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Introduction:

It’s often suggested that forex and markets in general are a succession of random movements, a random walk. People trade based on logical reasoning but there are so many people affecting the same value that the movements of a price become impossible to tell apart from a random walk.
With a simple method of random walk visualization, we can easily show that the above theory is incorrect. Especially for short periods like ticks, prices tend to travel in easily identifyable trends, much more so than a random instrument would.
Random walk vs tick data

First let’s see what pure randomness, as far as computers can generate it, looks like:
The pictures above are generated by a random walk. On each step, the position has a 50/50 chance of going up or down and on the next step, a 50/50 chance of going right or left. The colors change accordingly purely for aesthetics.
Now we’dlike to do the same using actual tick movements from forex instruments. We generate the following images using forex tick data. We move up or right for rises in price and we move down or left for falls in price. We alternate horizontal and vertical movements. If forex is simply a random walk we expect t…
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salamandra avatar

Поддержу за оригинальность... Но все же выскажу замечание... Хаотичное движение распространено во всех направлениях. Рынки движутся во времени только вперед... Движений вверх, вниз, и обратно не существует. Отсюда понятно, что все будет в направленном диагональном треугольнике. Если так же ограничить хаотичность получим то же самое...

olga avatar
olga 14 May

If I understand your comment correctly, I think you must have missunderstood salamandra. The position on the image moves horizontally and vertically one after the other, so if a price movement is random, the final drawing will have no global direction. The truly random images at the top could also be translated to a chart that goes only forwards in time. I just find this method of visualization much more telling.

ioannist avatar
ioannist 21 May

"There is a strong tendency towards diagonal movements" ...well, of course, since you have coupled the up movement with the right movement, and the down with the left. You did not do that with the random walk data.

ckdot avatar
ckdot 16 Dec.

"If you simply predict that the next tick movement will be the same as the previous, you’ll be right about 65% of the time". I've double checked that via a simple script for about 5 million ticks from January 2011 till November 2017 and the chance to guess the right movement is nearly exactly 50% - not even close to 65%. I just checked for all data if tick 3 is bigger than tick 2, if tick 2 is bigger than tick 1 - or tick 3 is small than tick 2, if tick 2 is smaller than tick 1. Maybe I'm mistunderstanding something right now, could you explain this a bit further please?

elfen avatar
elfen 10 Feb.

yeah,i found the same with you ,you can filter the tick date with distance pipes.but the probability of trend will affected by the distance.

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10/38
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The promise is due and as such, I am here to continue the explanation of the strategy of "pivots", but not before making some comments to the approaches made ​​by some readers. We must consider this strategy as "dangerous", since in most situations be against it trend, this attitude somehow makes sense, when much always heard that the "Trend" is our best friend, but there a very important rule, there is no trends, to move in the direction of the infinite, everything rises and falls all that falls sooner or later ends up climbing, my experience says that in regard to this strategy of "pivots" it is an effective strategy and that "pivots" are like the "Gap", always turn out to be met, so I stated in the previous article that requires patience but the most important is how we do management of funds, we must not excessively leveraged and walk whenever possible, one should take into account other aspects that I will try to address in this article October. In the previous article I made a special reference to "Time Frame" Monthly, this month I will explain the importance of TF weekly and daily. And will introduce the filters that should be considered in this strategy. Last month we had t…
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jlongo avatar
jlongo 9 Oct.

Waiting for the next ones... Good work.

Bluedragon avatar
Bluedragon 10 Oct.

it was a surprise to me the vote from Dukascopy in last Month. i'm very glad with TOP10 POsition. This is a evidence that anybody can win. 1st when get new knowledge, and then wen we get a price. I Hope that this 2nd part be usefull to everybody.

LinnuxFX avatar
LinnuxFX 10 Oct.

I made a lot of green trade in testes with this strategy, next step on the way is building a profitable strategy... Thanks for shearing...

doctortyby avatar
doctortyby 16 Oct.

I am currently using Pivot Points in my Trading Strategies. I highly recommend Pivot Supports and Resistences for profitable trading setups. But one has to be careful to be able to trade both real ad False Breakouts signals provided by Pivot Points. Keep writing

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