Why do I see "Trends" in Randomly Generated Data?

[Corey]

Quote from spike500:

I don't agree.
I trade a multiple timeframe system and i see, most of the time, the probability of prices moving higher (or lower) for the next minute and even for longer periods. I already demonstrated this to certain ET members in privat ( in privat because i do not like the bashers on ET). This does not mean that i can see the tops and the bottoms (although i can see them in hindsight ), but that's not necessary for profitable trading.

That is very interesting. I too have noticed a similar characteristic. I like to think of it as the decisions and events of the higher periods are randomly distributed in the period below. Though that theory would somewhat assume that the closer you go to the tick level, the more random the sequence becomes. Has anybody read anything about this?

I would love to discuss more in PMs if you are interested, spike500.

 

[Corey]

Quote from marketsurfer:

ok. So it cant be defined and is based on feelings?

What cannot be? A trend? As I said, I believe a trend is an imbalance between buyers and sellers. I believe that imbalances derive from interpretation of news events and emotion (fear and greed at extremes). Ever wonder why the only thing that goes up in a down market is correlation? That is a pretty consistent trend...

 

[marketsurfer]

yes. Maybe back in the day prior to behemouth funds crowd behaviour and mass psych could be used as an argument for tech analysis and behaviorial finance. Now. The whims of one person SAC for example holds the same power as thousands if not millions of the crowd. I'm sorry but just for this reason. These pro trendtrading and tech a arguments hold very little water. It's time for a new paradigm if you want to thrive

Surf

 

[Jerry030]

Quote from marketsurfer:

yes. Maybe back in the day prior to behemouth funds crowd behaviour and mass psych could be used as an argument for tech analysis and behaviorial finance. Now. The whims of one person SAC for example holds the same power as thousands if not millions of the crowd. I'm sorry but just for this reason. These pro trendtrading and tech a arguments hold very little water. It's time for a new paradigm if you want to thrive

Surf

And that new paradigm is?

 

[fluttrader]

Quote from straywolfe:

Forgive me if this has already been stated.

Random Number generators are not random. It is impossible for a computer to "flip a coin". A random number equation is designed to produce a sequence of numbers that statistically appear to be random.

The quality of a specific algorithm for random number generation is in large part based on a desired application.

Therefore, in "random" created data, trends and patterns may in fact form over time as the "bigger picture" of the algorithm starts to show it's face.

Having said that, I still find a great deal of the posts in this thread interesting.

That observation makes the question raised in this thread meaningless,no ?

 

[EPrado]

Quote from marketsurfer:

yes. Maybe back in the day prior to behemouth funds crowd behaviour and mass psych could be used as an argument for tech analysis and behaviorial finance. Now. The whims of one person SAC for example holds the same power as thousands if not millions of the crowd. I'm sorry but just for this reason. These pro trendtrading and tech a arguments hold very little water. It's time for a new paradigm if you want to thrive

Surf

Yeah...trend traders are doing horrible this year.

JWH is up 70%.......Dunn up +40%.......

Yep...time for them to get out of the game.....


How is Matador Fund doin?...oh...thats right.....VN blew out and isnt in the game anymore.

It's killing you that they are back on top once again.

 

[theboxer]

Quote from squeeze:

Markets are much closer to random than most traders would like to admit and much more deterministic than most economists believe. [/B]

I've done some tests similar to the OP, but more in depth, using randomly generated data. At first, I was also struck by the apparent existence of trends, S & R, and like things in the random data.

I've since come to this exact same conclusion, and I think it sums it up perfectly: MORE RANDOM THAN MOST TRADERS THINK, yet MORE DETERMINISTIC THAN MOST ECONOMIST BELIEVE. Well said.

This first part is the most important to me; markets being more random than most traders think (so trade accordingly).

 

[marketsurfer]

Quote from EPrado:

Yeah...trend traders are doing horrible this year.

JWH is up 70%.......Dunn up +40%.......

Yep...time for them to get out of the game.....


How is Matador Fund doin?...oh...thats right.....VN blew out and isnt in the game anymore.

It's killing you that they are back on top once again.

Yes, They finally guessed right.

 

[straywolfe]

Quote from fluttrader:

That observation makes the question raised in this thread meaningless,no ?

Yes... While finding the responses interesting in and of themselves, I have to admit a smile or two while reading through them because the basic premise of the question is flawed. The foundation on which the premise rests being that a computer can generate random data, which in fact, it cannot.

 

[PitchBlack]

Quote from marketsurfer:

Yes, They finally guessed right.

SAC and other big hedgefunds guessed clearly wrong in the VOLKSWAGEN-PORSCHE bet.