amateurs have no chance

dozu888 said:
the key here is you need to think like the big boys... their intentions can be read if you train yourself to read it.. the evidence is everywhere because they have all the tools... they have the firepower to move the market in any direction (but it must be the logical direction!), and they have the media machine to pound your psychie from all the channels... if you cannot beat them you have to join them...
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The issue I have here is cause and effect.

Is the market moved because of net short or long positions...or are positions net short or long because the market is moving in that direction?
 
MoneyMatthew said:
This data is not representative of retail as a whole. This does not represent positions on the S&P 500. The "US 500" chart and data that you are showing is from one of IG's CFD products. There are no pro-traders within that sample because no hedge funds are taking speculative or hedging positions in a CFD. Even if "pro-traders" were in the mix, I don't think IG crosses orders, they are a dealing desk right? So the "pros" would never be directly competing with the "amateurs" at least from a counterparty perspective.

To top it off, the sample size is very limited at around 2400 traders. Either that or this market is really small with 2400 traders total. In that case it is not a sample but instead showing the entire population for that product. The majority of retail equities holders are long only/buy & hold. Either directly as a holder of an S&P 500 tracking etf or via a long only mutual funds that track the S&P.

I'm not saying that this data is worthless. Maybe it could offer some value by fading the crowd? The main problem you would face trying to trade this information in an automated fashion would be sideways periods of sentiment flip flopping. Take a look on your chart at October to mid November, you would be flipping positions from long to short and short to long multiple times during that period. All of that chop would eat you up and really put a dent in the gains you would realize from late December to now. My guess is, the returns of this signal would be similar to that of trading based on a 200 day moving average. Better look elsewhere for alpha.
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some good points... let me reply..

I use this data to demonstrate how amateurs think and get slaughtered:) as a side note check how they also pile onto bitcoin and gold... amateurs love to pick up dead garbage, and short the strong stuff going upwards.

the sample size - do you know how many stocks you need to mimic the sp500 performance? about 30... 2400 traders is more than enough to represent how amateurs think.

buy and hold - true, this portion is what the pros can NOT shake (for the most part), so this game is really the pros against the amateur speculators... and this data is perfect!

I don't use it directly as trading signals... I do longer term accumulating/investing, so this data is really a guidance for how aggressive I accumulate and how much I need to prepare for corrections.... shorter term traders may use it differently... e.g. if the ration is around 1:1 and market sells down hard from the top, the likelihood is high for a bigger correction hence shorting can be good for a few days.... but e.g. right now we are around 8:2 short long, therefore any big down day is unlikely to have follow thru.. that type of thing.. But for me, the shift from 9:1 to 1:1 takes a long time so there is now whipsaw.

The other purpose, as food for thought, is how we should approach the market mentally... do you think it's you against the market? or be in sync with the market? whatever, that seems mainstream.. but I think the easier way is - this is a game of the hunter and the hunted... the hunter has the fire power and the news media...what if you wake up everyday, and think - I am a hunter, how do I hunt 'them' down today (or this month, this year etc).... because there is a clear division of the predators and the prays.... in other words you figure out what the pros are doing, what the amateurs are doing, and you just play on the right team :)
 
lindq said:
The issue I have here is cause and effect.

Is the market moved because of net short or long positions...or are positions net short or long because the market is moving in that direction?
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good question..

the short answer is simple - if SP today is back to the mid october level, why is the amateur short/long ratio so different today?

so my interpretation and the over all background is this -

stocks are too under-valued and we will go much higher (I have posted elsewhere about the Fed model and the current 10-year yield vs. the SP forward yield etc)... but by october there were already large number of amateur speculators on the rally train and the pros need to get rid of these people.

hence the hard shake from oct to dec.

now that we are back close to the previous highs... the pros have achieved their goal.. the amount of money in the market is the same, but ownership has changed.. amateurs have been shaken off, and the chips have been collected by the pros, and we are now ready for the next push higher.
 
_eug_ said:
I find it interesting how you kept a similar thread back in the summer right before the big sell off came... hmm
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oh thanks for remembering that... yeah I have been using this data for a while, since mid 2016 when I found it.... there is the other stuff like put call ratio and vix and aaii etc stuff I use.... but this forexIG data is so interesting to look at.
 
.... you also have players arbitraging between products. That's why theories sometimes work and other times the market just moves against your theory.
Markets don't always have the same players involved, that can change.
 
Another way to look for retail sentiment in traders / speculators is to go to stock twits and look at the ratio of comments. It's probably not the most accurate but its another data point. I've also used google search analytics to gauge interest in products / search terms and get a idea of how the public feels.
 
DepthTrade said:
.... you also have players arbitraging between products. That's why theories sometimes work and other times the market just moves against your theory.
Markets don't always have the same players involved, that can change.
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markets don't, but the forexIG traders and the AAII subscribers are a predictable bunch.. although I prefer the former..
 
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