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

achilles28 · May 31, 2011

Who cares if trends exist in random data?

Trends exist in all random and non-random activity.

And the market is not random. So the implied premise is wrong.

Close thread.

oilfxpro · Jun 1, 2011

Quote from Visaria:

Why would you suddenly start making winning trades after 30 more losses than profits. Why couldn't you keep losing, in fact losing even more since you doubled your position size?

If you use a 50 /50 system , 49 % used in this method, your 50 % hit rate will come back.

There is random distribution of profits and losses , so your system will revert to 70 profits/30 losses at double the lots.

Some of the day trading systems around have 20 % hit rate, they are not suitable for increasing bet size.

This sort of money management can have many complex variations , they can turn random systems into profitable systems.

oilfxpro · Jun 1, 2011

Quote from achilles28:

Who cares if trends exist in random data?

Trends exist in all random and non-random activity.

And the market is not random. So the implied premise is wrong.

Close thread.

Nothing wrong with this thread , great thread by some useful positive contributors.

If you are a real trader , you want to know why you see trends where none exists.

Random distribution of bidders and offerors of prices will create so called trends where none exist.10 sellers and 10 buyers come into the market every day , but their buy orders and sell orders are randomly distributed , at different times and in different quantities.On different days you will see trends where none exist , and on other days where trends exist you will see none on the lower time frames when their activity takes place.

achilles28 · Jun 1, 2011

Quote from oilfxpro:

Nothing wrong with this thread , great thread by some useful positive contributors.

If you are a real trader , you want to know why you see trends where none exists.

Random distribution of bidders and offerors of prices will create so called trends where none exist.10 sellers and 10 buyers come into the market every day , but their buy orders and sell orders are randomly distributed , at different times and in different quantities.On different days you will see trends where none exist , and on other days where trends exist you will see none on the lower time frames when their activity takes place.

that's a load of shit. obviously you don't know how to trade or you wouldn't have said that. the market is not random. study after study has demonstrated the extreme prevalence of fat-tail market events. guess what that is?

Butterball · Jun 1, 2011

Quote from oilfxpro:

Yes ,a trader highly skilled in money management can make money from a random chart.

No he can't. A random market by definition doesn't offer any alpha to be captured by even the most skilled trader. In the best case in a perfectly efficient market (according to the EMH) all there is to capture is market beta, e.g. the S&P500 performance.

Factor in commissions and slippage and your highly skilled trader is losing money in a perfectly random market.

achilles28 · Jun 1, 2011

The market is not efficient, boys and girls.

97-99% of market volume is speculative. Put the pieces together.

oilfxpro · Jun 1, 2011

Quote from Butterball:

No he can't. A random market by definition doesn't offer any alpha to be captured by even the most skilled trader. In the best case in a perfectly efficient market (according to the EMH) all there is to capture is market beta, e.g. the S&P500 performance.

Factor in commissions and slippage and your highly skilled trader is losing money in a perfectly random market.

What is money management?Isn't it betting a % on every trade?
You couldn't devise a betting formula to beat zero sum outcome?

I did point out a 49 % hit rate system on random charts ,using specific criteria.

Visaria · Jun 1, 2011

Quote from oilfxpro:

If you use a 50 /50 system , 49 % used in this method, your 50 % hit rate will come back.

There is random distribution of profits and losses , so your system will revert to 70 profits/30 losses at double the lots.

Some of the day trading systems around have 20 % hit rate, they are not suitable for increasing bet size.

This sort of money management can have many complex variations , they can turn random systems into profitable systems.

This is nonsense. If it were true, why bother with 2x position size, why not go for 10x position size since you "know" you going to have mean reversion

.

oilfxpro · Jun 1, 2011

Quote from Visaria:

This is nonsense. If it were true, why bother with 2x position size, why not go for 10x position size since you "know" you going to have mean reversion .

The important thing was having a 50 % system , sooner or later it will revert to mean.The problem of not reverting to mean arises with some of the crappy systems.

It might not with the next 100 trades , but surely with the next 200 , or 300 trades.

The idea is to keep increasing bet size, bets don't have to be double , they can be increased and decreased in different percentages , and various break-even exits can be implemented , eliminating the need for increasing bet sizes.

A clever money management system can beat random markets.

oilfxpro · Jun 1, 2011

Quote from achilles28:

The market is not efficient, boys and girls.

97-99% of market volume is speculative. Put the pieces together.

China is holding $3tn usd for speculation .The world is hold trillions of euros for speculation.

Go back to your type of threads , I read on you history the type of threads you post on , most at a glance had nothing to do with trading.They are entertainment threads .

97/99 figures come from plucking in thin air.