Do markets have to be inefficient for you to capitalize on them?
- Thread starter c_323_h
- Start date
I'm a mechanical trader, I dont even hang around while the markets are open so quantifying is everything. What I'm trying to quantify most is whether there's an opportunity for profit in the market using one or two models (of non-randomness). In other words my program is 'watching the market until it gets in synch, then it trades'. So as you can see it's not about why folk cant make money at all. You may be thinking of 'random walk' theory which sudgests that markets are entirely random in the long term and cant be traded. But this has been rightly discarded by quant analists. Just the same we need some test for non-randomness becausae non-random behaviour is our trading opportunity. Your test is to watch and get in sync, cool.
I always thought an efficient market is one that correctly prices stuff at all times to balance future supply/demand. Based on that, my feeling is that you make money if you contribute to the efficiency of the market, your lose money otherwise.
So in a perfectly efficient market, you could still make money if you're the last cog required to keep it perfectly efficient
So in a perfectly efficient market, you could still make money if you're the last cog required to keep it perfectly efficient
Quote from kubilai:
I always thought an efficient market is one that correctly prices stuff at all times to balance future supply/demand. Based on that, my feeling is that you make money if you contribute to the efficiency of the market, your lose money otherwise.
So in a perfectly efficient market, you could still make money if you're the last cog required to keep it perfectly efficient
try considering trading ahead of the market.....
then all of your trades are pushed.
some technical purists consider all factors to be wrapped up in price
hence all the inefficiencies (namely overbought or over valued or discounted vs. fair value, etc.) are either a function of new events not factored into current price
or
representing undue influence not factored into price or volume, such as pairs traders using the underlying to counter balance another position.
Generally the latter offers no indication in price or technical patterns that one could anticipate the underlying being used as a hedge to another position, thus creating its own inefficiency.
net, net, net (as we say in Wall Street) you will almost always have market inefficiencies, which create opportunities to profit from...
some also say that efficient markets are generally in balance or equilibrium and hence offer fewer if no opportunities to take advantage of.
hence all the inefficiencies (namely overbought or over valued or discounted vs. fair value, etc.) are either a function of new events not factored into current price
or
representing undue influence not factored into price or volume, such as pairs traders using the underlying to counter balance another position.
Generally the latter offers no indication in price or technical patterns that one could anticipate the underlying being used as a hedge to another position, thus creating its own inefficiency.
net, net, net (as we say in Wall Street) you will almost always have market inefficiencies, which create opportunities to profit from...
some also say that efficient markets are generally in balance or equilibrium and hence offer fewer if no opportunities to take advantage of.
Quote from nononsense:
Hi guys,
What do YOU call an INEFFICIENT market?
I call it opportunity. What do you call it?