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Are markets random?
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Created: by Big Mike Attachments:11

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Are markets random?

  #31 (permalink)
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  #32 (permalink)
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I am intrigued by the high number of members that have voted the answer "It makes no difference" on the poll. Anyone care to discuss?

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  #33 (permalink)
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How can something so counter intuitive be random? (I see mattz made this point)

For example, setting a 15 tick stop loss on a particular euro trade, only to have it drop 17. That happened last week and I re-entered at about the same level, for a gain of 35, but had that initial loss to work off.

The best I have come up with to combat this shortcoming (while keeping a pretty tight SL), is to stagger the orders on the total number of contracts committed to, as the chart pattern progresses.

Also, I have more anxiety when establishing / maintaining positions when highly profitable opportunities (bigger price change) are observed, as opposed to smaller scalps, with fixed profit and stop loss targets. Not implying that others, such as Monpere, are missing out with smaller targets: I just don't do that successfully.

Very interesting input on the topic gentleman.
----

About HFT - if I understood the topic intimately I probably wouldn't post about it, but found the following interesting:

EuroNext called HFT the primary driver of the markets in a presentation they held abroad (not sure if it was before or after they merged with NYSE).

For stocks I've heard it described as replacing the effects of real market participants by breaking up larger block orders and stretching them closer to the max bid. So not good initially for your entry price, but going forward as you hold the position, other buy orders are stretched.

What I initially thought happened in the flash crash was that the algos were switched from stretching the buys to stretching lows. But ZeroHedge found evidence of quote stuffing.
----


mrphr View Post
the odds are 1:3 = 0.33333... or simply 33.33%, why? Because you can only Buy, Sell or do Nothing.

Only three possibilities:

If you Buy you have 33.33%
If you Sell you have 33.33%
If you do Nothing you have 33.33%

Just because there are three possibilities doesn't mean you have 1/3 odds. Isn't that the same logic used to say you have a 50% chance because price goes up or down?

"Be right and sit tight." - Jesse Livermore
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  #34 (permalink)
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whatnext View Post
Just because there are three possibilities doesn't mean you have 1/3 odds. Isn't that the same logic used to say you have a 50% chance because price goes up or down?

So tell me what are the odds then? If you do not know the outcome, unless you can predict;
I know I can not predict, the only thing I can do is increase the odds in my favor and then I have a better change of succeed.

And there are many ways of doing that, but I am not trying to convince you...


Last edited by mrphr; April 10th, 2012 at 09:02 PM.
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  #35 (permalink)
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mrphr View Post
So tell me what are the odds then? If you do not know the outcome, unless you can predict;
I know I can not predict, the only thing I can do is increase the odds in my favor and then I have a better change of succeed.

And there are many ways of doing that, but I am not trying to convince you...

You are contradicting yourself...

There is a thread on probability 101; you should check it out.

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  #36 (permalink)
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Lornz View Post
You are contradicting yourself...

There is a thread on probability 101; you should check it out.

No, I am not... I could explain you exactly why. But anyway let's forget about it and come back to the topic...

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  #37 (permalink)
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mrphr View Post
No, I am not... I could explain you exactly why. But anyway let's forget about it and come back to the topic...

Your logic is faulty on several levels... I would be honored if you would educate me!

By the way, this is actually relevant to the topic of the thread.

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  #38 (permalink)
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http://www.cboe.com/Institutional/JPMDerivativesThemesCorrelation.pdf

Stock market prices do not follow random walks: evidence from a simple specification test


http://www.smbtraining.com/blog/volatility-clustering-one-way-that-markets-are-not-random



Quoting 
However, stock prices are not the product of a random number generator, but rather the end result of buying and selling decisions made by human beings who are basing these decisions on a combination of intellectual analysis and emotional reactions. There are some quantifiable non-random elements in market data, and some of those can be used as the basis for profitable trading strategies.


"Successful trading is one long journey, not a destination" Peter Borish Former Head of Research for Paul Tudor Jones speaking on conversations with John F. Carter

Last edited by GridKing; April 11th, 2012 at 07:30 AM.
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  #39 (permalink)
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Lornz View Post
Your logic is faulty on several levels... I would be honored if you would educate me!

By the way, this is actually relevant to the topic of the thread.

What would you like to know? BTW I am not a educator... Perhaps you could educate my?

Not being arrogant, but one thing I can guarantee my theories and concepts works for me, my track record does not lie.


Last edited by mrphr; April 10th, 2012 at 11:18 PM.
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  #40 (permalink)
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mrphr View Post
What would you like to know? BTW I am not a educator... Perhaps you could educate my?

Not being arrogant, but one thing I can guarantee my theories and concepts works for me, my track record does not lie.

I've decided to bow out of this debate...

However, I would like to say that your theories and concepts might work for you, but words actually have quite specific meaning. People tend to redefine concepts like randomness and probability on the fly, and that makes it impossible to have intelligent discussion -- simply because the words have different meaning to different people. In reality, though, the subjects have solid theoretical underpinnings and should debated on the basis of those. Failure to do so renders message boards useless for meaningful discussions of anything other than vague theories like technical analysis. Not even a discussion of rudimentary probability gained enough traction to warrant further discussion.

It was not a question of doubting your success, it was merely an observation of a logical fallacy based on a traditional understanding of the topic.

All the best!

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