The market is random
- Thread starter college_trad3r
- Start date
Predictably irrational. If a mutual fund wants to dump all their GOOG stock the price may have to downtick several cents/dollars for them to find enough sellers. That's not random. That is supply and demand. Not predictive, but also not random. There are people who can spot these things. Just because you may not know why something is happening does not make it random. Also, you have to realize that aside from "Holy Grails" and market manipulation everyone is dealing in probabilities of outcome. So no one believes you can 100% predict the market but there may be signals/patterns/correlations that are statistically significant.
Or they call an institution they work with and dump it in one transaction, which is reconciled as a print at the end of the day or overseas, overnight somewhere. While the institution then issues an upgrade and the MM slowly sells it off in a rising response. At which point, people like yourself make the argument that institutions must be buying, you can clearly see it in the charts.
Not exactly a great argument you have there.
A better question to focus on might be; considering that markets are highly random, is there any way you could make money off that hypothesis?
I would say that many have.
Actually, the patterns within it are not all that complex, are very repeatable, and very simple to understand. Some people can't trade them because of psychological issues, but the way the market moves is far from random.
The markets exist in one of only two states: trending and range-bound. There are various degrees of trend, and various degrees of chop, and the market spends all of its time transitioning between the two. Your job as a trader is to be able to identify the transition points between trending and range-bound states. If you can do that relatively consistently, then you have essentially identified the market and trading becomes pretty easy.
You're not going to be right on every trade, but you can be right much bigger and more often than you are wrong. Some people can do this and make consistent money. People like George Soros have made billions and never given it back. Plenty of other traders have done the same thing.
The notion that somehow all of these traders are outliers of luck is so pathetically ridiculous that I don't know how we can even be discussing this topic. The people that propose the random market theory obviously don't know anything about statistics... there is a bigger chance of the entire universe turning into a giant furry rabbit tomorrow than there is of all the consistently profitable traders' winning trades being due to luck. Random by definition means 50% up or 50% down. It means that you can never pick market direction in any way better that a coin flip. There are literally hundreds of thousands of traders who have consistently made millions and millions of trades over a period of many decades that completely defy this ridiculous notion. The statistical probability of that is effectively ZERO. Literallly, ZERO. Just look at the market cycles that repeatedly come and go decade after decade... that alone should tell you that there is a repeatable pattern in there.
Luck is the refuge of the confused brain. It is mystified by a concept, doesn't understand how other people can get something that they don't, and then in an amazing display of arrogance somehow comes to the conclusion that because THEY can't get it, therefore nobody must be able to get it and everyone who claims otherwise must somehow just be lucky. Ironically, this incredible level of denial of basic fact and self-delusion explains exactly why those people are not successful traders in the first place.
The reality is that if the market is random to YOU, then YOU SUCK. Admit it. Maybe you can't trade. Maybe you're not cut out to be a trader. Maybe you'll never "get it". But for god's sake, stop making a fool out of yourself by coming to these boards and telling the rest of us who have figured it out that we don't know what we're doing either and it's just a bunch of luck, because it makes you look like you can't even understand simple statistics or what randomness really means.
The market has been doing the same thing day in and day out forever... if you learn how to read that short-term movement and understand how it leads into broader movement, there is nothing random at all about it. It is too complicated to be easily programmed into a computer algorithm, but it is NOT too difficult to understand for the human brain (at least, for SOME human brains).
The incredible hubris of people who don't themselves understand the true principles of the market and yet have the balls to come here and tell the rest of us that somehow we must not understand it either never ceases to amaze me.
Even if you didn't know anything about trading, a moron with an IQ of about 85 should be able to figure out that they are not random just by looking at the people who espouse the various opinions. INVARIABLY, the people who preach random market theory are either failed traders, or mathematicians who never traded a day in their lives. INVARIABLY, the people who laugh at these guys are ALL successful traders who have made money and continue to make money in the markets. NOT ONE SINGLE SUCCESSFUL TRADER IN THE HISTORY OF THE WHOLE FUCKING WORLD HAS EVER AGREED WITH THE RANDOM MARKET THEORY. Now what does that tell you? It tells me that the people who have figured it out know something that the people who HAVEN'T figured it out don't know. Who would you believe, given a choice between these two groups of people?
You unsuccessful traders who can't make money should stop preaching about randomness to the rest of us, and try learning what the rest of us have figured out, which is how to read market movement. You are completely exposing yourselves as losing traders when you do this.
Rant over.
Very true, I can't argue with that. But, as I said there's nothing random to those manipulating the markets. And it does seem that there are scalpers/tape readers out there who can pick up on these moves often enough to earn a living, or maybe they are just being "fooled by randomness" for an extended period of time. I wouldn't know, still learning and feeling my way in the dark.
Wouldn't one of those who have figured out the secret let it slip at some point? Not everyone can keep secrets. So 'the trading edge' if it exists, is then likely scattered around threads on forums like this one?
Yes, it is. The "secret" (which isn't much of a secret) is understanding the transition between range-bound and trending states. It has been written about in tons of places. It is too complicated to program in an easy way into a computer, but if you can read price action then you can do it. In fact, that is exactly what reading price action IS in many respects.
Understanding the key to something is not the same thing as being able to do it. Everyone can understand that the key to winning at poker is understanding the odds and knowing how to read your opponents. Almost nobody in the world is good enough at it to make it as a top-level professional poker player.
Here's a post that may help:
http://www.elitetrader.com/vb/showthread.php?s=&postid=2590640#post2590640
here's another one:
http://www.elitetrader.com/vb/showthread.php?s=&postid=2561042&highlight=trendrange+axis#post2561042
and another:
http://www.elitetrader.com/vb/showt...&highlight=buy/short+MA+crossover#post2561494
and another:
http://www.elitetrader.com/vb/showthread.php?s=&postid=2589980&highlight=baking+a+cake#post2589980