[james_gsx]

I know, and that's why I said I don't think it would ever happen. But I do think it's possible. I don't think it will be a formula that you could just plug in a few numbers and get the answer. Maybe I don't explain what I'm talking about properly, some will understand and some won't.

If we have come as far as we have with physics and math, then I think it's entirely possible it could be used with the markets. I believe everything can be broken down into math and physics, but that's just my opinion.

But for the time being, a single trade can offset the market and make it random. But we have trendlines, support and resistance, market profile, and all those other tools that helps us rule out some of the randomness. Those tools help us break the market down into probabilities which is why trendlines work. That's also the same reason why sometimes they don't work.

[Anonymous]

In chaos theory chaotic implies a higher form of order. In other words, non-randomness on a higher level. An example of this would be the fractal nature of the markets. A 5 min. chart looks like a 15 min. chart looks like a 240 minute chart. The higher timeframes tending to influence the lower ones. If markets were random this would not be the case.

As far as saying the markets are logical, this can't be the case. In that markets are driven by FEAR and GREED two emotions that defy all logic.

[james_gsx]

And I think we need a definition of random before this thread goes on anymore.

I agree exactly with what PP says but when I'm trading I know that anything can happen therefore I believe it's random. And by random I mean when I enter my trade it could go up or down, and I don't know and that's what makes it random. Hopefully that makes sense.

[darthtrader]

Originally Posted by james_gsx »

And I think we need a definition of random before this thread goes on anymore.

I think the problem is we have a bias in everday life towards randomness being like a coin flip and not the more precise definition of a stochastic process:
"A stochastic process, or sometimes random process, is the counterpart to a deterministic process (or deterministic system) in probability theory. Instead of dealing only with one possible 'reality' of how the process might evolve under time (as is the case, for example, for solutions of an ordinary differential equation), in a stochastic or random process there is some indeterminacy in its future evolution described by probability distributions. This means that even if the initial condition (or starting point) is known, there are many possibilities the process might go to, but some paths are more probable and others less."

It just seems like the popular financial literature on this gets these two mixed up. Shows a chart of coin flips and how it looks just like a stock chart, hence the market must be just like flipping coins. That would only make sense if each market participant were making a buy/sell decision with one piece of information on both sides. The reality is its thousands of participants each making decisions on thousands of pieces of information. I think the markets are random as I can't think of a better definition than a stochastic process but the reason you can trade is because of the bold part in that definition.

[MrPaul]

Originally Posted by james_gsx »

And I think we need a definition of random before this thread goes on anymore.

I agree exactly with what PP says but when I'm trading I know that anything can happen therefore I believe it's random. And by random I mean when I enter my trade it could go up or down, and I don't know and that's what makes it random. Hopefully that makes sense.

Random:

Having no discernible structure or repetition. An uncertain or equally probable choice or outcome, without pattern and dictated by chaos or chance.

Perhaps if anything can happen you mean unpredictable?

Financial markets are not random. Chaotic systems maybe (I'm not qualified enough to give a definitive answer), unpredictable yes.

Weather forecasting is a great example someone else mentioned earlier.