Market randomness
Every tick, every pip and every move has it’s movers behind. We all know that. Supply and demand is meeting and creating imbalances in markets and affecting the rate of the particular financial vehicle. As technician I like my charts but I know by hard failure how easy it is to fell in love with nice H&S pattern or a strong S/R breakout. As a technican I have to be aware that not all actions are created with specific meaning {although financial news agencies are trying to convince us otherwise}. Let’s say we trade EURUSD pair and price set a new support at 3615. This stop doesn’t necessarily means that the market doesn’t like this specific level and is not willing to go below. This can simply mean that the ratio between sellers and buyers is different at that specific moment yet we sometimes create a support level out of this 3615 even when it doesn’t have any psychological meaning to the big money which are moving the market.
As an example I created this very simple experiment in excel to show you how random markets can be {excel file can be found at the end of the post}. I took 20 000 numbers and assigned them random function. This function then generated three possible values: 1; 0; -1. Every time the random value is generated it is added to the previous number. For 10 numbers it might look like this:
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