A trading thought experiment

I cannot answer this question.....why do you ask?

Some say that only 30% of the time the market trends....so would you be creating a trend? So could we assume others would jump on? .....then on the way back up the same....?

It seems that prices fall faster than they rise....I have heard this...but have not seen cold hard facts...I just seem to observe that.

You would need a tremendous amount of capitol to achieve this.

The outcome of this would be determined by how many jumped on the trend with you that you created.....and on which side?

Michael B.
 
In such interesting times as today, where debt is out of proportion, job situation gets worse everyday, and the Fed is priniting cheap paper like there is no tomorrow (being that is the only way to stimulate any growth), I do not think you would have any problems covering your shorts at an excellent price.

If S&P actually halved, one would have to be an idiot to start buying for any fundamental reasons and long hold times. There would be so much panic, that everybody and their mother would sell in the fear that a big time crash is coming.

Of course this is all assumming you are shorting with the market trend. Although it would be damn impossible to manipulate the price down 50% with 100 contracts so it's not an incorrect assumption
 
Quote from pspr:

Actually, Globex will bust most of your trades as the E-mini will move away from the big S&P and the cash.
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You have to *ask* for your trades to be busted. If you don't ask, then generally they stand.
 
You would lose your ass big-time and the market would end up about 100% higher (just an estimate) than when you started this ridiculous experiment. The locals, hedge funds, pit brokers, etc. would immediately see your pattern or believe that you sold in error and they would gap the bid back to your initial selling price. You would then have to buy back all of these silly contracts at WAY higher than where you even begun shorting. I can only pray that I see that situation in my lifetime (nothing close would ever happen as the trades would be busted). Anyway, this is the answer, plain and simple...
 
Quote from trade-ya1:

You would lose your ass big-time and the market would end up about 100% higher (just an estimate) than when you started this ridiculous experiment. The locals, hedge funds, pit brokers, etc. would immediately see your pattern or believe that you sold in error and they would gap the bid back to your initial selling price. You would then have to buy back all of these silly contracts at WAY higher than where you even begun shorting. I can only pray that I see that situation in my lifetime (nothing close would ever happen as the trades would be busted). Anyway, this is the answer, plain and simple...
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i think axeman wants you to suspend reality in this experiment.

best,
surfer :)
 
Thanks for the reply. I believe that I am suspending reality for the moment by acknowledging that hypothetically the trades do not get broken. Are you suggesting that I should suspend reality to the point of actually imagining that anyone in their right mind would sell to you as you try to buy it back on the way up? The bid would gap immediately close to your starting price as soon as the street realized what you were doing. Maybe axeman can clarify? Thanks.
 
Quote from Cutten:



You have to *ask* for your trades to be busted. If you don't ask, then generally they stand.
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When the E-Mini had those spikes a few months ago they busted everyones trade including some here who bot near the bottom of that sell off. The reason given was that the E-mini moved too far away from the cash and the big S&P. :)
 
axeman- the statementabout the 3 points----I was sort of poking fun at my own inablity to trade well in the low volitility enviornment. I have been trained to take what is on the table and a do not go for the big trades like I did in the past.
 
Quote from axeman:

Imagine the following scenario:

You have unlimited capital.

You start shorting the emini futures market at the rate of
100 contracts every second.


You do this until the market loses HALF of its value.

At that point, you start buying all of it back at the rate
of 100 contracts per second (same rate).

Anyone care to wager if in the end you:

1) made money
2) lost money
3) About even


peace

axeman
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None of the above: you would come out exactly even no matter what happened.

Unlimited capital - X = unlimited capital
Unlimited capital + X = unlimited capital

I know the implications of infinity are probably a technicality you meant to overlook, but if you're going to do a thought experiment you might as well be rigorous in your terms

p.s. given that you actually meant to say 'a sufficiently large enough amount of capital to conduct the experiment' (a few trillion maybe?), a realistic answer is that you likely would lose net because of slippage on the way down and back up, similar to the principle of heat loss in energy transfer.

an even more realistic answer is to say that such an experiment would not be possible within the markets as they currently exist. the experimental 'caveats' required in actuality distort the character of the markets so much that the hypothetical markets you end up with no longer bear a sufficiently useful resemblance to the real thing.

 
Hi All,

Some people seem to have a lot of time to amuse us with their silly questions. I am heartened by the few posters calling this a "perplexing" and "crazy question".

Reading the header "A trading thought experiment", I fail to see what this has to do with thinking.

nononsense
 
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