#21
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Re: Random Walk
It's either you or me... I think it's you.
The point is that if the security price always equals its intrinsic value, the price can't change unless the underlying value changes. That being the case, chart patterns or other technical factors cannot predict future movements of the stock. BTW, I don't believe the premise of this argument, I took it from the OP. |
#22
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Re: Random Walk
Those you believe in the random walk theory have probably never made money in the market. Good luck with your treasury securities.
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#23
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Re: Random Walk
[ QUOTE ]
It cannot simultaneously be the case that the price of a security always reflects the best possible estimate of its intrinsic value and that technical analysis is profitable. [/ QUOTE ] Of course it can.. here is the most simplest of examples... A stock breaks out to new highs on significant volume, because of an intrinsic value change. The insider and early institutional buying create the volume surge. Day Traders jump on the immediate breakout. End of day traders get on the bandwagon the next day. The institutions continue to push the stock up as they refine their analysis of the new intrinsic value. The uninformed public buys at the end of the immediate trend as the day and swing traders start to sell and take their profits when price approaches the new "perceived" intrinsic value. Simple! |
#24
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Re: Random Walk
TA and specifically trend following techniques do not attempt to predict, whatsoever.
This point is absolute. There is no prediction in trend following. Probability is all you have to go on. Letting go of predicting (philosophically) is essential to the practice of successfully following trends. TA and specifically trend following techniques look to identify +EV spots to enter. What plays out after that is a question of uncontrollable events and the 100% controllable practice of applying specific trading discipline. TA and specifically trend following techniques assign and act upon valid probability estimates of price moving in one of three directions (up, down, sideways) from the current price. Let "act upon" include the action 'do absolutely nothing'. |
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