Do markets move in trends – I find it baffling and fascinating that this question is still even debated, but there are individuals – usually in the academia – who, in all seriousness, will maintain that price fluctuations are random, and that we essentially hallucinate trends. I’ve tackled the issue in some detail in my book Mastering Uncertainty in Commodities Trading, but perhaps a few charts could help settle the issue:
Is it obvious as it appears, or is it a hallucination as some are convinced? What do you think?
Alex Krainer is an author and hedge fund manager based in Monaco. Recently he has published the book “Mastering Uncertainty in Commodities Trading“.
I too have studied trending in major markets for decades and my conclusion is that price movements tick-by-tick or candle-by-candle on any time frame are random however the Flow of prices are influenced by a ‘trend’ factor that influences direction and is what accounts for the obvious wave structures.. the interesting thing I think is that not many traders or analysts can put forward a definition for “Trend” that captures the features of what a trend is and how it can be discerned..
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If I understand your last statement correctly, I believe it is not possible to define a trend – it would entail distinguishing all trends from all non-trends which can’t be done because a trend is a fuzzy concept. All you can have is a judgment and a relative degree of confidence in that judgment. When some trend is at its peak, then you may be certain. As it pulls back your confidence gradually declines. When prices are in a sideways consolidation, your confidence could be at zero… so a black/white definition is out of the question. But this can be resolved with a neural network and a set of fuzzy logic rules.
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