"The market goes where it can f*ck the most people"

FaderTrader · May 20, 2006

It's interesting. I have a firm belief that most people enter a trade planning to get stopped out. Most people blow up as a result of these Pirahna attacks; not by being swallowed by a Great White stop out.

That's why I take profits all over the place. The sum of taking profits on small-medium gains is often going to amount to more than the total of any single move, which you probably won't catch anyway.

steveosborne · May 20, 2006

Quote from Pabst:

The Keynes statement "The market will do what it must to make the most amount of participants wrong", will ALWAYS be true. Markets are two sided auctions. If we possessed information that everyone who is a likely long is already long, then we'd know the market's about to break. If one is max long then what's their next trading action going to be? Doesn't matter if it's 1547, 1929 or 2006, those who are longs are the next wave of sellers. We're about to see this pricing phenomena in housing.

Certainly things change. However the concept of positioning and how it effects prices cannot change. It takes participants to bid or offer and those participants and their motives aren't manufactured in a genies bottle. EVERY TRADE effects prices. Even a one lot.

Excellent!

JMowery1987 · May 20, 2006

Quote from GlobalFinancier:

The market is only a concentrated display of human irrationality.

What about when computers takeover?

jficquette · May 20, 2006

Quote from Bitstream:

again, me thinks we'll have an exhaustion rally followed by a relatively long period of consolidation, maybe 10-20days in no mans land...then wooooosh...shorts punished once again, hee hee.

It is simple to understand what is going on here. Most particpants are little guys trading with the masses. When 80% of the particpants get on the same side of the trade then the trend stops from the shear weight of the particpants. It is the 20% on the other side with deep pockets that simply waits until everyone else is in on the other side. Once all are in it stops and begins to retrace faster and faster. LOL.

Go to the ocean and watch the waves as they build up in height. Once they get tall enough they fall over because the tops are going faster then the bottom which is dragging the ocean floor. The ocean floor gets the best of them.

John

Cheese · May 20, 2006

Quote from jficquette:
It is simple to understand what is going on here. Most particpants are little guys trading with the masses. When 80% of the particpants get on the same side of the trade then the trend stops from the shear weight of the particpants. It is the 20% on the other side with deep pockets that simply waits until everyone else is in on the other side. Once all are in it stops and begins to retrace faster and faster. LOL.

Go to the ocean and watch the waves as they build up in height. Once they get tall enough they fall over because the tops are going faster then the bottom which is dragging the ocean floor. The ocean floor gets the best of them.

John

You must explain: how do 80% get on the same side?

For every sale (eg YM) there is an equal and opposite purchase and vice versa. Sellers equal buyers; vice versa. Only price can change.

Isn't it wonderful?
It really is no wonder irrationality and lossmaking go together for so many players or would-be players .. that is for so long as they can last at trading.

erlewine · May 20, 2006

Quote from Amnesiac:

"The market goes where it can f*ck the most people"

I love this quote! All you need to know about trading is in this sentence.

BTW, that's a quote from "Leg The Spread" by C. Lynn, 2004.

It's psychobabble like this that inflates the ego of traders, 90% of whom grossly underperform the buy & hold "sheep" who are always getting "f*cked" by the market. Look at the account runs at a major discount broker and you'll see who's really getting "f*cked."

FaderTrader · May 20, 2006

The pros can shoot and miss and can average down a loser with big size to create a winner.

The Public doesn't have that luxury. This results in them seeking absolute wins. I'm on the record as being a fan of pyramiding, but at what point does pyramiding become chasing? Herd psychology often results in the public believing that they are putting on a good risk/reward trade when, in reality, they are simply increasing their chances of getting stopped out quicker.

When I speak of the public, I'm referring to the very large population of active yet undercapitalized, trite investors who research stocks via thier Scottrade, Etrade, Ameritrade, TD Waterhouse accounts... and to a considerable degree, even IB.

mhashe · May 20, 2006

Quote from spike500:

I don't care who "controls" the markets (what's the CM?). I trade different from the mass and make good money because the mass does what i do, but there is always a delay between us. This delay gives me the opportunity to take position and let the others do the work.

If you can visualize what the mass will do you only have to be ahead of them.

CM is shorthand for composite man or the key players behind each market move. The markets primary moves are initiated not by the sum total of all its parts/participants, but from velocity provided by a minority of discrete key players, those superiorly informed and well capitalized. As you suggested the masses then provide further fuel to the initiated moves. It must be nice to be able to visualize what the masses will do next, I have yet to arrive at that level in my own trading.

PitchBlack · May 20, 2006

Quote from mhashe:

CM is shorthand for composite man or the key players behind each market move. The markets primary moves are initiated not by the sum total of all its parts/participants, but from velocity provided by a minority of discrete key players, those superiorly informed and well capitalized. As you suggested the masses then provide further fuel to the initiated moves. It must be nice to be able to visualize what the masses will do next, I have yet to arrive at that level in my own trading.

Thanks for the explanation.

It is indeed nice to have an idea of what is coming.

jficquette · May 20, 2006

Quote from Cheese:

You must explain: how do 80% get on the same side?

For every sale (eg YM) there is an equal and opposite purchase and vice versa. Sellers equal buyers; vice versa. Only price can change.

Isn't it wonderful?
It really is no wonder irrationality and lossmaking go together for so many players or would-be players .. that is for so long as they can last at trading.

Money is equal but particpant number is not.

John