Easy edges in the markets for retail participants?

[dbphoenix]

As we all know, it is very difficult to change the long established habits that were inculcated in us when we were quite young. People will fight to defend old maps and old symbols, regardless of whether those maps actually represent any territory here and now, and regardless of whether they ever did represent just what we were told they represented.

Even when people take their map and go to the territory and compare them and note the changes or corrections the map needs, they will still cling to the old map, so much so that even when these realities have demonstrably changed, or are provably different from the "map", they still tend to deny the external reality and assert the "truth" of the map.

Is it any wonder then that there are contradictions among the views of various . . . market analysts, if they are each clinging to a simple all-out view and for all practical purposes ignore anything that does not support the view they hold already? There are no contradictions in reality, you know. If we can just look away from the high abstraction long enough to see the facts, we find no contradiction.

If we value the map more than the reality, we must not be surprised to find that the reality doesn't always fit the map. In such a case, the reasonable man will change his map, not try to explain away the facts.

-- John Magee

 

[learner2007]

From the OP: "trading mechanically or fully automatically, an "edge" based on some repeating pattern. "

Trading profitably means making decisions based on information (in the real world). That is not to say that certain "patterns" will not appear that are repeated. Eg a flag or pennant consolidation pattern in the chart of an equity that has a prolonged monstrous run, or a pattern of a new low just prior to the moment of an absolute bottom in a chart (for you doji guys)... But the pattern in and of itself is meaningless, simply a side effect of what just happened. Similar patterns happen continuously in the markets w/out leading to the same subsequent extended directional sought-after chart... It was merely a coincidence; a random event

I've been trading the 'flags' you mentioned for 40 years based solely on the pattern itself without any 'real world info.'. And I can assure you that in the vast majority of the cases, the supply and demand that created the flag continues on leading to the desired result. Moreso than any other pattern I know. And as it is my favorite, I had one embroidered on a sweater someone knitted for me!

Actually, rather than reply to your post, I just wanted to show off my sweater!!

 

[trader198]

the only thing I firmly stick to is buy low and sell high. no secret to everyone here. a little bit advantage over others I programmed my rules into my trading platform.
I am a small retail trader. trading is an art. at the mean time, it is science.
when you talk about why sky is blue, that is science. when you talk about painting a blue sky, that is art.

the market actually just does two things,either up or down. when you are in the market a lot, you will easily get a sense what the market will do next. even though not every time my guess is right, I know I only need 0.55% winning rate, I am on the roll.
that is science. (I just factor 0.01% commission and slippage).

I do not pay attention much to chart patterns. I know chart patterns are illusions. just like when you look at clouds, if you want something meaningful from the cloud, you can easily find out something like a car, a person,sheep, ...you name it. I called it make sense from non-sense. there is no science here. I wrote a small simulation program,randomly generate charts. I found amazingly those charts seems real!

bascially if you are an ebay aution user, you know how the market works. stock/future/option are AUTIONED.

my edge is I strickly follow BUY LOW and SELL HIGH law. I enjoy trading.

 

[NoDoji]

I know chart patterns are illusions. just like when you look at clouds, if you want something meaningful from the cloud, you can easily find out something like a car, a person,sheep, ...you name it. I called it make sense from non-sense. there is no science here.

They're only illusions in your mind. The clouds (patterns) themselves are real. They are amazingly useful for predicting the weather that will follow if you pay attention to the clouds and not the shapes you believe they look like.

 

[deltagamma]

I trade pull backs to moving averages. I make money on most of them. A good product to trade these on are the eminis.

You should be able to make around $2k a week doing this, assuming you have around a $20k account.

NB: don't trade break outs. That is a loosing strategy. Trade 1 minute charts and use a 20 period moving average. Don't use candlesticks, since they lie. Use line chart to smooth out the noise.

 

[trader198]

cloud is cloud. you should never think cloud as something else.
chart is chart. I give a joke here. there is a gamber, who throws coin. head up,draw a green bar. head down, draw a red bar. he is a professional gambler. magically he draws a nice up trend chart. then presents this chart to a chartist. the chartists' eyes light up, he insists on knowing what the stock/future/option sybboml is, and he wants to buy. the gambler told him: the charts is drawed using a coin flipping way. the chartist is mad!

Chart itself does not add more information. In our programming word, it is a representation of data. that is why I called illussions. scientifically, in order to improve odd, you need add more information, the more raw information you have, the higher the odd. that is why house has edge, insider always wins.

x=y+z+i+j+k look at this formula, you have five variables, in order to predict X, you need know all those five variables. if you know just one, you predict the X with other four unkowns, may be way out of the exact X, with more being known, your prediction of X becomes more accurate!

chart is just like replace above formula with x=g+m+n+W+t. actually the same formula.

They're only illusions in your mind. The clouds (patterns) themselves are real. They are amazingly useful for predicting the weather that will follow if you pay attention to the clouds and not the shapes you believe they look like.

 

[dbphoenix]

They're only illusions in your mind. The clouds (patterns) themselves are real. They are amazingly useful for predicting the weather that will follow if you pay attention to the clouds and not the shapes you believe they look like.

Damn, that's pretty good, ND.

 

[nth]

chart is chart. I give a joke here. there is a gamber, who throws coin. head up,draw a green bar. head down, draw a red bar. he is a professional gambler. magically he draws a nice up trend chart. then presents this chart to a chartist. the chartists' eyes light up, he insists on knowing what the stock/future/option sybboml is, and he wants to buy. the gambler told him: the charts is drawed using a coin flipping way. the chartist is mad!

Isn't it funniest that the gambler after mocking the chartist says he makes money off the "lows and the highs" from the same chart..

 

[Surprise]

It appears some retail traders make a living, perhaps even a good one, trading mechanically or fully automatically, an "edge" based on some repeating pattern.
But isn't the existence and long term stability of easily exploitable repeating patterns in price movement, counter to good sense?

By which I mean; shouldn't such opportunities disappear due to the counter action of more professional, higher capital, better equipped, quicker, market participants?
Or, were those to be inescapable consequences of price dynamics, shouldn't they be acted upon more quickly than possible to small retailers, thereby cutting them out?

Assuming that these simply accessible opportunities exist and perdure, why is that? What is their place in the "ecology" of trading? What do "mechanics" and "automatons" (yes I'm being facetious) get paid for?

- ras72

You are right , there's no such thing as "an edge" - for retail traders - :

I believe that there is no secret edge and there is no static set of rules which will make u money always . I found these posts useful it is in FF from Porkpie :

" Most noobs are taught to trade what they think or see which by default puts you on the same side as the herd. If 95% are losing, what are the chances that a new approach using a variation of the same old defunct concepts using the same old indicators is going to put you on the winning side of the curve?

Making a living in the markets requires that you identify and react to the behaviour of others, not analyzing patterns and using indicators to time trades.

The market makes sure that nobody has a static edge by repeating the same exact strategy. Otherwise, it would get massively exploited with huge capital. If there was such a loophole that developed, it would be quickly closed. If participants instantaneously catch onto it then the price returns to complete efficiency. This action is not created by any individual or specific group, it is the auction itself and all the participants acting in the entirety that create the movement. "

" The bars, indicators, patterns, systems, structure, and action are all driven by what the other party is doing. The other party is the cause and everything else is the effect.

This is why some of the best "setups" you see still often fail to produce winning trades. We use tools and visuals to have context in what we decide to do relevant to direction and timing but the outcome after the entry is made is driven by the other party.

There are no "winning" entries. There are no winning trades that are decided in advance as many would like to believe. It is a game of who has the will to hang in there and who will push the other out. It is a game of poker and a game of chicken. I best compare it to a tennis match in which one player will wear the other down to the point that an unforced error is made.

Many of us are correct in direction and premise on our winning trades but still end up donating to the market. This is the a result of the trader on the other side having the ability to wear us down and force an error. "

"The market cannot be defeated with a static set of rules because it is dynamic. The players have to constently change up the action in order to keep the price fair. Those that play poker will agree that you can not win repeatedly at poker by making the same bets on the same types of hands. Same goes for trading. Either you are going to get pushed out or your opponent is. Successful trading is about engagement with the other traders. You get a random hand each time. Whoever plays the hand the best wins. The player with the best hand is not always going to be the winner.

Judging by all the systems/methods and discussions on FF, very few traders think about the person on the other side of their trade (ok we know its the broker but their prices come from the interbank of competing traders). This is the single most important factor in trading imo and will often decide the outcome of your success. Next time you stick an indicator on your chart, think about what you are doing and why. "

http://elitetrader.com/vb/showthread.php?t=216484

 

[Bob111]

The market makes sure that nobody has a static edge by repeating the same exact strategy. Otherwise, it would get massively exploited with huge capital. If there was such a loophole that developed, it would be quickly closed. If participants instantaneously catch onto it then the price returns to complete efficiency. This action is not created by any individual or specific group, it is the auction itself and all the participants acting in the entirety that create the movement. "

BS... in short...throw you example why-there is an edges(in stocks in particular) that are too small to be exploited by big money. Yes, that simple. You just can't trade big size there, because of liquidity constraints. On top of that-50k a year trading simple *pattern* off a bunch of stocks might be enough for me, but not enough/not worth for a big house to exploit it. I'm saying this, cause I trade EXACT same thing over and over every day for YEARS. This post above might sounds good, sophisticated and s*** but reality is a bit different. Simplier perhaps.