Is trading completely useless?

The market is very efficient and efficient market hypothesis holds up to a certain degree, but it does so in a very week form. But as it is the nature of any highly competitive activity, whoever is participating in search of profits have to have some sort of a competitive advantage (this is what most people don't seem to understand, hence the reason they rely on mass produced books and ideas). It is not a difficult concept, if i have to have a competitive advantage in order to succeed, it is a no brainer that I cannot possibly look to gain this advantage by doing things that everyone else is doing or relying on things that are available to the public. Strategies that have been publicized in books and magazines by themselves have absolutely no competitive advantage, they might however be able to provide ideas for a starting point but that is it. The reason why those strategies will not work is because the EMH holds up to a certain degree; those holes (inefficiencies) are already plugged.

<img src="http://img96.imageshack.us/img96/5150/emh1vr1.gif"
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these inefficiencies are very hard to find, and often when you think you have found something it might be that all you have found is noise. but this does not mean that markets are so efficient making it impossible to find inefficiencies. the biggest problem is not that there are no inefficiencies, it is that most people do not realize that there is no free money. in other words they are not even looking for inefficiencies, they are trying to beat the market with what they found in some trading book they read...........I've probably gotten carried away...in any case, without understanding these elementary facts about the markets, trading, as the OP suggested, is completely useless. just my .02

shane
 
Quote from otcstockfund:

efficient market believers are people in the educational community who are net losers
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Sort of like "those who can, do. Those who can't teach... BS."
 
Quote from shanoballs:

The market is very efficient and efficient market hypothesis holds up to a certain degree, but it does so in a very week form. But as it is the nature of any highly competitive activity, whoever is participating in search of profits have to have some sort of a competitive advantage (this is what most people don't seem to understand, hence the reason they rely on mass produced books and ideas). It is not a difficult concept, if i have to have a competitive advantage in order to succeed, it is a no brainer that I cannot possibly look to gain this advantage by doing things that everyone else is doing or relying on things that are available to the public. Strategies that have been publicized in books and magazines by themselves have absolutely no competitive advantage, they might however be able to provide ideas for a starting point but that is it. The reason why those strategies will not work is because the EMH holds up to a certain degree; those holes (inefficiencies) are already plugged.

<img src="http://img96.imageshack.us/img96/5150/emh1vr1.gif"
<br>
these inefficiencies are very hard to find, and often when you think you have found something it might be that all you have found is noise. but this does not mean that markets are so efficient making it impossible to find inefficiencies. the biggest problem is not that there are no inefficiencies, it is that most people do not realize that there is no free money. in other words they are not even looking for inefficiencies, they are trying to beat the market with what they found in some trading book they read...........I've probably gotten carried away...in any case, without understanding these elementary facts about the markets, trading, as the OP suggested, is completely useless. just my .02

shane
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Drill a hole in the pipe. I drill according to what is flowing in the pipe so that the fow comes to my account. Quants are people who work for BIG money using the leaks you are talking about.

EMH is what keeps the pipe from rattling as the flow goes through it. EMH is the set of brackets that keeps the pipe secure and what lets mt drill my holes and put in the piping to my account.

Think of my accounts as operating on gross price change of each and every instrument that has good price change.

Watch the ES for example. Every time price is changng I am draining out money from the price change. I take out money whether it is flowing long or short; I do not care which way I take the money out all day long day after day.

Drill a hole in the pipe. Extract the flow of the market.
 
Here is a picture of the efficient market theory at it's best. Notice how effiecient and smooth prices are. Just don't mind today. :D :D :D :D

<img src = "http://elitetrader.com/vb/attachment.php?s=&postid=1292612">
 
Wow.... you could have said nothing in less words and saved your fingers.

http://www.answers.com/topic/concise

Quote from jack hershey:

Thanks for responding. That was unfortunate.

The theme of the thead is market utility (stated in a productive way) and getting EMH down cold in interactive settings (meaning classrooms) really flushes out how to pick out where money is to be made.

The heirarchy that builds on money, power and information is very key to making money. The information that is at the top is what drives things.

It seems to divided into what is there in the NOW and near past as compared to what is being telegraphed. The information of intention. All that math comes down to errors and their correction.

I do not forecast but I do front run the smart money and it's telegaphed forecasting and its marginal analysis of the related corrections.

The old sigma n of the f sub i's. Independently created forecast errors on the same side by the smart money always telegraph the turns by the rate of correcting.

It is like thinking of each day as a before, during and after settlement. Settlement comes raging onto the power desks (information hitting the powerful) who then have until close to "fix" stuff. And then at open the next day everything that leads to settlement is being input from the "outside" (this is the money on the lower level below power) until the moment of settlement again returns.

Did anyone learn the multiple choice test answer for settlement time? Well who cares. Knowing how EMH makes the wold turn is not lectures or multiple choice or papers being written.

It is learning how to make money by knowing how information telegraphs the opportunities.

Money flows and provides the settlemen data, power dictates the resolution of the settlement problems (and opportunities). Then they sleep and, then, it starts over everyday of the business year.

Front running the telegraph using the sentiment created by the power guys dictating resolutions is how to be where the money is to be made.

They are trying reversion to balance and I'm the 3 beta guy who is looking at where the max money velocity is on wrong one sided forecasting.

Infomation has two neighbors there at the top of the pile the technical and the sentiment. It comes down to pace and sentiment. Correcting wrong sidedness (sentiment) and jumping off the train (or reversing) when they try one more time to bring the train back to the station after overshooting it.

Trading is a thing a person does to really collect the penalties others are paying to fix what is out of whack.

When I walk in a room to say something. I ask one question usually. Then I say something short and sweet and then the games begin. The idea is to get the people paying to learn to get their money's worth to the extent, that after that, they are never the same again. That is done by answering thoughtful personal questions of the people who came to learn. People only learn by stepping out from where they are in their formal quest. They ask about what they see right in front of them. Making them get on the rocket is the mission.

I ask about their skills in calculus as my only question. If sets the level of discourse and gets the dicussion way the heck away from probabilities.

Does anyone know why the financial industry doesn't do settlement after hours? lol... Why did Greenspan always make his announcements after settlement? lol.....

It might be neat to do some educating on ET.

QED.
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I suggest to anyone interested in EMH to obtain a 10 year time-series data set of your favorite market and calculate the distributions over different time frames. It is quite an eye-opener! At least it was for me.
My analysis convinced me the market, on a single equity, while not perfectly efficient is very near that, suggesting the probability of using past historical data to develop a strategy is near zero. But do not be discouraged the market while efficient on a single name basis is rife with inefficiencies in markets of portfolios.
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Please explain the momentum effect to me, then. Or long-term memory in stock returns. Or, any autocorrelation in stock returns. It's there, it's highly statistically significant, and it isn't going to go away no matter how much EMH True Believers wish it would. Investors are irrational and markets are complex systems (in the mathematical sense of the phrase.) You can add all of the fudge factors to the CAPM you like, retconning risk factors from now until Kingdom Come, but you will never accurately describe that reality within the EMH framework, because the assumptions implicit in it are wrong.

You may be familiar with the first few chapters of your finance or economics textbook, but you pretty clearly don't read the literature, or just crunch the numbers yourself, for that matter. The people who do will always have an informational advantage on you, and hence will always be picking your pocket in the real market.

Stick that in your efficient markets pipe and smoke it.
 
The theory is assuming the perfect market condition where investors known ahead of time the supply and demand therefore profit potential; it doesn't apply to trading since we are trying to predict the market movements plus the fact that the market is also being manipulated by short plays from various investors, therefore the market is not as easily predictable.

....I agree, and as a person 3 hours away from an MBA, I can confirm most profs can't find there butts outside of the classroom . However I tend to think I have to learn and understand something ( a theory) first before I can reject it totally, and form my own opinion.

:D
 
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