trend following delusion shattered

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Quote from ProfLogic:

Price is the cause . . . the oscillations are the effect.


The only thing "anchored in the past" is your opinion of the consistant tradability of these markets.

Peace, Good Health &
Happy New Year

Wm. "Bill" Schamp
ProfLogic
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Thank you for the well wishes. I wish the same to you and your bride.

However, as you can expect, I must point out the obvious disinformation contained in the above post. Price is the effect with oscillations simply being reflections of the past. Order flow imbalance is the cause of price movment, attempting to add your structure to order flow imbalance is futile.

peace,
surfer

ps. in addition, its not a zero sum game. trading is a negative sum game, its important that this is understood by people new to the field.
 
"ps. in addition, its not a zero sum game. trading is a negative sum game, its important that this is understood by people new to the field"

if you want to get technical, OPTIONS, FUTURES, and FOREX are a negative sum game (zero sum only if you eliminate trading costs).

however, STOCK trading is NOT. for a daytrader, who is flippin' shares, it is PRACTICALLY Speaking, the equivalent of a negative sum game, but technically speaking it is not

the difference is that in futures, options, and forex "game", there is an equal and opposite position to your position NECESSARILY such that the net won in the game (absent the effect of trading costs) is ZERO. it has to be. there are exactly the same # of people long the dow as short the dow futures, at any given moment in time. that is how futures work. you CANNOT be holding a long without an equivalent short being held

the stock market is NOT structured thusly. since the sum is not necessarily zero, it is not a zero sum game.

however, again, it SEEMS to be, and for practical purposes it has the effect of being one, on an intraday time frame. but, in reality it is not

every tick i make (long or short) in a futures contract, ANOTHER contract is losing the exact same # of ticks. that is not the case in stocks.

options are zero sum (without costs) for the obvious reason that every option is written by another, thus my gain is his loss and vice versa
 
Quote from whitster:

"ps. in addition, its not a zero sum game. trading is a negative sum game, its important that this is understood by people new to the field"

if you want to get technical, OPTIONS, FUTURES, and FOREX are a negative sum game (zero sum only if you eliminate trading costs).

however, STOCK trading is NOT. for a daytrader, who is flippin' shares, it is PRACTICALLY Speaking, the equivalent of a negative sum game, but technically speaking it is not

the difference is that in futures, options, and forex "game", there is an equal and opposite position to your position NECESSARILY such that the net won in the game (absent the effect of trading costs) is ZERO. it has to be. there are exactly the same # of people long the dow as short the dow futures, at any given moment in time. that is how futures work. you CANNOT be holding a long without an equivalent short being held

the stock market is NOT structured thusly. since the sum is not necessarily zero, it is not a zero sum game.

however, again, it SEEMS to be, and for practical purposes it has the effect of being one, on an intraday time frame. but, in reality it is not

every tick i make (long or short) in a futures contract, ANOTHER contract is losing the exact same # of ticks. that is not the case in stocks.

options are zero sum (without costs) for the obvious reason that every option is written by another, thus my gain is his loss and vice versa
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Regarding equities and equity futures:

If you collateralize t-bills to finance your futures position, the total return (futures price appreciation and t-bill yield) should approximate the total return of the cash equities over a reasonable period of time. Arbitrage (program trading) makes it so.

So if one is a negative sum game or a zero sum game, so is the other.
 
Quote from whitster:

"ps. in addition, its not a zero sum game. trading is a negative sum game, its important that this is understood by people new to the field"

if you want to get technical, OPTIONS, FUTURES, and FOREX are a negative sum game (zero sum only if you eliminate trading costs).

however, STOCK trading is NOT. for a daytrader, who is flippin' shares, it is PRACTICALLY Speaking, the equivalent of a negative sum game, but technically speaking it is not

the difference is that in futures, options, and forex "game", there is an equal and opposite position to your position NECESSARILY such that the net won in the game (absent the effect of trading costs) is ZERO. it has to be. there are exactly the same # of people long the dow as short the dow futures, at any given moment in time. that is how futures work. you CANNOT be holding a long without an equivalent short being held

the stock market is NOT structured thusly. since the sum is not necessarily zero, it is not a zero sum game.

however, again, it SEEMS to be, and for practical purposes it has the effect of being one, on an intraday time frame. but, in reality it is not

every tick i make (long or short) in a futures contract, ANOTHER contract is losing the exact same # of ticks. that is not the case in stocks.

options are zero sum (without costs) for the obvious reason that every option is written by another, thus my gain is his loss and vice versa
More...

i beg to differ. someone is always long and short stock. The issuing public company takes the liability of being short a stock. Thus buybacks.

Money comes from somewhere. Lets start at IPO process, simplified:

1) public buys IPO stock. Company shorts stock in exchange for cash position necessary to grow, with agreement that the stock is a liability. Company foregoes ALL future profit on the stock.

2) public sells stock at 30 bought from issuer at 20. Company foregoes this $10 gain to the trader.

3) As stock trades up, capital comes from outside investing public and moves to profit takers.

It is zero sum in a macro picture. Within the stock market itself, not necessarily zero sum. In macro picture, that money is coming from somewhere. It is not coming from nowhere.

All markets (tradeable on or off exchange) are zero sum games. Whats even more fascinating is that one markets gain (most recent housing runup) could be viewed as being at the expense of currency value.

So housing goes up, currency value goes down. In the end, total net wealth always remains the same.

Same thing in stocks. lets say $100 billion dollars comes into the stock market from cash reserves. Suddenly cash liquidity is mopped up and perhaps as a result, bond values are bid down (since bond demand is down). there was just an effective intra-market transfer of money. So stockmarket gains came at the expense of bond market losses.

The futures and options markets are closed markets, and are internally zero sum games. Gains are losses are usually (with exception to a disaster where a large position loss can not be covered by one side) internally covered between market participants, with no affect or interaction with other markets.

But all markets are zero sum in the macro market picture.
 
we' ve already explained this in a thread

i will make it brief

"zero sum game" is an invented term that describes a SPECIFIC kind of "game"

i have spent years studying game theory

the stock market is NOT a zero sum game. period

i suggest you actually read up on what zero sum games ARE and not try to fit a definition to something it does not apply to

i will explain again.

the above point about t-bills is 100% irrelevant

it says nothing about the STRUCTURE of the market

zero sum is a structural definition

you CANNOT make a single dollar in futures without some other position LOSING a dollar

money CAN be created in the stock market (or destroyed), thus it is not zero sum

no money/wealth is created in a futures market. only transferred

there is a radical difference

this says nothing aobut whether you (or I) can make money in it

i trade futures for a living. the fact that it is zero sum is irrelevant to the fact that i make money doing it

but i don't try to redefine the term 'zero sum game;

because i understand what it means

i suggest a book on game theory, because it is not complex
 
btw, scria

you are 100% incorrect

markets do not have to be zero sum any more than economies have to be

if you believe that an economy cannot create wealth, then you are wrong, but at least you are consistently wrong

it is amazing the fundamental error you make

wealth CAN BE and IS CREATED or destroyed in economies, and capital markets

it CANNOT be created or destroyed in futures markets (different structure) only transferred

we have far more wealth - per capita AND on an absolute basis, than we had 100 years ago

innovation, efficieny, economy of scale, invention, etc. etc. can all increase wealth

but again, i get bored trying to teach elementary economics and game theory to people. been there, done that
 
i'm open up to new reading. suggest a good book on game theory.

obviously you see my point of transfer of funds between markets. by the way I incorrectly used the world intra-market transfer; i meant inter market.

I fundamentally (in your view incorrectly) see most wealth as being circulated, not created. i imagine you could argue that increased productivity is a mechanism for increase of wealth. but does productivity come at an equal expense, just one that isn't obvious or necessarily accounted for?

so i just see stock market wealth often coming from different markets. thats the only way it differs from futures or options markets, where market participants are trading merely amongst themselves.
 
Quote from whitster:

we' ve already explained this in a thread

i will make it brief

"zero sum game" is an invented term that describes a SPECIFIC kind of "game"

i have spent years studying game theory

the stock market is NOT a zero sum game. period

i suggest you actually read up on what zero sum games ARE and not try to fit a definition to something it does not apply to

i will explain again.

the above point about t-bills is 100% irrelevant

it says nothing about the STRUCTURE of the market

zero sum is a structural definition

you CANNOT make a single dollar in futures without some other position LOSING a dollar

money CAN be created in the stock market (or destroyed), thus it is not zero sum

no money/wealth is created in a futures market. only transferred

there is a radical difference

this says nothing aobut whether you (or I) can make money in it

i trade futures for a living. the fact that it is zero sum is irrelevant to the fact that i make money doing it

but i don't try to redefine the term 'zero sum game;

because i understand what it means

i suggest a book on game theory, because it is not complex
More...

I'm not trying to hijack your terms or definitions. I don't care to read any more books on game theory either. I simply pointed out that for the professional participant the total return is the same regardless of the instrument used (S&P 500 futures OR S&P 500 cash stocks). Since return is what matters in the end I fail to see the significance of your "...it's not a zero sum game...by the definition of..." revelation.
 
Quote from marketsurfer:

However, as you can expect, I must point out the obvious disinformation contained in the above post. Price is the effect with oscillations simply being reflections of the past. Order flow imbalance is the cause of price movment, attempting to add your structure to order flow imbalance is futile.

peace,
surfer

ps. in addition, its not a zero sum game. trading is a negative sum game, its important that this is understood by people new to the field.
More...

Price and its created oscillations mean something entirely different to me than you because my environment is non-varying, yours is constantly in a state of flux.

Order flow imbalance, as you call it, IS the cause of the price movement and its created oscillations. I do not ADD to that structure I simple diminish the chaos from it by encapsulating it into a fixed, stable and readable environment and that is something you refuse to understand how it is done. I do not manipulate the data one itty bitty bit. Adding or manipulating the data to trade it would be futile and downright stupid. It would be adding to the chaos not diminishing it.

Thanks for the clarification, you are correct. I call the Futures, Options and Commodities environment a "zero sum game" because I KNOW commissions and costs turn it negative. I assume that is understood and assume too much sometimes.
 
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