Random or not?

I wanted to import historical stock prices to MT4 for charting. I found a script which does that, but I started to think, what if I put random numbers in it? How would a 'price chart' based on random numbers look like?

Well, I created random M1 data for the hypothetical WFT currency - USD/WTF, EUR/WTF, AUD/WFT and CAD/WTF.
The charts have all the characteristics of a real Forex chart - trendlines, patterns, volatility, trending, ranging ...

I attached some random WTF charts and real FX charts - I can't tell the difference, really. Can you? Is price random?

<a href='https://www.myfxbook.com/files/speki/1_3T.gif' target='_blank'><img src='https://www.myfxbook.com/files/speki/1_3T.gif'/></a>

<a href='https://www.myfxbook.com/files/speki/2.gif' target='_blank'><img src='https://www.myfxbook.com/files/speki/2.gif'/></a>

<a href='https://www.myfxbook.com/files/speki/3.gif' target='_blank'><img src='https://www.myfxbook.com/files/speki/3.gif'/></a>

<a href='https://www.myfxbook.com/files/speki/5.gif' target='_blank'><img src='https://www.myfxbook.com/files/speki/5.gif'/></a>

<a href='https://www.myfxbook.com/files/speki/4.gif' target='_blank'><img src='https://www.myfxbook.com/files/speki/4.gif'/></a>

<a href='https://www.myfxbook.com/files/speki/7.gif' target='_blank'><img src='https://www.myfxbook.com/files/speki/7.gif'/></a>

<a href='https://www.myfxbook.com/files/speki/6.gif' target='_blank'><img src='https://www.myfxbook.com/files/speki/6.gif'/></a>

<a href='https://www.myfxbook.com/files/speki/9.gif' target='_blank'><img src='https://www.myfxbook.com/files/speki/9.gif'/></a>

<a href='https://www.myfxbook.com/files/speki/8.gif' target='_blank'><img src='https://www.myfxbook.com/files/speki/8.gif'/></a>

..how about Technical analysis of a random chart? Sounds like fun? It sure is! Let's have a look at USD/WTF hourly (attached)

The WTF appreciated versus the dollar but the strong oversold RSI readings anticipated reversal. Price began to rise again and formed an upward channel. Yesterday's better-than-expected GDP figures caused the WTF to gain versus the dollar again: price broke out of the channel and fell to the previous monthly low - just below 950. The level proved support again - with institutional buyers rumored. Technically, the massive hidden bullish divergence on MACD and the double bottom formation was a screaming buy signal, with logical profit target at the Fibo 50 retracement of the latest swing down.

LMAO

<a href='https://www.myfxbook.com/files/speki/ta1.gif'><img src='https://www.myfxbook.com/files/speki/ta1.gif'/></a>

That's a great question and assumption!

This begs the following question - if you were to provide a random price feed to a successful trader, would he be able to remain profitable?

I wonder if we can somehow test it?

Well you can see that random charts look like real ones. And you can see that many of the technical analysis tools can be applied to random charts too - do you think my analysis above is nonsense? The oversold, the divergence, the support, the double bottom, the Fibo 50, the channel - they're all there and trust me, the chart is randomly generated.

So how can you tell it's not random? You just know, that's it? 😁

very interessting.
but what does this tell us?

It tells us that most of the TA stuff can be applied to random charts and we can find wonderful patterns, price levels and indicator signals. So we can fool ourselves that we found something that works in the markets. Yeah, it works, but it also works on random charts.

It tells me that most of the TA stuff I used to believe in, is Mickey Mouse. Big time.

Nothing less, nothing more.

Ah, I have a headache from all this thinking. Thinking always gets me into trouble. Let's play some music - warm and slow tunes.
Kylie is wonderful - I'm looking forward to seeing her new show this year -

who knows... perhaps there is an unknown mathematical force that does this.. just hasn't been discovered yet?

meh.. all speculation at this point.

Voffi posted:
    who knows... perhaps there is an unknown mathematical force that does this.. just hasn't been discovered yet?

meh.. all speculation at this point.

Well, if that's correct, then there's must be a mathematical formula to crack it! Who's got it? 😀

I wouldn't complicate it with unknown forces, theories or anything. Just look at the random charts and real ones - even TA works wonderfully on random charts. I for one have seen a few charts so far but honestly I would mistake any of the above random charts for real FX charts - all of them go up and down like a hookers knickers.

You know what? Generate charts for yourself - and if you can tell what's random and what's real, you're the winner.

1. copy the attached scripts to the Experts/Scripts folder of your MT4
2. drag randomcharts.mq4 on some open chart, will generate M1 data
3. when finished, open offline chart with MT4 and drag period_converter script and change 3 for 60 (H1) or 240 (H4) or 1440 (D1), or whatever you like
4. now you have the chart in other timeframes too

I think there could be a bigger share of randomness in price movements than most of us would like to admit.
Random or not ... you decide, I'm not trying to convince you... have fun

fun is good
😄😄😄

Are you sure technical analysis works on random charts? How do you define 'works'?

Do you have an EA which works on both real and random charts?

My friend, if you check the last chart I posted, I wrote a technical analysis for a random chart. Channel, trendline, fibo, divergence, whatever.

I don't have any EAs.

Let me repeat my statements:
1. I have a hard time telling the difference between a real FX chart and a randomly generated one.
2. I find it interesting that it's so easy to fit a pattern, indicator signal or other TA stuff on a random chart.

That's it.

Yes, I understand, however would you be able to profit using technical analysis on regular charts?
My point is that it's valid only after the fact, where it's easy to draw it. I think statistically speaking, some analysis would have to match a chart out of so many possibilities eventually, however it doesn't make it valid.

I agree with you that it's practically impossible to tell the difference, which is already very intriguing...

if price is indeed random, then technical analysis can predict random movement, on the other hand, if price isn't random, the random charts might appear 'trade-able' to the naked eye, but if you were to apply a trading system, it would fail.

You've put it very simple and clear, there are so many possibilities for analysis, something just has to match even a random chart.
Which leads us to the question, which parts of TA could be considered valid or useful on real charts.

Let's agree that by 'random' we don't mean totally haphazard up and down movement, but rather 'unpredictable'.

And we could also agree on that longer term trends exist - gold is in an uptrend. Oil is in an uptrend. Chances are, their price will rise in the next couple of weeks, months or years. Where exactly to go long, with the smallest risk, is another question. I could go long on oil but if it tanks heavily then I might get margin called before it goes up again.

I'm gonna have to think about your last statement, I don't think that TA actually 'predicts' anything - if it would, we'd all be millionaries - of course TA does not predict random movements - but this does not prove the 2nd part, namely that price isn't random (put it less provocative: unpredictable most of the time)

Ah, f...ing hell, I started the thread becoz I don't know if it's random or not! And I have a bloody headache from the thinking again!! Music time!!

music is good
😄😄😄

Yes, it's quite a difficult topic to think about 😄

In any case, if you can create a profitable system based on a random price feed, I believe you will definitely be able to profit in the real markets!

Hi skepy

Just only a small contribute to the discussion.Your thinks are mine too but:

I ask myself and ask you : are the charts (you have randomized) really random ?

Or when you have generated them throught a script did you assume something for true ?

I mean max&min values and close and open and period and standardDeviation and Volumes and so on ?

just to say I would not be sure at 100% the charts are random .

Have a good day

Giorgio

Sorry ...... speki not skepi

I am already sleeping

Giorgio

Hi Giorgio ... good questions. I think it's really about our expectations ... and that will affect what we see on the charts ... like the famous paintings of Arcimboldo ... is it a human face or is it just vegetables?



have a nice weekend

yes even if at this point we can ask ourself :

do I see what expect?

or .... and I like a bit more this ask


do I see what I know? or to say better : do I see what I have learnt to recognize?

At least this way to see the world move me to improve my knowledge of things.

Yea I am truly an optimistic guy

Have a good weekend too

Giorgio

It's been a long story... There always have two sides on the market during transaction. Assuming that they both have the same TA tools there should not be any transactions, because why should anyone sell if the TA 'says' that the price will go up? But when you start adding different time frames and position sizes this gets more and more complicated. The number of possible factors that influences the price (especially in short term) grows exponentially...

My current stance is -- price movements are random short term, if you have a system you need to take care of proper position sizing and adequate risk/profit ratio.