Read more, post less and maybe you'll spot the obvious.
Where are all the Trading and/or Investing topics showing Funnymentals work ....
- Thread starter SunTrader
- Start date
Exactly. His theory dovetails Keynes's remark that markets can remain irrational longer than market participants can remain solvent. These observations can render FA somewhat wobbly when it comes to shorter term trading as it relates to both entries and exits, since the premise is that the markets tend to deviate from equilibrium prices more often than not, and sometimes substantially so. I suppose you can overcome this weakness in part due to the scope and depth of your analysis and your familiarity with what the large market participants are doing at any one time, along with your knowledge of what analysts will report before they actually do so. However, I am not nearly as well plugged in; in fact, not at all. So I have no way of playing that game.
"Feedback loop" is a nicely succinct and descriptive term. A feedback loop implies a trend in price. And so, a short-term trader's objective is to catch bits and pieces of this "loop" whether it is moving toward or away from equilibrium. Loop trading. Trend trading. Something that can be captured on a chart in real time as it is occurring. Whether it will continue in the next moment is anyone's guess, but that's the play. And that's where risk control comes in.
I wouldn't bet money on that if I were you but I appreciate the kind words, and think this would be a good note on which to conclude this exchange.
The challenge with that approach is that what shows up in a chart is ex-post and the performance of chart analysis is very poor. There’s a joke among quant researchers that the worst ten years of a backtest is the subsequent ten years…
There are lots of sources of returns and I’m not here to criticize the validity of them. However, elevating that analytical rigor has positive externalities… so I recommend that you take a look at the momentum anomaly and short-term reversal anomaly. Within an EMH framework any type of excess return (such as the return of a trend) is described as an anomaly. I had the pleasure of working with a leading momentum researcher (at a hf) in 2016 which taught me a lot about that source of return and the types of strategies traders use to harvest it.
If you think about your thought process on (1) which stocks to trade and (2) when to trade them, the steps you have primarily act as filters to the broader universe and time period. A deeper understanding of the anomaly you’re trading will help you utilize better filters that actually impact pnl.
When you go down that rabbit hole you’ll also find that much of opinions or views of retail traders is just wrong (much like most of the retail discussion around medicine and such). So I recommend sticking with papers or research that clearly present their methodology and went through some sort of peer review.
At the end of the day, to each their own.
Trolling the fundies I see.. Schwager lists "14 Popular Fallacies" for trading;
4. Using Fundamentals for Timing
Dunno if you understood the chart that I posted showed that the stock peaked AFTER it missed earnings and guided lower.
Also, the analysts that dug into the numbers after their earnings in Jan called them out. Analysts covering the stock also noted that its MTM portfolio was literally wiping out equity, indicating the company was insolvent. Wall Street analysts also knew and wrote about it in their notes — but they (and the remaining investors) thought that SVB would raise capital in an orderly fashion. That ended up not happening.
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And look, I get that you and your friends make fun of fundamentals. For what it’s worth I think retail traders who only use fundamentals are as bad as retail traders who only use technicals. Both are dumb because both haven’t done the homework to see that there’s no source of excess return in the work they do.
I follow the Gregorian calendar, don't you?
Which means Nov 16th, 2021 comes before Jan 20, 2022 - 44 trading bars as chart image shows at the top. And $654.27 open is already $109 lower than high $763.22
If I traded equities the red arrow in red box shows where I would have considered shorting - close below the low of the high close bar, stop one tick above the high of the high close bar. Which as the horizontal line shows was never threatened.
But certainly not half way down the next swing lower. lol. Or especially late in the day following, that gapped and traded lower into the close. Only to bottom day after that, then rip back up almost $130 higher. Follow the funnys. I got better use of my time, energy and most importantly trading capital.
And what about the observation made years ago that a monkey throwing darts at a board did at least as well as typical fund managers, as mentioned recently by another member either in this or a related thread? Fund managers who presumably relied on FA and couldn't even keep up with an index. Do we then conclude that FA doesn't "work" because they weren't able to make it work? Come on. The researchers who "tested" PA and found it wanting are as much the arbiters of PA's efficacy as are the observers of underperforming fund managers using FA, arriving at similar conclusions.
yeah, that.At the end of the day, to each their own.
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