Don't Be Fooled By Randomness

[TheDude 10]

Some studies have shown that a high percentage of chart patterns may be simply random lines on a piece of paper. Burton Malkiel in A Random Walk Down Wall Street cited an experiment his students participated in, constructing a hypothetical stock chart. Each day they flipped a coin, plotting heads as a 1/2-point gain and tails as a 1/2-point decline. The resulting chart from these random coin flips displayed all the classical patterns such as head and shoulder formations, flags, pennants, triangles, etc. There were even indications of cycles.

 

Sticking to the original idea ( i do try sometimes ).....

 

I think there have been several references to the original post and coin flipping experiments.

 

Therefore, if we are all agreed that random outcomes can indeed look like a price chart, then it would suggest than in order to make money, the skill lies in risk management and money management - not analysis.

 

I appreciate there are some aspects of a price chart that cant be mimicked so easily with the coin flip chart such as volume, and non linear price/time segments. And that would suggest these differences are the only variables worthy of any kind of analysis - the patterns and magic lines certainly arent as any profitable trader will tell you.

 

This is just yet another massive nail in the coffin of the hobby trader and his charts. This is partly because the chart trader needs to wait until the end of the time segment to make his decision - which is an utter nonsense if day trading, but may have some merit if position trading.

 

This is because the settlement of a day (NOT the close) means something. The close of an intraday bar means jack shnit of course.

Edited April 14, 2013 by TheDude

[TheDude 10]

Within reason/ability to pay fines, yes.

 

 

 

BlueHorseshoe

 

most prop traders are acting as liquidity providers. they want to get filled. they want to be on every price if they can.

 

a profitable short term strategy aims to trade as often as it can in order to play the edge out as often as it can.

 

also, the unit cost of transactions decline the more volume is traded. Exchanges rarely enforce those fines unless you really screw up their bandwidth with an autospreader with incorrect parameters. No exchange is going to stop liquidity being added to its books unless its stopping others from trading.

 

i see you have yet to read Irene Aldridge.

[BlueHorseshoe 10]

 

i see you have yet to read Irene Aldridge.

 

This is very true - but it is on the list, I promise!

 

BlueHorseshoe

[Enigmatics 10]

Bothered.

 

Youve probably read the following posts by now in which case you probably understand a screenshot is really quite irrelevant. Maybe you'd like to do some work yourself rather than expect others to feed you?

 

Anyway - back on topic.....

 

 

Actually it's not. Either put up or shut up. You spend way too much time trying to dispel the generosity of others. Why should anyone listen to you in the first place? Oh that's right .... that's where the trading record comes into play. So again, what do you have for us besides fancy forum talk? Let's see a screen shot breakdown of your historical trading statistics. Surely your platform keeps tabs of it and SURELY you can show us a nice shot of your P/L.

 

Won't happen though. You'll continue to play the elitist contrarian "I know everything about the market" role.

 

Steve you've done a fantastic job in this thread bud. Keep up the good work. Learning a tremendous amount.

[steve46 12]

Ok well thanks I guess, and I couple of quick comments

 

and these comments are NOT meant to be critical..

 

First, its a good idea to know your statistics....and by that I mean just basic descriptive and inferential concepts....if you actually do the work, it gives you an advantage...if on top of that you have maturity and common sense, the difference between you and the "next" participant is significant....

 

Item #2...understand also that a significant number of participants are NOT traditionally educated...typically those folks have had to rely on their understanding of human behavior to make a living elsewhere in the world....this understanding of basic human nature gives them a very real advantage....they use it (some might even say they rely on it) when they make decisions....

 

Look folks its really pretty simple, markets exhibit dual aspects....in the same way that in physics we say that particles exhibit wavelike behavior, markets exhibit characteristics of very basic human behavior (fear & greed)....as I have said, markets tend to cycle from random to non random behavior...we can test data..(I do it every weekend) and those of us with a suitable background can see it....skilled observers who have to make a living in the markets on a daily basis NEVER discount the fact that human emotion is a work....once you understand how this works, the question random or non....is simple to answer (its both)...

 

Now I have to get ready for the next session

 

Best of luck folks

[BlueHorseshoe 10]

Let's see a screen shot breakdown of your historical trading statistics. Surely your platform keeps tabs of it and SURELY you can show us a nice shot of your P/L.

 

I can't show you this, not at all . . . therefore, please feel free to ignore everything I have said hitherto in this post or any other. It's for the best . . .

 

BlueHorseshoe

 

ps. truth comes in very, very small chunks, and from a thousand sources - it is unreasonable to expect the gospel from one man with screenshot proof that he is the messiah!

[TheDude 10]

Actually it's not. Either put up or shut up. You spend way too much time trying to dispel the generosity of others. Why should anyone listen to you in the first place? Oh that's right .... that's where the trading record comes into play. So again, what do you have for us besides fancy forum talk? Let's see a screen shot breakdown of your historical trading statistics. Surely your platform keeps tabs of it and SURELY you can show us a nice shot of your P/L.

 

Won't happen though. You'll continue to play the elitist contrarian "I know everything about the market" role.

 

Steve you've done a fantastic job in this thread bud. Keep up the good work. Learning a tremendous amount.

 

 

LOL

 

You're not following this at all are you pal.

 

The screenshot I mentioned was in reference to the strategies being discussed, not P&L. In other words, you cant really show a screenshot of stock lending for example, or an options hedge.

 

It was in reference to the fact that TA isn't much use in my opinion, and next to useless when day trading. The posts were to prove the point that there are other ways of making money that have less risk than TA, and have a clear edge which TA does not. Primarily though, it was to show that not all analysis was TA or FA as some here try to impose.

 

If you had the brain power to understand and follow what was being discussed you would have understood this.

 

Therefore, perhaps it is you that should 'put up or shut up', or at least have the manners to follow the line of conversation before spouting off your pie hole!

 

Finally, I dont believe Steve was even in this thread at the time of conversation. Hey! We have a trend here! A trend of errors and mistakes on your part. Lets bring the conversation back on track.... Is your foolishness random, or purposeful?

 

Do try harder next time.

 

:rofl:

Edited April 15, 2013 by TheDude