Nobody here is under 18 and needs a mommy to wipe their ass.
What is Technical Analysis? Why does it work?
- Thread starter iamnewuser911
- Start date
Nobody here is under 18 and needs a mommy to wipe their ass.
I know one who is under 18... mentally. But they should kick his ass, not wipe it.
You can never make profits by taking the wrong direction.
When Robert says, "I have a profitable system that is not dependent on picking the right direction", perhaps he is referring to creating a synthetic long volatility position using futures with two stop limit orders. For example, if price gets into a tight trading range, and his model tells him that there are a lot of stop orders both above and below the range, then he places a buy stop above the range and a sell stop below the range. So he doesn't know which way the market will break out of the range, but he expects a big move once the range breakout occurs. At the time of placing the two stop orders, technically he is not picking a direction because he doesn't know whether he will be long or short. So he can argue, "my system is not dependent on picking direction..."
However, if this method is profitable over a very long period of time, it does in fact prove that markets are not random, because once the break occurs, the market has tipped its hand...at that point, direction IS predictable (to some extent). So even a profitable directionally neutral strategy can be used to demonstrate that prices are not random.
Of course, he might be referring to something completely different, in which case I just wasted 5 minutes typing on my keyboard...
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Sounds like you're saying the markets are both random, and predictable. Sounds familiar.
The neutral position was taken because, initially, the direction is not predicable...right? Then, you let the market move into a certain direction, then you say, "See, I now can predict the direction. I predict that the direction the market is now moving...is the same direction it is now moving!"
Predictable, doesn't necessarily imply 'not random.' Again...perspective.
Simply because the balls starts towards one direction; doesn't means it's fall is less random as it continues down. Certain outcomes become less likely; become more predictable; but not less random.
The ball sees the same scenario all the way down...a peg in its way. The only thing that changes is...the perspective of the observer.
[Assume the image is of the classic ball falling down a pegged board.]
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When Robert says, "I have a profitable system that is not dependent on picking the right direction", perhaps he is referring to creating a synthetic long volatility position using futures with two stop limit orders. For example, if price gets into a tight trading range, and his model tells him that there are a lot of stop orders both above and below the range, then he places a buy stop above the range and a sell stop below the range. So he doesn't know which way the market will break out of the range, but he expects a big move once the range breakout occurs. At the time of placing the two stop orders, technically he is not picking a direction because he doesn't know whether he will be long or short. So he can argue, "my system is not dependent on picking direction..."
However, if this method is profitable over a very long period of time, it does in fact prove that markets are not random, because once the break occurs, the market has tipped its hand...at that point, direction IS predictable (to some extent). So even a profitable directionally neutral strategy can be used to demonstrate that prices are not random.
Of course, he might be referring to something completely different, in which case I just wasted 5 minutes typing on my keyboard...
The result is that he made profits by taking the right direction. As I told before. If he would have taken the other direction (which was wrong) he would have lost money. For him it was random as he did not know what to do, and placed two opposite orders. So it's about the person, not the market.
I'm not saying random at all. I'm only saying the markets are predictable. Robert cannot predict direction when he places the two stop orders, but that doesn't say anything about whether it's possible to predict the direction of the breakout, just that he cannot. Others might be able to accurately predict direction even whilst price is inside the range. In fact, there's a great likelihood that someone is able to make that prediction. All they need is some knowledge of order flow, e.g. bank employee seeing central bank activity in the currency or bond markets. Or maybe somebody builds an indicator that is very accurate in telling them when some activity is occurring, so they don't even need to directly observe the central bank activity.
So on this point I am in agreement with IAN. For Robert, it appears random inside the range, because he cannot predict direction at that point, but for others it might not be (and almost certainly isn't - you only need one person to be able to accurately predict the direction of the breakout for this particular type of range (as defined by Robert's criteria) for direction to be predictable inside the range). And even for Robert, he is able to predict subsequent direction, once the breakout from the range occurs.
Almost nothing is random in this universe, just it appears to be when we cannot explain it. In many situations, we can make a mathematical assumption of randomness to create a model that corresponds closely to reality. And that model might work well enough to explain the situation, depending on the goals of the model. But the model is just an abstraction of reality. And the reality is that the markets are not random, they are predictable, for some more so than others!
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That image is nice to look at, but is not reality. It is just a nice abstraction of reality created by mathematicians. And that assumption of randomness works quite well for creating option pricing models because most traders are not able to predict direction, so the option market maker can still make money overall due to the bid ask spread. But if one person is able to predict direction with enough accuracy, that one person will consistently take money off the market maker using that model because his model does not reflect the reality well enough. From the market makers perspective he doesn't care about one person picking him off most of the time, provided he makes enough money overall from his model. The model works well enough, given his goals.
If you are saying the markets appear random to most, then you may have a case, they almost certainly do for 95%.
Edit - I changed the first line because it was too strong a statement before!
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No, I was quoting the Matrix changing the words a little. I believe during the times the market is predictable, you can take a trade. If the market was completely random, there would not be so many systems that work over the long term. For example, Buffet buys value stocks many that pay dividends when the price is low. The TA part is choosing when the price is low and not buying them at random times.
So, I've changed your position
