Are market-movements predictable in the short-term?

Okay, so short-term I mean a day to a week. Some argue that price-action analysis helps you predict movement but what about today and yesterday? These gap downs weren't predictable (I don't think) but why do prices gap down like this? Does an algo just randomly pull bids and price drives downward due to other algos exasterbating the process?

Seems like the real trading action happens in London at 3 A.M. (Futures) and everything just snowballs.

I feel since 99% of retail traders lose money, the real winners are the HFTs/MMs (bid-ask inefficiency), and insider traders. I believe these will be flattening out with time. Oh, and of course the house (brokerage).

Comments (13)

Jan 30, 2018

If a person creates the algorithm and market movements are based on this, feeding into supply and demand, why would it be random?

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

Jan 30, 2018

I should re-phrase my question. Is it predictable to see where algos will pull the ask or pull the bid?

Jan 31, 2018

You'd have to have a basic intuition of how algos work for that. But even that would not be enough.

Anything can happen in the markets. No matter what action you take always remember it takes just one trader participating in the market to negate your move.

Also another thing to consider is that as a retail trader you will not be successful unless you have an edge. Trading is a numbers game. Each trade is statistically independent of each other. But if you have an edge and apply it enough number of times irrespective of your emotional feelings you'll come out profitable in the long run

Always remember, you do not need to know exactly what the market will do the next moment to to be successful. Also, it's impossible to predict anything as such.

Jan 31, 2018

So this is the whole "let your winners run and cut your losses short?"

Jan 31, 2018

Nope. You may let your winners run and cut your losses short but if your number of losses is far greater than your winners you will lose money.

Feb 1, 2018


Feb 1, 2018

Just think about this. According to pricing models such as the Black Scholes and according to most basic market theory in the academic world, a security's returns at least in the equity world, are assumed to be log normally distributed. However, if you think about it logically, from what we've seen in the past, isn't it more likely for the market to have a strong unexpected drop rather than a strong unexpected rise? Now having mentioned this, ask yourself, intuitively, what must be true, for phenomenons like Volatility smiles to exist?

Carl Van Loon
Van Loon & Associates

Feb 1, 2018

certain patterns have a higher than 50% occurrence of, if you can find these patterns, and then create a set of risk management rules around them, you will be able to come up with a statistically profitable trading strategy. Identifying those patterns (both historically, and in real time) is the hard work of an intraday trader.

First, you need to do the work to identify a set of patterns that repeat. Then you need to watch the market and constantly look for them...and when you find them, apply your risk management rules. Some people code this up (quantitative / algo traders)...others do it all in their head (discretionary traders).

Assuming you find a pattern with a 70% win rate, you can still lose all your money if you don't have good risk management rules to save you from the 30% of the time that you lose. This is why risk management is equally as important as trade pattern detection. Based on this theory, some days you will be more active as a trader than others. Some days the market will be completely random in your eyes with no clue, and so you won't make a single trade.

just google're welcome

Feb 1, 2018

100% predictable. Bloomberg had the article a week ago. Predicted it. Month end rebalancing flows.

Feb 1, 2018