Haven't read Margin of Safety (Pretty rare by the look of it) but do have Greenblatts Little Book from back in the day when I considered myself an investor. Now as a speculator the method doesn't have the risk control I desire.
When do I become enlightened in terms of price action trading?
- Thread starter Saigyou_123
- Start date
That what most of the books are..
This sophisticated click is only by training demo and micro size of your chosen market.
Beside knowing reading the notes you to master playing the piano during intrady day scalping.
End we shell not think that sophisticated contradict simplicity for the small retail trader.
well, from a speculators standpoint, you need to pay attention to your factor risk, risk budget (var), and other metrics. Stop losses aren't effective tools because you when you really need it, it doesn't work as well; and if your investment framework is just momentum, it is hard for you to come up with an expected return framework to compare vs. ex-ante risk.
This is where (a) sources of return, (b) sources of alpha, and (c) sources of risk need to come together. For example, if you are seeking to invest in XYZ security because (a) company is expanding production (b) faster than expected you can distill this into a price and generate an expectation of returns.
Sources of risk include factors (how sensitive is the stock to market, to interest rates, etc.), its own historical volatility (how much does it fluctuate on average), and liquidity (how much will it cost you to enter or exit the trade?) + others/idiosyncratic issues.
So if the stock is trading at $25 expected EPS growth of 15% and your view is that EPS growth will be 20%, then you think the stock is actually worth $33.2 which is a 32% expected return.
If the stock fluctuates on average by 20% each year, then you can expect the stock go move up/down $5 from 25 (even if you are wrong the stock can still go up to $30). You will know whether you are right or wrong when the company reports earnings and those higher production numbers will be printed.
So now you have two risk items you can use -- 1) you should expect the stock to not go down past $5/252 * days to earnings, 2) you will know whether your thesis is right/wrong once earnings are announced.
Now you can set risk limits to trim/add to position when risk limits are breached. You can do so either cyclically or counter cyclically depending on your conviction.
You just described why every tick counts and perhaps not as explicitly - "resupply at Bbid/Bask."
you're confusing what is a matching engine to capture a spread vs. an intentional decision to buy or sell at a tick. At the market structure level, there is no "bull" or "bear", there are only "events" which HFT's try to front run. These happens in such a small time scale that they do not even show up on your tick feed. Nothing you can visually see can be used to interpret what is happening beneath the surface.
The matching engine is subordinate to the orders fed into it. Algo's are based on human conceptualization of pricing models, therefore "intention" is expressed via a specific implementation of a strategy.
I agree that what is visually seen does not capture the sequence of events that occurs in an HFT's algo but never-the-less the movement of a tick in a window of time triggers an algo or not. The movement of a tick can also trigger a discretional trader's decision as well.
HFT's in practice operate on a visually sub-perceptional scale. Moving up to larger timeframes for a discretionary trader mitigates this specific risk.
Orders aren't fed into the HFT...millions of people are submitting their orders at any given time for a variety of reasons (selling stock to buy a house, trimming a positions you dislike, etc.). So at any given timeframe, there are a bunch of orders passing through HFT without any explicit intention. It could even be that someone submitted an order and has slower internet, which means their order arrives 500 ms later vs. 250 ms.
All the HFT tries to do is match the buy and sell orders before they get to an exchange. They are not "trading" in the traditional sense. They are losing on most trades, but make them up when they successfully front run larger orders.
Day traders are a miniscule part of the market and provide noise that informed traders use to obfuscate their orders. They are not moving markets, investors are.
%%To each their own
The fact many hate[or dont use much] a 5 minute chart, could make it fine for those that do
NOT all will like IBD books, that'$ fine also...............................................................................................%%
The fact many hate[or dont use much] a 5 minute chart, could make it fine for those that do
I absolutely love the 5 minute chart.