Kudos to MMs

Quote from johnnyqpublic:

Of course the answer to #1 has everything to do with how "FV" is defined. There is of course an immediate fair value that you can figure for SPX and S&P 500 futures, based on index constituent weightings, and premium.

However I think you believe you can define a "more fair" value that the market will eventually revert to. Thus the market is not usually efficient, but sometimes will honor the efficiency of your "FV". Have I misunderstood?
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No you understand quite well. But here is what no one is getting. The markets have all sorts of swings. How can you tell what the real signal is? The smart money knows and is often the first to get in this direction. What I have noticed is that

1) SPX is sometimes extremely efficient and is the signal,
2) and at other times it seems as if the inmates are running the prison.

The key is to avoid betting against 1 because invariably if FV does not agree, it turns around and follows, leading to loses. BUT, when 2 happens, that is when some juicy profits are to come. I am getting a feel from when to distinguish 1 from 2, although I admit it is "gut" at this point. However, I have been considering using tools like Elliot Wave to keep me on the right side of a trend to amend FV, or something that has some respect for being accurate on these time frames. DOW theory doesn't seem to work too well...

The market most definitely has a structure, and I am definitely decoding it. There are a few details here and there left to iron out, but I see a light at the end of the tunnel. FWIW, FV is but a tool, although the crown jewel in my toolbox, and I have had to use several tools to help the actual trading/timing. Amazing how hard this is.

One last note, the short side is much harder then the long side, but the rewards come faster and are a magnitude bigger. Also, I hate buying expensive vola.
 
Quote from nitro:

1) Is the premise of FV valid?
2) Is the way that I trade FV valid?
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1. Obviously not.
2. Irrelevant, because of the answer to #1.

Also, when/if that giant gain happens, how do you know that it is not an accidental statistical outlier and you just got lucky, and it is not the result of your system????

After all if you keep trying, eventually you are due to catch it right, just by pure luck....
 
Quote from nitro:

The smart money knows and is often the first to get in this direction.
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Do you have quantifiable data that supports this or is it something you intuit?

What I have noticed is that

1) SPX is sometimes extremely efficient and is the signal,
2) and at other times it seems as if the inmates are running the prison.
More...

If you're measuring SPX's efficiency using FV as the statute that is fine, but you need a basis for doing so that is intellectually satisfactory. It is easy to invent/discover a formula that results in a time series that sometimes tracks SPX, sometimes diverges—but by itself this means nothing with regard to its predictive power or (greater) efficiency.

Not trying to short-sell your reasons for doing what you are doing, simply working/thinking with the info you have provided.
 
you can't build a house on sand,you need a concrete base,your base sounds very philosophical,most philosophy is based on ifs, i.e,i don't now,i wonder,what if this were true,then it would be safe to assume this,and with those 2 possible truths then this would be true.and so on...eventually you have hundreds of writers printing thousands of books on what if..or hundreds of guys building trading systems on what if's,....price is price... concrete...now if you want to extrapolate on that ,take the price of 2 instruments,3,4 ,5 ,add in supp/res (if's)...always work back to price..when you see a pattern in how they interact with each other at different prices..you can start to fine tune it..watch how they react at supp and res.....when you build a house,you pour the concrete,you add a solid floor,resting on the concrete,you add walls and stack on another floor,all the load heading back to the concrete..your system has to do the same thing or it's just a what if...based on assumptions...that are randomly true or false at any given time...when it's supported by price and reacts predictably most of the time,you have something useful
 
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