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FishSauce
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Posts: 72
Joined: June 7th, 2003, 11:06 pm

Random walk and technical analysis: New Perspective

August 8th, 2003, 10:33 am

Pretty neat article:http://satyrican.tripod.comorhttp://sat ... No1.pdfThe basic premise is that random walk trendiness might explain why technical analysis might work.Simple and to the point, explaining the possiblity of the coexistence between random walk andtechnical analysis. A must read. A clear contrast to the constant "psychological" explanations we are accustomed to hearing,ex. : http://www.sugaronline.com/editorials/e ... is.pdfWhat do you think, can random walk and technical analysis coexist? ....
 
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GM
Posts: 106
Joined: August 20th, 2002, 5:11 pm

Random walk and technical analysis: New Perspective

August 8th, 2003, 11:37 am

No
 
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FishSauce
Topic Author
Posts: 72
Joined: June 7th, 2003, 11:06 pm

Random walk and technical analysis: New Perspective

August 8th, 2003, 11:40 am

Care to elaborate?
 
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LongTheta
Posts: 1504
Joined: August 3rd, 2003, 6:06 am

Random walk and technical analysis: New Perspective

August 8th, 2003, 11:41 am

By definition, the answer is "Definitely, no!".LT.
 
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N
Posts: 2808
Joined: May 9th, 2003, 8:26 pm

Random walk and technical analysis: New Perspective

August 8th, 2003, 12:03 pm

The answer is definitely 'yes'. What do you think RenTech and Shaw do...LongTheta is a f'n idiot.
 
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doubleV
Posts: 20
Joined: June 25th, 2003, 11:27 am

Random walk and technical analysis: New Perspective

August 8th, 2003, 12:06 pm

You can always find technical analysis patterns (trend, head and shoulders, ...) in a given random walk path. But at by definition, a random walk can either go up or go down with proba=1/2. So TA and random walk may seem consistent when you look at past data but are simply in total contradiction when it comes to the future.
 
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andym
Posts: 805
Joined: July 14th, 2002, 3:00 am

Random walk and technical analysis: New Perspective

August 8th, 2003, 12:11 pm

FS, Satyrican should really be Satyri-CON
 
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doubleV
Posts: 20
Joined: June 25th, 2003, 11:27 am

Random walk and technical analysis: New Perspective

August 8th, 2003, 12:24 pm

..and the high quality of the website tells a lot about how profitable technical analysis is
 
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N
Posts: 2808
Joined: May 9th, 2003, 8:26 pm

Random walk and technical analysis: New Perspective

August 8th, 2003, 12:53 pm

You can always find technical analysis patterns (trend, head and shoulders, ...) in a given random walk path. But at by definition, a random walk can either go up or go down with proba=1/2. So TA and random walk may seem consistent when you look at past data but are simply in total contradiction when it comes to the future. Untrue, it's only TA as you know it.
 
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Johnny
Posts: 2431
Joined: October 18th, 2001, 3:26 pm

Random walk and technical analysis: New Perspective

August 8th, 2003, 12:54 pm

N, I think you're saying that TA works in practice. I agree. But the question is whether TA can work on a random walk. The answer to this is undeniably "NO". So all you're saying is that market prices don't follow a random walk. I agree.
 
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matthewcroberts
Posts: 295
Joined: October 18th, 2001, 7:52 pm

Random walk and technical analysis: New Perspective

August 8th, 2003, 1:02 pm

I've gotta go w/ Johnny on this one. (no surprise, really...)But N & Johnny and any other traders out there, I have a question: how large of a role does technical analysis play in your decision-making? I've been doing some research on T/A, and I think one very difficult issue is that most traders who use technical analysis combine it with fundamental analysis, which makes it difficult to assess the marginal contribution of T/A.Thoughts?
 
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N
Posts: 2808
Joined: May 9th, 2003, 8:26 pm

Random walk and technical analysis: New Perspective

August 8th, 2003, 1:22 pm

Again, I'd say high-end quant HFs (Shaw and RenTech) only use TA and I do as well. The issue with TA is that it requires world-class mathematicians to implement.
 
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kr
Posts: 1885
Joined: September 27th, 2002, 1:19 pm

Random walk and technical analysis: New Perspective

August 8th, 2003, 1:28 pm

hah! let it be stated for the record: fundamental analysis is the technical analysis of financial reportsit may be a somewhat more successful endeavor with this set of data because there is plenty of autocorrelation in the key variables. I'd like to do a study of analysts' EPS predictions, where you could find real statistical evidence.pay careful attention to what analysts are saying - it's not support/resistance, but it's really not much different
 
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Nonius
Posts: 5115
Joined: January 22nd, 2003, 6:48 am

Random walk and technical analysis: New Perspective

August 8th, 2003, 1:36 pm

QuoteOriginally posted by: NAgain, I'd say high-end quant HFs (Shaw and RenTech) only use TA and I do as well. The issue with TA is that it requires world-class mathematicians to implement.Newton, isn't recreation time over at Riker's? back to the cell my friend. Lemme give you some tips though. Start pumping a lot of iron, get some tatoos, join a gang, and give all your cigarettes to your cellmates. that way, you will stop being the wife of Cedric the convicted rapist, who is a stone's throw away from your bunkbead.
 
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doubleV
Posts: 20
Joined: June 25th, 2003, 11:27 am

Random walk and technical analysis: New Perspective

August 8th, 2003, 1:38 pm

QuoteOriginally posted by: NUntrue, it's only TA as you know itI believe this is true for any forecasting method. To have an edge the forecast probability should be better than ½, but if the process we are trying to forecast is a random walk, the best we can get is ½ (actually any forecasting method will achieve this). I am of course discussing the use of TA or any other quantitative method to forecast directional moves of a random walk. Market prices moves clearly do not follow a random walk and I believe it is possible to get an edge using pattern recognition techniques (with some luck not to be at the end of the market structure/conditions that created the pattern at the first place).
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