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Showing results for tags 'predictability'.
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A pattern failure of a false breakout usually leads to a quick reversal. I would like to learn how I can predict a false breakout from a real one before the move happens. It appears that professionals usually get in before a breakout and would short new highs. How are they able to do this?
When I first came across this ages ago it made me sit up and it did the same when I came across it again recently. Take a look at the chart I have attached. What is it you ask? Oil, gold, S&P 500. Nope, it's nothing. It's a chart which I had excel generate simply by getting it to choose a tick higher, a tick lower or unchanged from the last price. But it looks very familiar doesn't it? Now we all know the markets aren't random , but really when you look at an example like this it makes you wonder. What are the implications of such an exercise? Here are some thoughts: There is an element of perceived randomness to the market at times which may or may not perpetuate further 'random' activity. Markets are not random at all as conditions present at any given moment, caused the subsequent price movement. However, when you look at historical charts, they have the appearance of being randomly generated as there is no context when viewing historical prices. Unless we assign useful context to market movements, any analysis which is done is never going to be much better than random. Would you trade the product in my chart if you knew it were completely random??? What do you guys reckon?
Before I go off about this or that concept or idea, let's make clear first that none of this is representative of my own trading, let alone my own personal view about the market. This thread is intended to discuss two fundamentally opposing views: (1) The market is completely predictable and all you need to do is find the right key to decipher its language. But basically the market will do whatever it plans to do, regardless of any 'external influence' or manipulation. In other words, the path of price is laid out in advance. (2) The other one is that the market is unpredictable, but not random. Randomness and unpredictability are not the same, but that's topic for another discussion. The second view is what I think most people would adhere to, and it's also what Douglas says in his "5 fundamental truths": on the one hand "anything can happen" and on the other hand "you don't need to know what's going to happen next, in order to make money of it". Throughout history however, a lot of people have tried to determine what is going to happen next (rather than trade in the moment). Whether or not they were successful and to what extent, is another matter. Everybody knows that from time to time a new method or guru comes along, claiming he has found the secret to the markets. Some people probably have not given the above much thought. Perhaps because they need not have to, and their trading is doing just fine. The more time I studied charts, the more I observed that price moved in a very "orderly" fashion... although there are times where I have no idea what the market is going to do, I still make money by following my plan. On other times, the market acts like if it was destined to this or that. But let's not get into anything too esoteric Thoughts, views, opinions,... all welcome in this thread!