The scientific theory of "random wandering"

The scientific theory of "random wandering"The theory of random walks has nothing to do with attempts to get from a point. And to point B without a compass and a map. On the contrary, it is a scientific theory that testifies to the extremely random nature of stock prices. In other words, yesterday's behavior of stock prices in no way determines their current behavior.


In addition, this theory asserts that the market is so effective that it is almost impossible to constantly exceed the broad market indices. In other words, any advantage that you can achieve as a result of fundamental analysis, technical analysis or fortune telling on the coffee grounds will not only cost you dearly, but will not bring you substantial or lasting benefits. Ultimately, transaction costs substantially outweigh any improvement in efficiency that you will achieve through analysis.


Armed with computer models and the results of numerous studies, scientists and experts pray on these hypotheses of an effective market, as an icon. Their arguments are disputed by several arguments.An authoritative organization such as the Federal Reserve Bank of New York published the results of a study that shows that the use of support and resistance levels improved the trading results of several firms. In addition, articles published in the Journal of Finance indicate that trading based on moving averages and “head and shoulder turning scenes” surpass market average indicators.


Maybe you believe that this proves the effectiveness of technical analysis in all cases of life? Of course no. However, at least this raises doubts about the validity of the theory of random walks, especially the part that claims that technical analysis cannot be used to continuously improve results in comparison with market average indicators.


Discussion of these arguments to some logical conclusion is not possible. Even if you successfully use technical analysis, proponents of the theory of random walks will argue that your success is also accidental and is the result of a fortunate combination of circumstances. Do not believe these people.Believe the well-known proverb that claims that luck smiles to the strongest.

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