Graph of number of trades, profit or loss, % greatest draw down for Walgreens stock symbol WAG traded with random entry followed by exit at lowest price of prior 30 sessions, 1 % risk.
Stocks are random variables
- Thread starter WallStGolfer31
- Start date
Wallstgolfer31,
Humans are making up price action in the market and since
human behaviour is mostly driven by fear and greed, market
prices are also driven by fear and greed and that kind behaviour
you cannot call random, chaotic would be a better description.
And as scientists know , there is order in the chaos so there
are exploitable patterns in the market.
EMH assumes that new information is priced IMMEDIATELY into
stock prices.
This is not a correct assumption because there are market participants who have this new information quicker than other's;
one being insider information, other's have professional
newswires like bloomberg ,housefather's read the new info the next day in their papers so new info is being priced step
by step into the stock price and not immediately.
I think I have read already that the academics are coming back
from this EMH , will look it up and come back.
It's not because you didn't find an "edge" in the market that
some did
Humans are making up price action in the market and since
human behaviour is mostly driven by fear and greed, market
prices are also driven by fear and greed and that kind behaviour
you cannot call random, chaotic would be a better description.
And as scientists know , there is order in the chaos so there
are exploitable patterns in the market.
EMH assumes that new information is priced IMMEDIATELY into
stock prices.
This is not a correct assumption because there are market participants who have this new information quicker than other's;
one being insider information, other's have professional
newswires like bloomberg ,housefather's read the new info the next day in their papers so new info is being priced step
by step into the stock price and not immediately.
I think I have read already that the academics are coming back
from this EMH , will look it up and come back.
It's not because you didn't find an "edge" in the market that
some did
i recommend you read mandelbrot or go to www.santafe.edu and have look on complex economics. EMT is based on a paper that was originally coined by a french mathematician one hundred years ago. also, take a look on economics nobel prize laureate, kanheman. his writings explain a lot of behavioral aspect of trading or any other activity that involves risk of financial loss. clearly EMT is about to be replaced by a new framework.
even the top BS are teaching EMT with a grain of salt these days and complex economics is one of main research areas in PhD thesis.
he's basically using an argument from authority "phd's say"
why CARES who is saying it? the issue is the theory, not its pedigree
academics are frequently wrong , and this is ESPECIALLY true in "soft sciences" like econ and social work, etc.
i gave already several examples of academic rubbish being peer reviewed and supported for DECADES despite immense contrary evidence.
proponents of EMT use the same illogic that many intelligent design people do- as regards to "provability" etc.
cause if somebody is a successful trader, they are just discounted as a random aberration.
but when i personally (and have seen my mentor and others) CONSISTENTLY reap profits from the market, it is clearly not efficient to the extent that edges cannot be developed
for example...
in the 90's bull market, one edge was pretty simple. emphasize growth over value, and buy strength (generally speaking).
now, we are in a means reversion low volatility market environment
why?
because the market IS what people are doing, therefore it adapts to their changed behavior. now that that edge is thoroughyl disseminated and used, it ceased to (generally) exist, and the market moved into a phase where mean reversion is the better strategy (generally speaking)
most of my futures trading strategies involve mean reversion concepts, because that is what works NOW. and a lot of the reason they work is that i know how most retail traders trade (using lagging indicators like MACD, RSI, etc.) with a healthy dose of emotion, panic, fear, euphoria, and chasing to go along with it.
so, part of my edge is NOT trading that way, but being peripherally aware of what the loser trader is doing
as for the comment about if i buy, somebody sold therefore they didn't think it would go up. that is less true with commodities (and some futures) than it is with stocks
the reason is that a large part of futures volume (especially in ags) is done by commercials hedging. if i own 100,000 bushels of corn to go to the market in Dec., i will short corn futures. im not selling futes because i PREDICT the market will go down, i am selling because it offsets my physical holdings and leaves me market neutral. consumers do the opposite by going long what they want delivered in the future, to counteract price rises
so, one can look at COT reports, institutional capping reports (CBOT provides these) and understand the nature of many commodities markets to also have an edge. in that case, you are not outtrading the commercials, you are understanding their footprints and taking advantage of the movements
why CARES who is saying it? the issue is the theory, not its pedigree
academics are frequently wrong , and this is ESPECIALLY true in "soft sciences" like econ and social work, etc.
i gave already several examples of academic rubbish being peer reviewed and supported for DECADES despite immense contrary evidence.
proponents of EMT use the same illogic that many intelligent design people do- as regards to "provability" etc.
cause if somebody is a successful trader, they are just discounted as a random aberration.
but when i personally (and have seen my mentor and others) CONSISTENTLY reap profits from the market, it is clearly not efficient to the extent that edges cannot be developed
for example...
in the 90's bull market, one edge was pretty simple. emphasize growth over value, and buy strength (generally speaking).
now, we are in a means reversion low volatility market environment
why?
because the market IS what people are doing, therefore it adapts to their changed behavior. now that that edge is thoroughyl disseminated and used, it ceased to (generally) exist, and the market moved into a phase where mean reversion is the better strategy (generally speaking)
most of my futures trading strategies involve mean reversion concepts, because that is what works NOW. and a lot of the reason they work is that i know how most retail traders trade (using lagging indicators like MACD, RSI, etc.) with a healthy dose of emotion, panic, fear, euphoria, and chasing to go along with it.
so, part of my edge is NOT trading that way, but being peripherally aware of what the loser trader is doing
as for the comment about if i buy, somebody sold therefore they didn't think it would go up. that is less true with commodities (and some futures) than it is with stocks
the reason is that a large part of futures volume (especially in ags) is done by commercials hedging. if i own 100,000 bushels of corn to go to the market in Dec., i will short corn futures. im not selling futes because i PREDICT the market will go down, i am selling because it offsets my physical holdings and leaves me market neutral. consumers do the opposite by going long what they want delivered in the future, to counteract price rises
so, one can look at COT reports, institutional capping reports (CBOT provides these) and understand the nature of many commodities markets to also have an edge. in that case, you are not outtrading the commercials, you are understanding their footprints and taking advantage of the movements
the point is...brain child....that people use these mechanism and hence they often times become a self fulfilling prophacy.
do you think that evey wall street frim is paying $250k-$10mm dollars per year to analysts and traders becuse they are lucky?
i will forgive your ignorance this time. do some actual study and research...and then form an opinion.
What does DD stand for ? Could someone enlighten me ?
If you take the time to research and analyze every aspect and perform the requisite amount of background checking needed to make a truly informed decision, then you will know what DD means..
P.S. DD = due diligence
P.S. DD = due diligence