Does Price Have a Memory?

[GlassOnion 12]

does price have a memory? no memory? does the market care about momentum? or is it all discounted in the price at every second it is quoted?

 

are we shooting darts in the dark in a random market?

can we exploit inefficiencies?

can we forecast the future via statistical representations of price movements?

 

Although I have my views on the matter I want to open a discussion about it.

 

some academics think that the masses flock to TA due to ignorance and laziness....due to it is easier to try to find patterns in a chart even if you do not know exactly what you are looking at.

 

some technicians believe all you need is a chart, all else is mental masturbation.

 

what are your views....newbie,wannabes, experts all ideas welcomed.

[Mysticforex 13]

does price have a memory? no memory? does the market care about momentum? or is it all discounted in the price at every second it is quoted?

 

are we shooting darts in the dark in a random market?

can we exploit inefficiencies?

can we forecast the future via statistical representations of price movements?

 

Although I have my views on the matter I want to open a discussion about it.

 

some academics think that the masses flock to TA due to ignorance and laziness....due to it is easier to try to find patterns in a chart even if you do not know exactly what you are looking at.

 

some technicians believe all you need is a chart, all else is mental masturbation.

 

what are your views....newbie,wannabes, experts all ideas welcomed.

 

Even better, does the Market have Memory?

[addchild 10]

does price have a memory? no memory? does the market care about momentum? or is it all discounted in the price at every second it is quoted?

 

are we shooting darts in the dark in a random market?

can we exploit inefficiencies?

can we forecast the future via statistical representations of price movements?

 

Although I have my views on the matter I want to open a discussion about it.

 

some academics think that the masses flock to TA due to ignorance and laziness....due to it is easier to try to find patterns in a chart even if you do not know exactly what you are looking at.

 

some technicians believe all you need is a chart, all else is mental masturbation.

 

what are your views....newbie,wannabes, experts all ideas welcomed.

 

No price has no memory.

 

After 4 years at this, I still have no freaking clue what people are talking about when they say "momentum".

 

I'm not sure what momentum is, so I have no idea how it would be discounted. But none of my trading models discounts for it.

 

Yes MOST people are shooting darts at a moving board in the dark. But the markets are not random, they are just most accurately depicted by a random walk model. This means they are efficient, not random.

 

Yes you can exploit inefficiencies, but finding them is the tricky part.

 

Yes you can reasonably forecast the probabilities of future prices. But the farther out you go, the worse your odds get.

 

The academics are right, and most "technicians" are just bastardizing what could actually be fairly robust statistical tools. And I'm fairly certain gartley patterns started as a traders inside joke about Keynes "animal spirits" and someone took them terribly out of context.

 

Technicians are wrong, and likely the only thing they're good at is masturbation.

 

That being said, academics might know the rules of the game, but don't know how to play. While technicians don't know either.

 

Also I don't like pissing on peoples beliefs, so if anybody angry technicians read this, sorry. But chances are you will only really be pissed if your a technician and not making money.

[steve46 12]

Having a tough day?

 

Price is inanimate....so no "memory" per se....markets and the folk that comprise them...do in fact display memory....most of us (those without Alzheimers) have the ability to recall past prices for tradable assets of all kinds....so it should be no surprise that markets display behavior confirming that participants do in fact remember past pricing of assets..

 

Do you really need a primer on momentum?....its not a complex concept....human beings display the same kind of herd mentality that other animals do....in financial markets, this herd mentality is affected by reference to time frame and the ability to tolerate risk....among other things....

 

and finally, technicians are no different than any other population of participants. Some display significant skill, some do not.....similar to the folks posting in this thread...

 

 

Good luck in the markets.

Edited October 9, 2012 by steve46

[TheDude 10]

some academics think that the masses flock to TA due to ignorance and laziness....due to it is easier to try to find patterns in a chart even if you do not know exactly what you are looking at.

.

 

Im hardly an academic, but I go with this.

 

I dont trade fx either, but consider this:

 

A govt wants to control its currency for fiscal reasons. It doesnt want its currency to be > x.

 

It will therefore sell when its currency reaches x.

 

Same with a pension fund that thinks xyz stock is undervalued at x. They will keep buying near x until they reach their quota.

 

Same with an oil refinery when crude reaches x.

 

Steve kinda eludes to this. It's the participants who are willing to trade at levels.

 

Given the market is made of people/organisations - who do have a memory, and more importantly, a purpose.

 

Sometimes they cant hold their level though. Nothing is written in stone here.

[ForexTraderX 10]

Im hardly an academic, but I go with this.

 

I dont trade fx either, but consider this:

 

A govt wants to control its currency for fiscal reasons. It doesnt want its currency to be > x.

 

It will therefore sell when its currency reaches x.

 

Same with a pension fund that thinks xyz stock is undervalued at x. They will keep buying near x until they reach their quota.

 

Same with an oil refinery when crude reaches x.

 

Steve kinda eludes to this. It's the participants who are willing to trade at levels.

 

Given the market is made of people/organisations - who do have a memory, and more importantly, a purpose.

 

Sometimes they cant hold their level though. Nothing is written in stone here.

 

That's good dude... i'll take it a step further if you don't mind:

 

different types of orders tend to congregate en mass in specific price points on a chart. Particularly daily, weekly, monthly, and yearly highs and lows.

 

If price is approaching a level that was a low for a previous day/week/month, etc... you tend to have a disproportionatly large amount of buy orders at or slightly above that low. And, there tends to be a disproportionately large amount of sell orders at or just a bit below that particular "previous daily/weekly/monthly low", etc.

 

Why does this occur? many reasons. I know a bank that adjusts it's capital currency balance by hedging a certain amount based on where price is now compared to where it was at the high or low of the previous month. In other words, a currency they need to get rid of is at the high of last month? sell it.

 

That's one of so many reasons why a large amount of orders are not randomly dispersed across the many points of price change measured over any particular time span.

 

I posted some charts up on my thread the last few days actually showing opportunities to exploit these large numbers of order in concentrated areas. Here's a few examples of things I posted up from last thursday/friday.

 

http://www.traderslaboratory.com/forums/attachments/2/31834d1349455614-watch-typical-day-real-day-trader-aud-cad-long-opportunity.jpg

 

And, on this page, read post #250

 

http://www.traderslaboratory.com/forums/market-analysis/13737-watch-typical-day-real-day-trader-32.html

 

Of course, these two examples do by no means validate the "price has a memory" side of the debate. What they do show is that it is possible to pick tops and bottoms with better than random results, if other criteria are also correct, based on non-fundamental data. Furthermore, the reason that it works is because these areas are such that they provide such a high concentration of orders in such a relatively tight price zone (compared to say, an order placed neither at a previous weekly or monthly high or low), that it provides large institutions the NECESSARY LIQUIDITY to be able to readjust or establish large positions with minimal slippage.

 

Define this type of analysis as you will, but it is clearly not fundamental analysis that works with intrinsic underlying economic or financial conditions of the market, and it happens to create a situation where price has a greater chance of turning at a price point at which it turned at previously, all things being equal. I think memory would be a terrible word to describe such a phenomenon, but it is also far from random.

 

FTX

[ForexTraderX 10]

As a follow up to my previous post, at least one person has spent a good deal of time doing studies of technical analysis of stocks that trade in the U.S. exchanges (NASDAQ, NYSE, other non OTC exchanges, etc)

 

He found a bearish engulfing candlestick pattern has a 79% chance to produce a further drop in price (he defines the conditions as well as what a "further drop" in price is, etc).

 

He made this determination after studying 20,000 different examples of this candlestick pattern, in over 500 different stocks, over the course of a 10 year period. He does give some qualifying conditions, but he also has very strict quantifiable definitions for those, so I believe nothing at all is left to discretion. It's kinda his style.

 

He does this for many other classical technical patterns, etc.

 

here is the bearish engulfing example i speak of: http://www.thepatternsite.com/BearEngulfing.html

 

I know this may not speak to price having a memory per se, but it does speak to price having statistically valid repeating patterns... call that what you will.

[jonnyfx 10]

does price have a memory? no memory? does the market care about momentum? or is it all discounted in the price at every second it is quoted?

 

are we shooting darts in the dark in a random market?

can we exploit inefficiencies?

can we forecast the future via statistical representations of price movements?

 

Although I have my views on the matter I want to open a discussion about it.

 

some academics think that the masses flock to TA due to ignorance and laziness....due to it is easier to try to find patterns in a chart even if you do not know exactly what you are looking at.

 

some technicians believe all you need is a chart, all else is mental masturbation.

 

what are your views....newbie,wannabes, experts all ideas welcomed.

 

price does not, but market

[SIUYA 11]

just to throw a spanner in the works........

 

what about when you take into account the futures backwardation and contango?

does the market adjust for this.....does the market just trade off the spot?

Is the memory just short term, or extremely selective and biased by hindsight (as memory actually is)

 

There is reality and there is fantasy, and when a market is in contango for much of the year, and people point to a continuous contract and say - if you had bought here and sold here you would have made X - they are living in a fantasy.....they forget about the reality of the roll each month.......

[MightyMouse 12]

just to throw a spanner in the works........

 

what about when you take into account the futures backwardation and contango?

does the market adjust for this.....does the market just trade off the spot?

Is the memory just short term, or extremely selective and biased by hindsight (as memory actually is)

 

There is reality and there is fantasy, and when a market is in contango for much of the year, and people point to a continuous contract and say - if you had bought here and sold here you would have made X - they are living in a fantasy.....they forget about the reality of the roll each month.......

 

Just about every tick has meaning to someone somewhere. I have seen the same when a trader anticipates a level from a continuous contract that, in fact, did not exist the previous time around. Yet, he''ll trade it and it works; reinforcing the thought that it was a valid level. Even though price may never have been there, if enough people give the level meaning, then it has meaning.

 

We can say that a trend is price moving to a new level where enough traders on both sides find meaning. Meaning, they completely disagree on the future direction of price. When a price is trending, most people agree on the direction of price.

[TheNegotiator 13]

Markets have high and low concentrations of trading activity at different prices.With that in mind I'll make 2 points. First is that if someone holds a position, the point where that position goes from positive to negative or vice versa is important to the owner of that position. Just think about how many people "move their stop to breakeven". It's a definite psychological factor. Just like 00 numbers. If there are many traders with positions there, that could cause them to act again at or beyond this point. Second is that other traders looking to profit from prior action will look at these previously important "action zones" and either trade with them in anticipation of prior business coming in once again to 'defend' their current position or look to trade a break where said positions are liquidated to a greater or lesser extent. This is why "stop hunting/running" exists. No levels = no stop hunting regardless of whether levels are self-fulfilling or not.

 

My feeling about people who claim "levels don't exist" or "price has no memory(or the market has no memory of price)" is that they do not understand the nature of trading very well. These are the guys who in the past have identified levels then tried to buy or sell every one then claim when they lose money that levels do not exist. Well, what do you expect? If the market was bound by the same levels then it would never go anywhere. Define a structure and assign context to the market which you trade, then you will truly understand how levels are so important. :shocked:

[TKDONG 10]

does price have a memory? no memory? does the market care about momentum? or is it all discounted in the price at every second it is quoted?

 

are we shooting darts in the dark in a random market?

can we exploit inefficiencies?

can we forecast the future via statistical representations of price movements?

 

Although I have my views on the matter I want to open a discussion about it.

 

some academics think that the masses flock to TA due to ignorance and laziness....due to it is easier to try to find patterns in a chart even if you do not know exactly what you are looking at.

 

some technicians believe all you need is a chart, all else is mental masturbation.

 

what are your views....newbie,wannabes, experts all ideas welcomed.

 

Price have a memory,but the price is the same amnesia effect, the physical price can be calculated, but human nature is unable to calculate!Market price is variable, and human nature is the most important weight genes, so I think the technical analysis of the soul is not to create a perfect, but locking the tip of the iceberg of the physical probability, however, the calculation and control of human nature in addition to talent, and on the leftunder luck, ---Sorry，my english is

very poor！

[zdo 20]

Price have a memory,but the price is the same amnesia effect, the physical price can be calculated, but human nature is unable to calculate!Market price is variable, and human nature is the most important weight genes, so I think the technical analysis of the soul is not to create a perfect, but locking the tip of the iceberg of the physical probability, however, the calculation and control of human nature in addition to talent, and on the leftunder luck ...！

 

Post of the Month winner!

Hands down...

let's resume voting in November

[Mysticforex 13]

Post of the Month winner!

Hands down...

let's resume voting in November

 

I'll let you have this one ZDO. Far be it for me to see what I believe that you can be.