Hmm.. interesting, if the market seems to react to any random lines..
That means that the market reacts to everywhere and that any line will work as long as time is given to it, then the market will react to it someday.
I think I can imagine it very well, place a random line on a chart, the market will react to it even whether it has significance or without significance to the price, all it takes is time, it can be a few years, day, hours or just minutes and you'll see the market "bouncing" or reacting to one of those lines.
I also understood that It's just your mind thinking it that way, when you're looking at a chart, you should not try looking for something or forcing yourself to find a signal because then, you'll just be seeing things that arent even there.
Much like religion.
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I'm not sure how you picked these random lines, but they look like ordinary S/R lines to me.
Did you just randomize based on previous day's range, or what exact procedure produced this randomness?
How do these lines corellate with volume spikes and low-volume zones, or even auto-SR lines from indicators?
Of course, random walk can produce anything, just like FFT can approximate any signal given the right curve-fitted parameters. It doesn't prove or disprove anything. Certainly the predictability is limited.
I do agree that pivot- & fiblines should be used with caution. They can be traps in order to run for our stops. You never know wether price will reach- or turn before, make a break for it, or if the market'll make chop suey . Better find ways to follow price action more directly. Trying to predict price is futile compared to what can be read from price and volume.
Update: Sorry, didn't see the rest of the discussion before I replied. Much of this has already been covered.
However, maybe random lines on a chart is a good strategy with the proper money management? We all see it makes it easier to spot price action, so why not use it? (playing devil's advocate here Of course, the real "indicator" should the be price action, and with practice, you could probably do without the lines.
This could even be made into a "methodology" to learn price action! Just make random lines before every open. Try to trade these during the day, protecting yourself against wrong price action dilligently. Since you know the lines are random, ie. useless restrictions, eventually you should be able to just drop them.
Last edited by steeltoe; November 4th, 2011 at 10:29 PM.
The “market” is a perfect example of an objective meaning-complex about subjective meaning-complexes. In other words, trades don’t make themselves, individual traders make them. It is the actors’ individual subjective values and choices in aggregate, that make a market. This “ universal entity” has to be personified and quantified, if it is to be understood. It’s instinctual for the human mind to find order in chaos and randomness. It’s an innate defense mechanism that will even allow us to deceive ourselves, (cognitive rationalization and confirmation bias). It’s very natural then that we assign significance to abstract patterns and formations, curve fit systems, and perceive what is non-linear and non-stationary, to be linear and stationary. The less diverse the participants, the greater the chance they will make decisions based on the observation of others, independent of their own, and the more fulfilling the prophecy will become.
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Has anyone ever tried trading on random lines? I don't mean something to actually use in production, but more for a training exercise in money management. Using a baseball reference, when I practiced fielding ground balls, I often strapped a small wood board to my hand instead of a glove. I figured if I could field ground balls with that, using a glove would be a piece of cake.
Same goes for practicing money management. If you could break even or even turn a small profit trading off random lines, it'd be a fantastic exercise for trading with a real strategy.
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