As prices are formed in the FOREX market


In practice to distinguish between a random walk of prices of non-random? At first glance, one can conclude that if the market is a pronounced trend, it is a sign of non-random price movements. Or, in other words, the long-period moving average curves with random walk rate of the asset should be placed horizontally, as an average over a large ensemble of random variables, as a rule, gives zero. But is it really? We can say that the dynamics of the foreign exchange market trading from a position can be completely random, if past stock price dynamics is close to the trajectory of the sequence numbers issued by the random number generator at regular intervals.

About two states

At the Physics Department of Moscow State University I did a few more paths modeled in such a generator under the following conditions:
1. The initial number was chosen at 1.5000, which is comparable to the rate of USD / CHF;
2. Standard deviation of the price of artificial currency is 50 points, which also falls within the range of real trading market for USD / CHF.

After a rather long comparative study of the trajectory charts with USD / CHF rate at various time intervals, I found more or less the same pattern.

Trajectory, drawn by a random number, can be taken for any exchange rate dynamics. If desired, they can see trends, turning points, loops, and other attributes of the graphs. One of my friend the trader to see lower graph in the figure, asked what instrument he belongs. In his view, it is easy to trade as a distinct trend can be traced, but also replete with plot reversal pattern and has some strong support levels. Friend was very surprised when I told him that this is the trajectory of a random walk. Ask the reader to take another look at the picture and answer presented itself: is it possible to say that the market there are trends (non-random processes pricing), only on the basis that they are easy to interpret visually on a chart?

Every trader knows how dangerous tendency to see where they are not, and pick up signals from technical indicators - and wrong. On the other hand, a trader who does not like to know how hard and recklessly trade against the trend as dangerous to hold position against obvious signals or indicators published political news. More dangerous categorically deny the trends and signals of the major technical indicators or the fact that the impact on the course selected asset political news.

Let's look at that part of the figure under discussion, where there is a real currency. Of its dynamics are clearly visible trends mean duration - pricing processes are not accidental.

Or is it random? Referring again to the concept of fractal market [1]. As we have said, a characteristic feature of a fractal of the financial market is the possibility of far-from-equilibrium many different situations with the same initial conditions. In each of these situations, the market behavior changes qualitatively, in particular, it can go to <a chaotic> state in which the behavior is best symbolizes the new that is introduced to the concept of randomness and non-randomness of modern science. Both states - and chance, and chance - are coherent. The latter means that for both states characterized range correlations, and both states are generally unpredictable. Dualism random and nonrandom suggests that both states are integral parts and products correlated evolutionary processes.