Kudos to MMs
- Thread starter nitro
- Start date
One extremely useful concept in trading is the notion of equilibria. FV is at it's core based on it.
On the other hand, we see markets bounce and reflect from prices, regardless of where FV may be at that point. One notion that I have not incorporated into FV is the notion of multiple equilbria. This notion of multiple equilbria explains a wealth of stylized facts of technical analysis, for example, levels, support and resistance. I get around this fact by getting the values from technical analysis, and then deciding how likely that level is to hold/resist.
It would be better if I had a more quantitative way to do this, but the technicians lines work surprisingly well. The nice thing is that I finally have a quantitative reason as to why they work - more, there is actually a body of theory as well. To the trader, they would just say, "I told you so." But when you don't understand the reason something works, it is hard to put real money behind it from a philosophical point of view.
On the other hand, we see markets bounce and reflect from prices, regardless of where FV may be at that point. One notion that I have not incorporated into FV is the notion of multiple equilbria. This notion of multiple equilbria explains a wealth of stylized facts of technical analysis, for example, levels, support and resistance. I get around this fact by getting the values from technical analysis, and then deciding how likely that level is to hold/resist.
It would be better if I had a more quantitative way to do this, but the technicians lines work surprisingly well. The nice thing is that I finally have a quantitative reason as to why they work - more, there is actually a body of theory as well. To the trader, they would just say, "I told you so." But when you don't understand the reason something works, it is hard to put real money behind it from a philosophical point of view.
Out unit 2 of 3 at SPX 1110. +76. Closed PnL is well over 200 handles per unit.
I am betting that the market bounces from here in the next couple of days. I hope to put this short on again in the 1130 - 1142 area and other units short at 1172 spx. All FV willing of course. Still holding one unit short from 1220 SPX for an open PnL of 110 handles. I am not worried it goes away, although one can tell that I am a bit nervous by the fact that I did not enforce discipline to take it at 1100. Crossing 1120 should have been reinforcement, instead it caused me anxiety. Go figure.
This is far and away the biggest sequence of trades I have ever had the privilege of being on the right side on, and the profits that come from being on the right side of trending markets are awe inspiring.
I am betting that the market bounces from here in the next couple of days. I hope to put this short on again in the 1130 - 1142 area and other units short at 1172 spx. All FV willing of course. Still holding one unit short from 1220 SPX for an open PnL of 110 handles. I am not worried it goes away, although one can tell that I am a bit nervous by the fact that I did not enforce discipline to take it at 1100. Crossing 1120 should have been reinforcement, instead it caused me anxiety. Go figure.
This is far and away the biggest sequence of trades I have ever had the privilege of being on the right side on, and the profits that come from being on the right side of trending markets are awe inspiring.
I am studying the time span from about May 2011 to today to see if there is some way that I can modify FV to better value (unseen to it) risk. As you may recall, it took FV about 120 handles to turn negative. I had an insight that a small modification to FV that I believe would allow me to shave 1/2 of that, without losing much if any predictability. Still not quite sure what the right equation(s) are, but I don't expect it will be hard. Calibrated FV may have been too slow...
It will fit in well with my expanding FV to take into consideration the notion of multiple equilibria described above.
It will fit in well with my expanding FV to take into consideration the notion of multiple equilibria described above.