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

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Are markets random?

  #51 (permalink)
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ThatManFromTexas View Post
If you're making money .... it doesn't matter if the market is random or not .....

LOL.

Except, that it really does. Because of something called Luck.

When someone says they have a winning method, but that method only consists of a very tiny result/data set, then it is very easy for this to be luck, or curve fitting, or cherry picked, or or or or.

But a lot of people don't recognize this, or dismiss it, or simply don't even know to look for it.

So I think it is actually important to come up with a statistically important way of looking at your trading (ie: in terms of a large forward tested result set) before making any assumptions about whether or not you actually have an edge.

Mike

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  #52 (permalink)
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It's important to make distinction between a random walk with and without drift, and a deterministic trend.

I think this article gives a decent overview:
Introduction To Stationary And Non-Stationary Processes

Attached Thumbnails
Are markets random?-random_walk.pdf  
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  #53 (permalink)
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It seems to me that everyone participating in the discussion is on the same side, which is the markets are not random. So, who here believes that they are random?

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  #54 (permalink)
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Big Mike View Post
LOL.

Except, that it really does. Because of something called Luck.

When someone says they have a winning method, but that method only consists of a very tiny result/data set, then it is very easy for this to be luck, or curve fitting, or cherry picked, or or or or.

But a lot of people don't recognize this, or dismiss it, or simply don't even know to look for it.

So I think it is actually important to come up with a statistically important way of looking at your trading (ie: in terms of a large forward tested result set) before making any assumptions about whether or not you actually have an edge.

Mike

Luck is when preparation meets opportunity....

If you can repeat the action consistently ... it ain't luck...

MLB pitchers throw random pitches .... yet some batters have consistently higher batting averages...

With cards dealt randomly ...different poker players dealt the same hand ... have varying levels of success with it...




monpere View Post
It seems to me that everyone participating in the discussion is on the same side, which is the markets are not random. So, who here believes that they are random?

Depends on your definition of random.

Price of Corn ...

If adequate rain falls... corn flourishes ... corn price goes down...

If drought sets in ... corn falters ... corn price goes up...

If other countries raise tariffs on imported corn ... corn price goes down

If Congress increases subsidies for Ethanol... corn price goes up

If Congress repeals subsidies for Ethanol... corn price goes down

If corn fields get flooded... corn price goes up

If farmers switch animal feed from corn to soybeans ... corn price goes down

If huge speculators take huge long positions in corn ... corn price goes up

If huge speculators dump huge positions in corn ... corn price goes down

If huge speculators cover huge short positions in corn ... corn price goes up

In spite of any of these scenarios or combinations of these scenarios ... if enough traders buy because they believe price will go up ... price will go up

In spite of any of these scenarios or combinations of these scenarios ... if enough traders sell because they believe price will go down ... price will go down

You cannot foresee any of these scenarios or combinations of these scenarios ...

You cannot accurately and consistently predict long term price due to these unknowns....


Is the price of corn random?

I'm just a simple man trading a simple plan.

My daddy always said, "Every day above ground is a good day!"
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  #55 (permalink)
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How many trades do we need to know if we are trading with an edge

Not sure if it makes sense but i came up with this:

Let's suppose i won 120 trades out of my last 200 trades with a 55% expectation.

Number of trade: 200
Odds of winning: 55%
Odds of losing: 45%
1 standard deviation: 7.03562364 << SQRT(200 * .55 * .45)
expected wins: 110
actual wins: 120
wins over expectation: 10
Standard Deviation for this event: 1.421338109 << 10/7.03562364
Chance of randomness: 1 out of 13 << 1 / (1-NORMDIST(1.421338109))

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  #56 (permalink)
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The markets are not random

The markets are carefully managed and controlled to separate the uninformed from their cash, and to cause as much pain, to as many people, as possible.

Another way of saying this is - 'MANIPULATION'.

And long may it continue.

Just my opinion. Don't crucify me if you disagree.

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  #57 (permalink)
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mrmuggins View Post
The markets are carefully managed and controlled to separate the uninformed from their cash, and to cause as much pain, to as many people, as possible.

Another way of saying this is - 'MANIPULATION'.

And long may it continue.

Just my opinion. Don't crucify me if you disagree.

In NLP, you learn not to use ugly words like manipulation, and use words like influence instead.

Then you realize that everything influences everything else.... and that's ok.

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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  #58 (permalink)
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Anagami View Post
In NLP, you learn not to use ugly words like manipulation, and use words like influence instead.

Then you realize that everything influences everything else.... and that's ok.

One man's Influence is another man's manipulation. Just semantics. I am a plain speaking guy who calls a spade - ' a spade', not an implement for digging turf.

Maybe it's just my age but the current politically correct speak is too modern for me.

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  #59 (permalink)
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mrmuggins View Post
One man's Influence is another man's manipulation. Just semantics. I am a plain speaking guy who calls a spade - ' a spade', not an implement for digging turf.

Maybe it's just my age but the current politically correct speak is too modern for me.

I don't care about political correctness.

I just do not choose to see the world in dark hues, that's all.

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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  #60 (permalink)
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mrmuggins View Post
The markets are carefully managed and controlled to separate the uninformed from their cash, and to cause as much pain, to as many people, as possible.

Another way of saying this is - 'MANIPULATION'.

And long may it continue.

Just my opinion. Don't crucify me if you disagree.

Yes, it is manipulated.

Thanks to the FED, ECB, IMF, Goldman Sachs, JP Morgan, HSBC, Barclays... also CME [Chicago Mafia Exchange]; And all their "friends" which I did not mention...

But do not worry, you just need to learn how to beat the devil at his own game.

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