Random Walk

What is Random Walk?

Random Walk meaning An economic theory that market price movements move randomly. This assumes anefficient market. The theory also assumes that new information comes to the market randomly. Together, the two assumptions imply that market prices move randomly as new information is incorporated into market prices. The theory implies that the best predictor of future prices is the current price, and that past prices are not a reliable indicator of future prices. If the random walk theory is correct, technical analysiscannot work.

 

reference: U.S. COMMODITY FUTURES TRADING COMMISSION – CFTC Glossary