A random walk theory suggests what about price movements in the market?

The concept of random walk theory posits that price movements in financial markets are essentially unpredictable and do not follow any discernible trend or pattern. This theory implies that each price change occurs randomly, reflecting new information that is inherently unpredictable. Therefore, past price movements or trends provide no reliable indicators for future price movements, challenging the notion of price prediction.

This understanding is crucial, particularly in market analysis, as it suggests that attempts to forecast future prices based on historical trends or patterns are likely to be futile. Instead, the random walk theory underlines the significance of new, unanticipated information as the primary driver of price changes, reinforcing the idea that markets operate efficiently in response to incoming data.