Random Walk Theory

Random walk theory holds that stock price changes are unpredictable and independent of past movements, meaning a stock's chart history contains no reliable signal for where the price goes next. It is closely related to the efficient market hypothesis and is most associated with Burton Malkiel's book "A Random Walk Down Wall Street."

The theory is the intellectual foundation for a lot of skepticism toward technical analysis: if prices really do walk randomly, then chart patterns that appear predictive are, by definition, coincidences that will not repeat reliably, a claim technical analysts sharply dispute.