What TA tool can detect random walk data?

I

ivanbaj

Is there a TA tool (indicator or method) that can detect if some data points are not generated by a random walk simulation?

If you are using TA method that can not detect "random walk" data, what makes you confident that you have an edge?

Do you think it is better to be lucky than good?

Do you care if you make your money from luck or skills?

If you say skills, can you prove that you can detect random walk data.

I mean if I give you two sets of data (charts) with 10,000 points each can you tell which one is from a random walk simulation?

My opinion is that the vast majority of TA indicators can not detect random walk simulation. I am curious if this can be proven.

If we apply our favorite TA tool to both set's of data (the random one and the actual market data) and we find that data set 1 contains more wins than data set 2 we should assume that set 1 is the real one. Let's say we do this 100 times and we have correctly detected the real set at least 51% of the time. Is this a prove that our TA tool works or is it luck? What success % will be needed to make sure the TA tool works?

My intuition tells me that random walk simulation data will perfectly match actual market data some times. There will be no way to distinguish them.

Also the actual market data for the last 100 years for example is just one possible version of many random walk simulation runs for the same period.

I think that if we run random walk simulation gazillion times. We will get many simulated data versions that match the actual data from the last 100 years.

This should also apply for a very short term data. Like the last 1 sec. for example.

The actual market data is only a subset from the gazillion possible versions of random walk simulated data.

If this is true, does it mean anything to the TA trader? Who cares if the data is random or not?

Is there an approach that can profit from random data?

It seems that some traders suggest that there are situations where the data is not random. For example a huge buy order comes to the market. But why will the big buyer be dumb enough not to randomize the order? Perhaps the buyer is in distress and shows his cards? Is this what we should be looking for?

Could it be possible that all market players, from the individual trader to the most sophisticated market makers are just trying to get lucky?
 
unless 'random' means something other than what I think it means...if the market is random then how on earth could anyone expect to beat the market based on anything other than luck? The only way to make money on randomness is to get lucky.

you may as well try to develop winning 'roulette systems'
 
Markets do not always follow a random walk. There have been numerous studies that support this. There are other stylized facts that aren't supported by rw's. Even if markets followed a random walk, you could still make money from them. Look Andrew Lo's old papers and then use more appropriate terms instead of technical analysis to base your arguements. The answers are there if you're willing to do the work.
 
Markets are not enough random to be random and are not enough predictable to be predictable. They are something in-between and volatility makes things harder. Volatility and leverage do more harm to traders than any supposed randomness. Most loser traders attribute their lack of skill and inadequate capitalization to what they think is randomness.
 
It always amazes me how those people who cannot make money in the market switch to trying to prove no one can make money in the market just to feel better about their failure.

If you cannot make money in the market just find something else to do, it is not for everyone otherwise everyone would be doing it.
 
Quote from optioncoach:

It always amazes me how those people who cannot make money in the market switch to trying to prove no one can make money in the market just to feel better about their failure.

If you cannot make money in the market just find something else to do, it is not for everyone otherwise everyone would be doing it.
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Agreed!
 
Random..... not random.... stop using academic words. Words used by "professors" who sit in an office discussing theories using unrealistic assumptions to describe theoretical behavior. Oh and I forgot to add who never have traded in their lives and just use historical data to backfit their pre-conceived notions.

THESE are the people you wish to emulate????? I would rather read Market Wizards and read about people who ACTUALLY
@#$%-ing trade!!!

Stop reading papers in A-C-A-D-E-M-I-C journals by failures and either work at making money or become one of the masses who sit in an office and pretend to tell others what is correct.

I never met any successful person who spends time arguing random v. non-random. Getting tenure by writing faulty papers is not considered success in the financial world.
 
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