|
PureBytes Links
Trading Reference Links
|
don't get too discouraged by the fact that
random walk data looks identical to
real market data. it does not automatically
mean that markets are random...
in fact you can have a non random complex
non-linear process generate data that
looks very similar to a simple purely random
process... but underlying processes are totally
different.
random walk is used simply because it is
very easy to generate and model trivial market variables
such as volatility, returns, etc...
the real price generation process is pretty complex and
has not been modeled as of yet ( at least not published ).
only in the past ten years some minor progress has been
made in modeling markets properly...
once you get there you will realize that market are
far from random...
undoubtedly there is a part of the market that is random
there is also a part of it that is not.
our job as system developers is to separate the two
and make money on the second part.
bilo.
ps. go see Beautiful Mind, it is mainly because of the
main character in the movie that are able to just
in recent 10 years understand the markets better...
that's why he got the Nobel prize almost 50 years later.
----- Original Message -----
From: "Rob Marsh" <dartingriver@xxxxxxxxxxxxxxxxxxxxx>
To: "omega list" <omega-list@xxxxxxxxxx>
Sent: Saturday, February 09, 2002 4:07 PM
Subject: Random Walk alive and well.
> While fiddling about in Excel today, quite by chance I found something quite
> sobering (from a classical chartist's point of view anyway)
>
> If you have a couple of minutes try creating the following simple Excel
> spreadsheet ( to generate a random walk 'price chart')
>
> In cell A2 :
> =rand()
>
> In Cell B2:
> =if(A2<=0.5,1,-1)
>
> In Cell C2:
> =C1+B2
>
> Copy this down (say) 3000 rows and plot a line graph of column C.
>
> Then keep regenerating the random numbers using F9 to get a freshly
> generated random walk each time.
>
> What do you see?
>
> Trend lines, retracements, consolidations, breakouts, Support,
> Resistance, Head and Shoulders, double tops, V-shaped
> bottoms...........etc....etc.
>
> Any pattern you like in fact.
>
> They are all there if you have an eye for them.
>
> AND ALL ON CHARTS THAT ACTUALLY ARE RANDOM WALK!
>
>
>
>
>
|