Efficient Market Hypothesis
The theory that asset prices already reflect all available information.
Quick answer
The efficient market hypothesis says asset prices already reflect all available information.
Definition
The efficient market hypothesis holds that prices instantly reflect all available information, so it is hard to consistently beat the market. In its strongest form it implies technical and fundamental edges are largely priced in. Most retail traders treat it as a useful caution rather than a strict rule, because markets are not perfectly efficient.
How It Works
- It implies beating the market is hard
- Markets are not perfectly efficient in practice
- It cautions against assuming easy edges
Trading Tips
1
Use it to question why a supposed edge works
2
Focus on edges that survive competition
3
Treat the theory as a warning, not a verdict
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