Do Forex prices move randomly ?

[Truville]

The Yuan is planned? Then how can it be traded?

prices goes against what you have predicted...you are therefore witnessing randomness Or I predicted wrong.

"random but still predictable" Come on dude.

[skater68]

"the Yuan is planned? Then how can it be traded?"

did they start freely floating the yuan....

the price is pegged...set....that does not mean you can not trade it...you just have to trade it at the specified, planned, dictated, nonfloating PRICE......forget about interest rates..inflation...and GWB flapping his trap.....

you go to the supermarket to buy eggs...they have a set price....the price does not fluctuate while you gander down each aisle...yet you can trade them...ie...give the market money they give you the eggs...and the majority of other items in our life have planned (planned by seller to obtain his desired profit margin) or fixed predictable prices that can be traded....



"prices goes against what you have predicted...you are therefore witnessing randomness Or I predicted wrong."

correct...i forgot to add that variable of a wrong prediction...you could have predicted wrong or there are times that you predicted correctly based on your TA...but your TA does not take into account that some central bank dumps or buys a huge amount or the currency you are predicting...THAT is one of the elements of RANDOMNESS in the the market......someting from left field...outside your TA...other than that bank making their unannounced move you predicted correctly but the price moved to the contrary because of a random event.....

YOU mean to tell me that never happens???????

"random but still predictable" Come on dude.

so you claim things that are Random can not be predicted....that goes against the mathematical definition of randomness....you can goto this website and review Pascals Triangel...its complicated but displays predictability/probability of a random event

http://www.nzmaths.co.nz/Statistics/Probability/Randomprocesses.htm

Also the following definition may assist you as well...definition of

PROBABILITY: American Heritage Dictionary defines the Probability Theory as the branch of Mathematics that studies the likelihood of occurrence of RANDOM events in order to PREDICT the behavior of defined systems.

so when we come up with our probabiliites we are in essence studying the randomness of the market.....

perhaps i should have said Random is PROBABLE..... )


how is that dude??

dave

[mishak]

Hi Skater,
very nice post, thanks

I totaly agree with you - forex prices are random.
Will you please add more about predictability...

Here are some questions from the top post for your convenience

1. What are the chances Euro will go up in the next hour ?
4. Say, EUR/USD is 1.1650. Which chances are better:
A. The Euro will reach 1.1700 (+50 pips) during next 24 hours or
B. The Euro will reach 1.1600 (-50 pips) during next 24 hours

Are forex prices uniform ?
Are they predictable with chances better than 50% ?

Appreciate your participation

[garyh]

Great discussion!

Are prices random...I wouldn't say so. Unpredictable, over the long haul, maybe, but short term the chances of prediction increase.

The markets remind me of a game I once played at camp. We divided into 2 teams and tried to push a huge ball (about 5-6 feet high) into the opposite team's goal area (like football). The markets about as random as that. The direction of that ball is dependant on the current pressure exerted on that huge ball by 10-20 people. Each with different strengths, sizes and locations around the ball. Each with varying effects on the outcome. Sometimes one side gets the ball rolling fast and the other team has a hard time stopping it. Sometimes neither team could move it anywhere but sideways. Sometimes, you're just tired and you rest, gearing up for the next big push.

The markets are like that ball with people push on it, but without a goal that ends the push, and teams that are not persistant.

Enjoy the game!

[Advocate]

When I'm winning My big head thinks it knows something - it says -this is not random - I picked the direction because my indicators said to go this way and it is - so my logic was proved right - it was a highly probable pick and its not random - its pedictable.
When I'm loosing - thats anouther story - then my little head meakly says - its random - why do I continue to persue this game.
My heart wants to believe its not random and I use what humble brain power I have to support that decision. Dont You?

mishak - Thanks for the post!

[skater68]

based on my past education of math and my current research on the internet after reading the initial post about Random....

i think there is some confusion

Just because something is random DOES NOT mean it CAN NOT be predicted......

PREDICTABLE - if something is random...its ability to be predictable is affected by the number of variables involved with an actual outcome.....

so you cn identify the variables...measure/quantify them then you can devise a behavioral pattern that allows for you to come to a conclusion (prediction) with RELATIVE certainty......

it should seem that the more variables involved in an EVENT the less predictable or the more random it may be....thisis true...

So lets look at some of Mishaks questions:

Whatare the chances the EUR will go up in the next hour?

OK..what are the total number of possible outcomes
1. Go up
2. Go down
3. Stay same

so just to answer your question of up or down use simple probability math 1/3= 33.3% chance

I performed the following test: Pulled up 1 hr EUR chart and randomly selected 30 bars and looked at open and close price

30 randomly selected
12 ups 40%
14 downs 46%
4 same 13%

then i selected 30 bars in a row
13 down 43%
14 up 46%
3 same 10%

i would venture to say that if we took a larger sample the numbers would converge on 33%

So only three possible outcomes...there are the numbers

next question

Say, EUR/USD is 1.1650. Which chances are better:
A. The Euro will reach 1.1700 (+50 pips) during next 24 hours or
B. The Euro will reach 1.1600 (-50 pips) during next 24 hours

this adds a different dimension and more variables to the mathematical probability equation ... WHY???

the first question just dealt with direction with 3 possible outcomes....easy to measure

your second question not only has direction...but has amount.....
One way of predicting this chance is looking at the variables that will push the price.....ie # of buyers/sellers....volitility...news...etc...

AH!!! techinical analysis..fundamentals....

you would build a formula using indicators that would help you PREDICT with a level of certainty which had a better chance of going up or down by a CERTAIN number of points....

whether they know it or not...this is what all you successful traders are doing.....with your sytem.....based on certain variables you make a prediction about direction and amount and you enter a trade.....


those truly interested in this thread should read about probability and randomness on the web or in a math book...dont get to caught up in the equations..to complex ...just try to understand the theory.....its what we are doing here in FOREX

good luck
dave