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Random Line Theory


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Random Line Theory

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  #31 (permalink)
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Now the session has closed.

What we can clearly see is how the first line predicted the day high within 1 tick, the third line the day low by 5 ticks, and the second line predicted the "point of control" as it were, where price battled against support and resistance all day.

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  #32 (permalink)
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Big Mike View Post
Correct.

What I posted in post #1 are lines on a chart from last session. Now I want to see how those lines "react" to price on todays session (ie: predict).

Mike

Ok but to be fair you can't use the R1, R2, Open, Close of the last session. I think those lines are still good

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  #33 (permalink)
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Ok but to be fair you can't use the R1, R2, Open, Close of the last session. I think those lines are still good

I didn't, they were random.

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  #34 (permalink)
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The lines I plotted with my eyes shut were tradeable today .

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  #35 (permalink)
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Eric j View Post
The lines I plotted with my eyes shut were tradeable today .

Awesome, thanks for sharing

I find this topic fascinating (hence why I created the thread). I hope others are finding it as interesting, and maybe some eyes are opening...



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  #36 (permalink)
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Heres tomorrows lines . Now heres the thing - if a sample of say 100 trades off these levels produces a positive result what would it take to consider this a methodology ? What would it take to prove its not a methodology ?

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Team

fantastic thread

wonder if these lines are similar to instituitional bands/lines

sharmas

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  #38 (permalink)
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Eric j View Post
Heres tomorrows lines . Now heres the thing - if a sample of say 100 trades off these levels produces a positive result what would it take to consider this a methodology ? What would it take to prove its not a methodology ?

It can not be a trading method by definition.

"Random" means that there is no edge.

It is just a method to show how easy it is to fool our minds.

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Eric j View Post
Now heres the thing - if a sample of say 100 trades off these levels produces a positive result what would it take to consider this a methodology ? What would it take to prove its not a methodology ?

If you expect your method to encompass an edge, then it would seem basing the method on a truly random line is not beneficial except from the psychological side.

Maybe @Fat Tails or someone else can explore the methodology aspect. My intention was simply to demonstrate that a lot of traders put faith in their indicators, they seem to assign value to these indicators (like prediction). Now here we are in the process of demonstrating that a purely random line can be assigned those same values. What does that do to your belief that your own indicators are useful in the way that you once believed they were?

Imagine for a moment the title of this thread was "The Next Holy Grail?" and in the first post I told you that I labored for the past two years and have created this indicator which consists of 2,000 lines of code that I labored over day and night. Then I proceeded to post the same screen shots as you see in this thread, saying "Ok, here is what the indicator is showing for tomorrow". You could substitute "showing" for "predicting".

It wouldn't be a stretch. The thread would resemble many others. The thread would resemble what some vendors claim, for instance. The trick is seeing past that. You know the truth here -- they are random lines. How do you determine the "truth" for something else?

More to the point, some traders (myself included, although I hope I am learning) have a tendency of assigning after-the-fact properties. For example, pivots are a good candidate. I use them in my own trading after all. If price moves to a pivot, stops, and reverses, then I could easily say "that pivot was resistance". The difference naturally is the pivot is used by other traders. That exact same pivot. Enough traders that it becomes a sort of self-fulfilling prophecy. Just like if thousands of traders suddenly started using the exact same random lines I post in this thread (exact to the tick the same), then price is likely to react on those lines.

We assign these properties thinking the line somehow carries weight or importance. Given what is shown in this thread, how do you feel about that?

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Oops I see Fat Tails beat me to it

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