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Is Forex Market Random?

Are Forex charts random? Does trying to predict the market and trade currencies for profit even makes sense? Traders and curious people ask these questions and, I am sure, find a lot of contradicting answers online. The number of traders who claim getting consistent profits from the foreign exchange market is counterbalanced by a number of persons stating that the market cannot be predicted because randomly-generated charts cannot be reliably distinguished from the true ones.

One of the most famous supporting work for the randomness theory is Eugene Fama‘s article Random Walks In Stock Market Prices. Despite it seeming contradiction, the market randomness theory is based on the efficient-market hypothesis. On the opposing side, a book called Non-Random Walk Down Wall Street by Andrew Lo and A. Craig MacKinlay does a great job backing up the case for non-randomness of markets. However, both camps are full of supporting articles, books, documents, and experiments. Nowadays, proponents of both points of view can be found among scholars, traders, analysts, and general public.

I will not be trying to prove one point or another here. I will just leave the following two chart images before the poll.

The first one is the well-know EUR/CHF disaster of January 15, 2015, when the Swiss National Bank decided to abandon its floor rate on the currency pair:

EUR/CHF - Price Action Following SNB Decision in January 2015

The second chart is a randomly generated one:

Randomly Generated Forex Chart

Note: There is a poll embedded within this post, please visit the site to participate in this post’s poll.

If you want to share a detailed opinion on whether Forex market is random or not, please do so using the commentary form below.

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About Louie Lewis

Louie Lewis
Successful forex trading starts with you first. Then comes the actual strategies and techniques. I have been involved with forex and forex trading for a few years now. It is a wonderful way to build wealth. The learning never stops and I want to help others along their journey into this wonderful market of opportunity.

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