trying to predict movements in index futures on 1min-5min bar intervals. That's pretty darned random.

Start talking about fundamentally or reflexivity-driven driven trends playing over weeks or months, and it's definitely not random. US growth / mega-cap tech right now, bonds from Dec 2019-Mar 2020, GBP/USD last year, gold over the last 18 months....

It's so easy after the fact.

 

[actively]

There is nothing to "predict" or understand, just follow the trend.

I agree

 

[themickey]

I'd say that often price does factors in price potential ... irrationally, and especially due to trader ignorance. This is how bubbles form.
This also causes the daily ebb and flow.

There are three prices, overbought, oversold and just right.
I tend to look out for cheap undervalued stocks, stuff not hyped and as for TA, forgeddaboudit.

 

[formikatrading]

Tall Mike:

I'm not a fan of Tom / TastyTrade and we'll leave it at that.

assume any question that is posted just comes from me from now on haha.

And yes, it was TastyTrade.

This logic doesn't make any sense to me. I've seen proof somebody laid out that if something is random you can't make money from it.

I used to enjoy their content, then I started realizing there is no edge in just blatantly selling premiums like they do. Personally, all these successful traders that come on their show, I truthfully don't think they understand the actual underlying risk of the strategy and how they are really exposed.

 

[Tradex]

Traders who are fundamentally ignorant would not know what they are missing.

As best, fundamentals can "explain" the past.

As a buy/signal tool they are more than useless.

 

[panzerman]

I agree

The problem is that there is every way under the sun to define a trend. How many of those can become a positive expectancy system? Who knows, perhaps many of them or perhaps none of them.

Unlike the opinion in the "Backtesting is Useless" thread, I think that's what you need to do in order to get a big enough N to have statistical meaning. Of course backtesting is an art and science unto itself.