Every move in the market explained in 2 sentences

JigsawTrading

JigsawTrading

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I am putting this out there so you can shoot holes in it, debate & disagree. My intent is not to start a war. This is my own personal view of the markets, I've held it for some time. Many have disagreed with it and I've always had a 'riposte' to the points raised.

So here goes - Pete's Unifying Market Theory

All trades are placed because a trader believes other traders will do something after they place their position. It is this and this alone that generates moves in the market.

In effect - everyone is trying to outguess each other and it is the trading based on these guesses that moves the market. Nothing else.

Now, a few caveats before I leave you to have at it:
1 - I do agree that hedging is like buying insurance and it could be argued a true hedger buying wheat or oil is purely buying insurance. I will say no more on this until it is countered - but I think it still fits.
2 - News does of course move the markets - but people trading on or anticipation of news still fit in my opinion.

So - have at it. There is no market - just lots of people doing the exact thing most you here are doing - trying to guess what everyone else is doing. Which is also trying to guess what everyone else is doing.

Brain twister.
 
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There is only one truism in the stockmarket which is the big boys (mutual funds, hedge funds, banks and brokers) rule the markets and set trends. They have tens of billions in capital, how much have the retail traders all combined? Retail traders are a very tiny portion of the trades placed on most stocks. Exception, is the day traders on penny stocks. Those are too small for the institutions to bother with. So, day traders are essentially, trading amongst themselves. Most of the stocks in the stockmarket move depending on where the big boys move their monies to. Want to make monies? Just follow the trend.
 
smallfil said:
There is only one truism in the stockmarket which is the big boys (mutual funds, hedge funds, banks and brokers) rule the markets and set trends. They have tens of billions in capital, how much have the retail traders all combined? Retail traders are a very tiny portion of the trades placed on most stocks. Exception, is the day traders on penny stocks. Those are too small for the institutions to bother with. So, day traders are essentially, trading amongst themselves. Most of the stocks in the stockmarket move depending on where the big boys move their monies to. Want to make monies? Just follow the trend.
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There must be 2 truisms then.

My 2 sentences apply to all the large trading entities you mentioned in my opinion.
 
Also, I don't think this theory explains investors who are looking for dividends. Many investors only care about the consistency of the dividends, and have no position, up, down, or neutral, on the value of the stock. Trade doesn't even need to be entered into the equation.
 
Spaghetti Code said:
Also, I don't think this theory explains investors who are looking for dividends. Many investors only care about the consistency of the dividends, and have no position, up, down, or neutral, on the value of the stock. Trade doesn't even need to be entered into the equation.
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Rate of return from a dividend trade is based on share price and dividend amount. So price must be considered good.

A dividend investor also needs to preserve capital.

So they believe others will buy or hold after they invest. Or not short the crap out of it...
 
Spaghetti Code said:
Also, I don't think this theory explains investors who are looking for dividends. Many investors only care about the consistency of the dividends, and have no position, up, down, or neutral, on the value of the stock. Trade doesn't even need to be entered into the equation.
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Everyone who's last name is NOT Buffett has a get me out at all cost - if a drop is severe enough no matter the dividend.

And as to The Fed, again it is still traders/investors watching/anticipating what other traders/investors are or will do once the Fed actions are known.
 
JigsawTrading said:
All trades are placed because a trader believes other traders will do something after they place their position. It is this and this alone that generates moves in the market.
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Yes, agree 100%. I actually call it front running:
HFTs front run Day Traders/Order Flow Traders
Day Traders front run Swing traders
Swing Traders front run Position Traders
Position Traders front run Macro Traders
Macro Traders front run Policy Makers

So pick your preferred time frame and start front running!
 
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