Thread: Random Price Movement

This experimentation is for all those who waste their time studying, predicting, or otherwise making up stories as to why price moved. While I don't subscribe to the thought that price motion is completely random I do believe most read too much into moves that are only a result of noise.

The program flips a coin 150 occasions and then generates a chart based on the outcomes. If you try it a couple of times you can make every pattern imaginable.

It is a simple excel document but FF doesn't allow .XLS files so I had to zip it for upload. Total credit for the genius who wrote this is contained on the first page of this worksheet.

Love, and consider exactly what this tells you.

Phil
https://www.forexforum.co.za/attachm...1825277591.zip

Intresting, so is Currency Market just a walk?

Originally Posted by ;

intresting, therefore is forex just a random walk?

It is not completely arbitrary, but you have to think in probabilities when you consider forex, or some other market for that issue. There is no thing that is certain.

those indiors and studies we are using, can tell us when the odds are in our favor which the price will go in the way we think it'll go, but it can go the other way. There are too many variables (people and/or trading associations ) involved and we can't understand what most of them are doing or will do in the near future, so anything can happen at any given moment.

So, I figure , the best we can do this is to create enough large number of transactions so that, at the end, the odds will operate in our favor.

Originally Posted by ;

It is not completely random, but you have to think in probabilities if you think about Currency Market, or any other market for that issue. There is no certain thing.

All those indiors and studies we are using, can inform us if the odds are in our favour which the price goes in the way we think it goes, but still, it can go the other way. There are too many factors (people or trading associations ) involved and we can't understand what all of these are doing or can do in the not too distant future, so anything can happen at any given moment.

So, I guessthe best we can do this is to make enough large number of trades so that, in the conclusion, the chances will operate in our favour.


Branac

branac,

Very well stated! The market isn't entirely random. There is still fear, greed, and a herd mentality. But it also means you shouldn't concentrate on each candle and search the internet to see why some thing moved 5 pips.

Phil,


What is you thinking on averaging down on a losing commerce, but using a stop loss point at X amount of your account. If the market is up/down (arbitrary ) surley a average price will aid a trader make money.

Give me your ideas,

.

1 Attachment(s) I got a Head and Shoulders pattern Outside or a random coin flip:

Originally Posted by ;

Phil,


What's you thinking on averaging back on a losing trade, but with a stop loss point at X amount of your account. If the market is up/down (arbitrary ) surley a ordinary price will help a trader earn money.

Give me your thoughts,

boycie.

There's a fine line here. If you place a halt and you permit yourself to risk 3 percent (for example) then you're done. You have got no bullets left into fire. However , if you are in a choppy market and also you risk 2% of the allowed 3 percent (same stop) and then you may find a better price on the remianing 1 percent (using the original stop) then I'm good with this. I do so on occasion in a slow market. In a fast market you can get left behind with a partial position. I've dont that as well and therefore don't get cute with this.

It's foolish of any of any of us to believe we have the best price once we decided to go into the market. Frequently you can find a slightly better price. The critical points are that you MUST define your risk up front and you may NEVER lower your original stop and you may NEVER exceed your first pre-determined risk amount.

Phil

Phil, so here is the wierd part, you'd have made a profit on the TP of this pattern. LOL Scott

From what I know, although it is basically true that it is irrelevant how many heads in a row you get from flipping a coin, the chances of getting a heads is 50%. However, according to the law of large numbers, from what I know, when you get large inconsistencies (such as 20 heads in a row) that the probabilities for getting another heads is not actualy 50-50

Yes, that is correct. The coin has no memory. This toss in no way influences another. In reality, just with amounts does a equilibrium is approached by one.

A very good book to read on the idea of randomness is Fooled By Randomness I believe it is cheap from Amazon.Com

Originally Posted by ;

From what I understand, while it is basically true that it doesn't matter how many minds in a row you get from flipping a coin, the chances of getting a heads is 50 percent. However, according to the law of large amounts, from what I understand, when you receive large inconsistencies (such as 20 heads in a row) that the probabilities for getting another heads is not actualy 50-50