A random number generated price chart would be dismissed by the one who created it due to his knowledge that they are generated by random numbers, even if the conclusion that such a chart is random may or may not be verified by the creator.

A person who does technical analysis could be accused of trying to apply his mind to such a chart, without the knowledge that it was generated using random numbers and not a real price chart.

The creator of a random number generated chart suffers from the illusion of knowledge. The Technical Analyst at worst suffers from the impulse to be curious.

Curiosity however may still lead to making some money, even if the performance can be explained by money management and not by any predictive ability of either the Technical Analyst or the chart. Data does not predict. It is the human enterprise, whether scientific or artistic, that predicts.

The creator of such a random number generated chart will however not make any effort to make money from such a chart, because of the illusion of knowledge.

To completely illustrate the point, the logical construct here is akin to putting the same random number generated chart in real time and beaming it to a pool of traders who may or may not trade on it. Some will, and some will make money. Some will lose money.





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1 Comment so far

  1. Ed on February 13, 2015 4:03 pm

    Also consider - what if the market was random until other traders started attempting to game the process. These other “random noise” traders, by their interactions with the market process, create patterns that a second group of traders can pick up on and profit from in a non-random way.

    The illusion or faulty quality of “random number” chart analogy is the idea that the market exists apart from the traders who trade it, as if we are observing a distant planet or star and not a human process subject to human intervention at the click of a button.


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