Changing Market- A Fallacy ?

[new_trader]

What exactly does "Changing Market" mean? Efficient Market Hypothesis and Behavioural Finance theory seem to contradict the notion that the market can change--Unless "Market Change" means a trend change, from bullish to bearish or vice versa.

If you have a trading strategy that works in any market trend, why wouldn't it work forever? :|

 

[sandpiper]

Whilst certain fundemental aspects of market 'behavior' or 'market forces' never change, other aspects clearly do. Usually when people talk about 'changing market' conditions they are referring to changes in liquidity or volatility, both of which can affect some methods of trading quite dramatically.

The reasons for these changes can be many..... from technology available to market participants through to climate change (depending on which markets you are talking about).

For a start, consider the last time there was a limit move on US Stock Index futures contracts or the frequency with which program trading curbs are imposed.

 

[barjon]

.............................If you have a trading strategy that works in any market trend, why wouldn't it work forever? :............................|

nt

Because when what you are doing becomes recognised other traders will exploit it and take profit from knowing your (and others who have picked up on it) intentions. Your best plan then is to write a book about it

good trading

jon

 

[Tuffty]

If you have a trading strategy that works in any market trend, why wouldn't it work forever?

If you had a strategy that worked well I'd assume your position size would get larger and larger as you accumulate money. Your large position sizing would eventually make dealing impossible as you'd move the market so much.

 

[SOCRATES]

nt

Because when what you are doing becomes recognised other traders will exploit it and take profit from knowing your (and others who have picked up on it) intentions. Your best plan then is to write a book about it

good trading

jon

Agreed.

That is why edges cannot be discussed or revealed, really efficient methods cannot be shown and really effective trading cannot be demonstrated because they lead to the direct disadvantage of the beneficiary of such priceless treasures.

This is also the reason why the beneficiaries of such priceless treasures do not write silly books. It is because these treasures cannot effectively be shared. It is not prudent to do so.

Writing about them taints them, unfortunately.

Additionally if the beneficiaries of such priceless treasures were to misguigedly and impulsively be generous possibly the gems in the treasure chest would not be recognised as such but instead only as pebbles of no value. This risk the beneficiaries dare not take with the crowd.

Then therefore the dilemma exists as to tell or not to tell to put countless sufferers out their misery against self preservation interest.

Self preservation wins every time, hence in the end no one benefits except the selfish ogre.
Not fair, is it ?

Piggy on the railway picking up stones,
By came an engine and broke all piggy's bones,
"Oh !" said the piggy, "that's not fair",
"Well", said the engine, "I don't care".

It is cruel, selfish and unfair.

 

[new_trader]

If you had a strategy that worked well I'd assume your position size would get larger and larger as you accumulate money. Your large position sizing would eventually make dealing impossible as you'd move the market so much.

Do you really think this is possible?

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[new_trader]

This is also the reason why the beneficiaries of such priceless treasures do not write silly books. It is because these treasures cannot effectively be shared. It is not prudent to do so.

Maybe these books are just a smokescreen designed to divert attention away from their real winning strategy. If such is the case, I'm safe

 

[Lightning McQueen]

Maybe these books are just a smokescreen designed to divert attention away from their real winning strategy. If such is the case, I'm safe

yes or maybe the authors of such books have earlier entry rules to the strategy they have published knowing that a buying (or selling) frenzy in the chosen investment is imminent

 

[SOCRATES]

Maybe these books are just a smokescreen designed to divert attention away from their real winning strategy. If such is the case, I'm safe

Yes, that is sometimes the case, or, the opposite.

Some authors have a lot of riddles they cannot solve themselves without help.

They then go and write a silly book.

They hope this silly book will irritate and stimulate an informed reader to comment and so to solve their riddle / riddles for them.

This ploy does not just apply to books, it also applies to posts on this website and others dedicated to this topic.

This is one of the reasons for so much open agression and hostility from unfortunate and frustrated entities, who are in the great majority, sadly.

 

[Lightning McQueen]

If you have a trading strategy that works in any market trend, why wouldn't it work forever? :|

new_trader if you can track trend successfully then you should be able to trade it forever :cheesy:

in my efforts in creating a strategy so far to this end I share my work so far

the trade would be entered on change of colour on an indicator bar. I will try and add a picture to illustrate my point

its early days with this strategy its work ongoing so not to much laughing please

 

[new_trader]

new_trader if you can track trend successfully then you should be able to trade it forever :cheesy:

in my efforts in creating a strategy so far to this end I share my work so far

the trade would be entered on change of colour on an indicator bar. I will try and add a picture to illustrate my point

its early days with this strategy its work ongoing so not to much laughing please

I didn't actually track trend successfully I backtested a system from 2002-2005 which covered a significant trend change.

I am not much of a chartist but I have looked at it with a view of position trading. The problem (IMO) is that they are more of a lagging indicator than a leading indicator. Things look obvious only when looking back historically. To quote a very rich and well known investor: "I have never met a rich chartist!"

 

[Lightning McQueen]

I didn't actually track trend successfully I backtested a system from 2002-2005 which covered a significant trend change.

I am not much of a chartist but I have looked at it with a view of position trading. The problem (IMO) is that they are more of a lagging indicator than a leading indicator. Things look obvious only when looking back historically. To quote a very rich and well known investor: "I have never met a rich chartist!"

yes i agree that for a position trader march 2002 to February 2004 would have been awesome if you were right on market direction and on the right vehicle but since 2004 it looks pants for a buy and hold position strategy IMO
please note that this comment relates to the dow only and my goal to swing trade it

because he hasn't met one (rich chartist) doesn't mean they don't exist :cheesy:

 

[Lightning McQueen]

They hope this silly book will irritate and stimulate an informed reader to comment and so to solve their riddle / riddles for them.

This ploy does not just apply to books, it also applies to posts on this website and others dedicated to this topic.

This I thought was what a place like this (T2W) was for, to discuss with like minded people about the many aspects of trading that there are.

As a newbie poster and a wannabe trader it is a bit daunting posting in the presence of bronze silver gold glittery tapestry types but yes please solve our riddles

my question to you would be is there any merit to a trading approach that is based on trend

 

[dbphoenix]

This I thought was what a place like this (T2W) was for, to discuss with like minded people about the many aspects of trading that there are.

As a newbie poster and a wannabe trader it is a bit daunting posting in the presence of bronze silver gold glittery tapestry types but yes please solve our riddles

my question to you would be is there any merit to a trading approach that is based on trend

A. It's supposed to be, and usually is.

B. Not all tapestry types are equal.

C. Yes, of course there is.

 

[new_trader]

This I thought was what a place like this (T2W) was for, to discuss with like minded people about the many aspects of trading that there are.

As a newbie poster and a wannabe trader it is a bit daunting posting in the presence of bronze silver gold glittery tapestry types but yes please solve our riddles

my question to you would be is there any merit to a trading approach that is based on trend

Read these articles if you haven't already done so:

http://www.trade2win.com/knowledge/articles/general_articles/point-and-figure-charting-part2/page1

http://www.trade2win.com/knowledge/articles/general_articles/indentify-trends-bollinger/

http://www.trade2win.com/knowledge/articles/general_articles/simple-swing-trading/

 

[A Dashing Blade]

. . . Efficient Market Hypothesis and Behavioural Finance theory seem to contradict the notion that the market can change . . .

I thought EMH had been pretty much discredited in th last 20 years.

 

[Lightning McQueen]

Thanks for your replies dbphoenix and new _trader

 

[new_trader]

I thought EMH had been pretty much discredited in th last 20 years.

http://www.investorhome.com/emh.htm

 

[Lightning McQueen]

http://www.investorhome.com/emh.htm

nice link thanks recommend people read it

A few points on it though if i may
The article states Efficient Market Hypothesis was evolved from a dissertation by Eugene Fama. It also goes on to say that decades later he also wrote papers on Market Efficiency, Long term Returns and Behavioural finance which casts a bit of doubt on his first theory.

http://en.wikipedia.org/wiki/Eugene_Fama

http://en.wikipedia.org/wiki/Efficient_market_hypothesis

so maybe A Dashing Blade has a good point unless ive completely missed it myself :-0

 

[new_trader]

nice link thanks recommend people read it

A few points on it though if i may
The article states Efficient Market Hypothesis was evolved from a dissertation by Eugene Fama. It also goes on to say that decades later he also wrote papers on Market Efficiency, Long term Returns and Behavioural finance which casts a bit of doubt on his first theory.

http://en.wikipedia.org/wiki/Eugene_Fama

http://en.wikipedia.org/wiki/Efficient_market_hypothesis

so maybe A Dashing Blade has a good point unless ive completely missed it myself :-0

No, you haven't missed any point. In my original post I mentioned both EMH and Behavioural finance. I wanted to understand more about what a "Changing Market" means. The theories describe how a market behaves but not exactly why it would change.

"A growing field of research called behavioral finance studies how cognitive or emotional biases, which are individual or collective, create anomalies in market prices and returns that may be inexplicable via EMH alone."

This implies that the market is unpredictable, or is better explained by chaos theory?

http://en.wikipedia.org/wiki/Chaos_theory