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Why Can't I Trade with the Trend
- Thread starter Flashboy
- Start date
Okay, here's the new and improved version:Quote from Cutten:
Not necessarily. It is possible that past price action could have no effect whatsoever on future price action, yet still signal the likely character of future price action to a sufficient degree to make a profit.
The real issue is whether or not future price can be determined on the basis of past price action.
That's incorrect.Quote from Cutten:
It doesn't say that - it says that in a perfectly competitive market in an equilibium state, the current market price accurately reflects all publicly available information. Given that no perfectly competitive markets exist (perfect competition requires infinite competitors, or finite competitors with infinite capital and infinite competing ability), your claim doesn't apply to any existing market.
Efficiency theory has no requirement of a perfect market as one of its functional parameters. Advocates of the theory make frequent comments on actual market conditions.
Quote from NickelScalper:
That's incorrect.
Efficiency theory has no requirement of a perfect market as one of its functional parameters. Advocates of the theory make frequent comments on actual market conditions.
For a perfectly efficient market, it does require perfect competition. The efficiency is relative to the level of competition in the market in question.
E.g. ""An 'efficient' market is defined as a market where there are large numbers of rational, profit-maximizers actively competing, with each trying to predict future market values of individual securities, and where important current information is almost freely available to all participants. In an efficient market, competition among the many intelligent participants leads to a situation where, at any point in time, actual prices of individual securities already reflect the effects of information based both on events that have already occurred and on events which, as of now, the market expects to take place in the future." - Eugene Fama
It is competition from rational profit-maximisers with cheap access to market sensitive information that creates efficiency. Therefore any barriers to that process will degrade efficiency. For example - irrational or non-profit-maximising behaviour, expensive or hard to find information, limitations (e.g. low capital) on the ability of profit-maximisers to trade on superior information, small numbers of competitors, and so on.
Jack. A fabulous post at page 44! I have done my best to keep your memory alive during your absence. You know that Nwbprop said a few days ago that he was giving himself two months to "get it" before he gives up and goes to B school (at, one assumes, a B school)? You still have time to teach him. Not since Lewis Carroll have we seen a genius like you! The concept of derivatives of a random variable leaves me breathless! And no one attracts ET's REAL talent to a thread more than you do! Bravo!
Quote from easyrider:
Prof
Being a logical person and a trader Im sure you can see how another trader might have a little problem with the claim that a person following your method would have made 203 consecutive trades this year without a loser. Since this is your system and you are the expert it is logical to assume that you are having similiar results in your own trading. Can you just give me a ball park figure on your actual winning percentage? I'll go first. Mines right at 50%.
The 203 trades accounts for ALL the aggressive and conservative set-ups the ES Market created so far this year based on reading the price oscillations. I teach people to trade with ultra conservative entries and exits, to use strict stops, stick to their daily goals and to use tight money management parameters. The Market creates 10 to 20 set-ups a day but if you KNOW that 2 or 3 or 4 of those are ultra-conservative and have a better that 90% chance of success, why on earth would you trade the other 7 to 17 other ones? I know of traders that haven't had a losing day in months but they pick their trades and have patience. Losing trades are no big deal, no one is perfect. Losing days are rare if you learn to read price.
Very well said! Excellent!Quote from Cutten:
It doesn't say that - it says that in a perfectly competitive market in an equilibium state, the current market price accurately reflects all publicly available information. Given that no perfectly competitive markets exist (perfect competition requires infinite competitors, or finite competitors with infinite capital and infinite competing ability), your claim doesn't apply to any existing market.
Limiting capital available for market transactions means that things such as liquidity conditions can prevent inefficiencies being exploited. Limiting competition, or limiting the scope of competition, implies a similar restriction on market efficiency.
Economic theory, when applied to conditions prevailing in reality (rather than in a theoretical perfectly competitive market), postulates a world where markets *tend towards* efficiency, but where competition and capital is limited, where unearthing edges and processing information takes time and varies according to talent, research resources, and effort, and where new developments are creating new potential edges all the time. The process of searching for inefficiencies is an ongoing one, in line with the opening up of new markets and asset classes. The fact that exploiting inefficiencies takes time means that edges don't disappear over night, but rather take days, weeks, months, years or even decades to disappear.
Above-average returns on capital ("edges") are subject to supply and demand, barriers to entry, lead times, competition etc like everything else. If the assumptions of efficiency theory held in the real world, then no businesses would ever turn an above average profit, and no individual would earn an above average income. Yet we can see higher than average returns on equity being generated by countless businesses, and plenty of people generate lots high incomes and excess wealth.
Quote from easyrider:
So your saying your win rate is around 90%. Impressive. Thats the best win rate of anyone I know or know about.
Lol, personally my win rate is over 80% but I only trade a couple times a day maximum. To me consistency of results is more important that quantity. No need to be greedy when I can trade, make what I need to be comfortable and be done by noon most days. It has to do with quality of life.