Markets: Are They Ever Changing or Do Proven Setups Last and Last.

Although herd mentality and group psychology are prevalent in the market, you must realize how many people are actually in the market at a given time. Old strategies really only work in "old" market environments.

As far as actual day to day setups go, I would say some have lasted but are far less profitable now. There is money to be made for a large firm who can stop hunt a fairly large trend line or what have you.
 
Quote from cyoungmark:

Although herd mentality and group psychology are prevalent in the market, you must realize how many people are actually in the market at a given time. Old strategies really only work in "old" market environments.

As far as actual day to day setups go, I would say some have lasted but are far less profitable now. There is money to be made for a large firm who can stop hunt a fairly large trend line or what have you.

There's a thread on ET that I've seen frequently when logging in, but never bothered reading until a few minutes ago. The first two posts say everything there is to say on the matter. Price action in an auction market never changes because it reflects herd mentality driven by ego and emotion (which has yet to have changed in recorded history), therefore the edge inherent in its patterns will last and last until the Dream of Planet (Toltec terminology) undergoes a fundamental change.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=233879&perpage=10&pagenumber=1

Quote from TheRumpledOne:

“Now, 2 patterns of market behavior happen on a regular basis:

1) the price breaks to new high's (or low's)

2) the price reverses from new high's (or low's)

They happen regardless of time frame (with the obvious limitations explained above)

They are phenomena that can be exploited without the fear if found out by others, that they might cease to exist.” - H. Rearden

Quote from TheRumpledOne:

"Look, for example, at this elegant little experiment. A rat was put in a T-shaped maze with a few morsels of food placed on either the far right or left side of the enclosure. The placement of the food is randomly determined, but the dice is rigged: over the long run, the food was placed on the left side sixty per cent of the time. How did the rat respond? It quickly realized that the left side was more rewarding. As a result, it always went to the left, which resulted in a sixty percent success rate. The rat didn't strive for perfection. It didn't search for a Unified Theory of the T-shaped maze, or try to decipher the disorder. Instead, it accepted the inherent uncertainty of the reward and learned to settle for the best possible alternative.

The experiment was then repeated with Yale undergraduates. Unlike the rat, their swollen brains stubbornly searched for the elusive pattern that determined the placement of the reward. They made predictions and then tried to learn from their prediction errors. The problem was that there was nothing to predict: the randomness was real. Because the students refused to settle for a 60 percent success rate, they ended up with a 52 percent success rate. Although most of the students were convinced they were making progress towards identifying the underlying algorithm, they were actually being outsmarted by a rat."
 
Quote from NoDoji:

The mass psychology of large groups of people driven by ego and emotion has not changed in all of recorded history. This is why in a large and liquid auction market price produces certain footprints that cause a majority (even if only a slim majority) of market participants to react a certain way.

Study the market in the time frame you wish to trade, identify footprints that cause a majority of the herd to begin running more often than not and run with the herd when those footprints appear.


BIIIIIIIINGO. So simple
 
I wish I had said that.

I think the phrase in brackets "even if only a slim majority" is what is frequently left out when people speak on this subject. Particularly at the inception of a move the incremental weight on one side of the scale versus the other can often seem inconsequential but given the trade position and prior price action can be of great consequence.

Quote from NoDoji:

The mass psychology of large groups of people driven by ego and emotion has not changed in all of recorded history. This is why in a large and liquid auction market price produces certain footprints that cause a majority (even if only a slim majority) of market participants to react a certain way.

Study the market in the time frame you wish to trade, identify footprints that cause a majority of the herd to begin running more often than not and run with the herd when those footprints appear.
 
Quote from NoDoji:

There's a thread on ET that I've seen frequently when logging in, but never bothered reading until a few minutes ago. The first two posts say everything there is to say on the matter. Price action in an auction market never changes because it reflects herd mentality driven by ego and emotion (which has yet to have changed in recorded history), therefore the edge inherent in its patterns will last and last until the Dream of Planet (Toltec terminology) undergoes a fundamental change.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=233879&perpage=10&pagenumber=1

I offer up this thread link as a replacement for TRO's panhandling efforts:

http://www.forexfactory.com/showthread.php?t=340503

It's the same basic system...minus TRO. ;-)
 
Back
Top