searching for holy-grail.. is this theory true?

[Purple Brain]

People may be buying and selling apples. The number of apples they can buy and sell is finite. Apples cannot appear out of thin air like contracts just because 2 people want to trade.

Isn't this where Apple Futures come in?

If there are as many apples right now for sale as there are required to buy, BUT one or more sellers/buyers expect that to change in the future - isn't that what will drive the current price of apples (and any associated Apple futures contracts prices)?

A UK MP last year or this suggested we should stock up petrol in jerrycans in the garage. There was no actual change in petrol supplies at the time he said that. But his suggestion caused a run on petrol hitting both supply and pushing prices up - even though the actual underlying supply side had not changed.

My point is that it's not the actual underlying value or supply of the asset being traded that determines its price but the expectations of future supply/demand.

 

[NVP]

my apples are now starting to rot ........anyone want to buy them on the cheap ?

what about trading them on the cider derivatives market ......package them up and sell them on ?

N

 

[barjon]

..............The number of contracts is infinite in futures............

Maybe describing it as "not finite" would avoid colourful leaps into the ether?

 

[Liquid validity]

What is that limit? Well, all we can really say is that, currently, it stands at whatever the number is for the most contracts traded in one day, week or year.

True, it could well be breached, there is nothing to limit that from happening.
The only thing that will essentially put a limit on is a brick wall
in exchange communication speed.

More likely though, is the abandonment of FIFO,
replacing it with randomised batch processing:
Exclusive: EBS take new step to rein in high-frequency traders - baltimoresun.com
The High-Frequency Trading Arms Race: Frequent Batch Auctions as a Market Design Response | Gold, Stocks & Forex

Whether or not the vested interests of the major exchanges follow suit
is anyone's guess.
http://blog.themistrading.com/wp-content/uploads/2011/11/HFT-Bibliography.pdf

 

[new_trader]

i suppose the 'holy grail' is finding out why price moves in the way it does therefore enabling you to 'front run' and make a profit entering and exiting your position.

The Toast is correct in his 'consumption of liquidity' postings and is light years ahead of most people on this thread HOWEVER this is still really the what and not the why, he knows that I suspect and you need to find out the 'why' to unlock the markets.

The arguments about futures being infinite are a bit of a side show here, as Toast has said all you need to magic up a futures transaction is any 2 people on both sides of the trade. Think about it I could have £10k in my account and another punter could have £10k, we could buy and sell to each other all day long, millions of contracts, does this mean the underlying is more scarce/plentiful, of course not, hence the supply/demand of contracts notion isn't helpful.

Supply and demand is not a great term to use for finding the why as it is really the amount of contracts people are willing to step up and buy or sell at any given price/time. If price is currently 7 and there are ton of people who are willing to buy it if it drops to 6 we could say there is a 'supply' of people who are willing to step up and buy at 6 BUT not a good idea to start thinking that there is supply of contracts or underlying, see the difference.

Now onto the point where Toast locked horns with others about fundamentals of supply and demand. The Toast is talking on a micro level so is strictly correct however lets take the current oil price as an example. News of an imminent scuffle in the middle east will cause people to 'believe' that oil prices will rise. Less people in the market will be willing to offer in the market than bid with the market believing price could/should/will rise. Once people step up and buy there will be less liquidity above to consume and therefore price will rise. So the perception of fundamental aspects and participants actions move price.

Toast is right about the short term speculators governing price in the short term however when a perceived big piece of data arrives this trumps everything. In short you need to know what is the driver at any moment.

So now onto the 'why', that's what you need to know. Here is some stuff to chew on.

Q.When do you want to buy or sell? Think about this, 99% of people cant answer.

I can tell you I want to buy when people are willing to buy at higher prices than I paid AND are less people are willing to sell above me.

It's also helpful to think about the people who can move the market you are trading, the people who trade size. If size trades you can compare what happens to what should happen.

:smart:

Toast this Toast that...I propose a toast to B.S!

 

[DionysusToast]

Isn't this where Apple Futures come in?

If there are as many apples right now for sale as there are required to buy, BUT one or more sellers/buyers expect that to change in the future - isn't that what will drive the current price of apples (and any associated Apple futures contracts prices)?

A UK MP last year or this suggested we should stock up petrol in jerrycans in the garage. There was no actual change in petrol supplies at the time he said that. But his suggestion caused a run on petrol hitting both supply and pushing prices up - even though the actual underlying supply side had not changed.

My point is that it's not the actual underlying value or supply of the asset being traded that determines its price but the expectations of future supply/demand.

Well the point is that these financial markets are somewhat different to markets for physical products.

On the one hand, we have people that think that these markets follow the same basic economic rules as say apples or petrol.

Then there's others that think that to varying extents, these markets are just people gambling anyway and that traditional economic rules do not apply in such a simplistic fashion in these markets. I am one of the more 'severe' cases of holding this opinion. I think it's all gambling. Therefore you have to focus on speculation and not supply and demand when trying to figure out what's going on.

The 'side discussion' to an extent is this infinite/finite thing where in futures the thing that you are trading comes into existence because 2 people want to trade it, whereas other markets like equities have shares generated by the underwriters and are only available in a certain qty and can become scarce.

In addition, new_trader is being insulting towards barjon and trying to make out he said something he didn't and Shakone is making feeble attempts to bait DT.

 

[new_trader]

Supply and demand is the key to understanding market movements, understanding how to read and correctly judge the supply and demand situation is how you will make money trading futures or stocks. You kids argue whatever you want, this thread has now become a waste of time for me.

 

[new_trader]

You will never be successful at trading/investing until you get this concept OUT of your head. Do not think in terms of buyers and sellers, instead think in terms of supply and demand. If supply overwhelms demand, the market (price) moves down, if demand overwhelms supply, the market (price) moves up.

For anyone with half a brain, you will see that this was my FIRST post in this thread and it was NOT, I repeat, NOT a response to anything Barjon had written.

 

[barjon]

Supply and demand is the key to understanding market movements, understanding how to read and correctly judge the supply and demand situation is how you will make money trading futures or stocks. You kids argue whatever you want, this thread has now become a waste of time for me.

That's just as well, NT, because you, in turn, have become pretty much a waste of time for the thread. Seems you can never advance anything constructive to a debate, only attempted destruction and petty insults. That either displays a feeble understanding of what goes on or a total arrogance in your own version of events - not that you have ever explained that of course.

 

[new_trader]

That's just as well, NT, because you, in turn, have become pretty much a waste of time for the thread. Seems you can never advance any thing constructive to a debate, only attempted destruction and petty insults. That either displays a feeble understanding of what goes on or a total arrogance in your own version of events - not that have ever explained that of course.

So you are judging me on things I've never explained....nice one Jon.

 

[timsk]

So you are judging me on things I've never explained....nice one Jon.

n_t,
Look through your own posts. It's in black and white for all to see that you are quick to dismiss fellow contributors for writing BS, possessing half a brain and being senile etc. How do you think people feel and how do you expect them to react when they're on the receiving end of such comments? That's a rhetorical question btw - please don't reply to it.

Your point of view is every bit as valid as everyone else's and, if you care to share it, that it will enrich the debate for the benefit of all concerned. But, please respect the views of others and accept that they may think differently to you on some issues. And, if you do think someone is posting BS, politely point out what you regard as the error in their logic (for example - as DT did with my earlier post) and then provide what you think is a better explanation. That way, you'll get the respect of fellow members and your contribution to T2W will be worthwhile.
Tim.

 

[new_trader]

Well, the funny thing about supply and demand is that it comes in many different guises - one of which is associated finite supply. And I doubt that traders actually move markets very much. That's down to money flow and if Joe public is pouring money into funds, both directly and through pension provision, then that creates demand since the fund managers must buy even if they think it's the worst idea in the world. Vice versa for supply, of course.

Whatever the futures may do they must, ultimately, reflect what is happening to the main index and the "real" buying and selling of stocks and shares.

No idea about FOREX though - I've never got involved .

Nothing funny about supply and demand Jon, but how would you know unless you've spent years studying the tape of one instrument. Have you done that? I doubt it very much judging by the utter nonsense you've written. When I watch the market, I don't think to myself, "Hey, that's Goldman Sachs".."Hey that's a fund manager" etc. I have devoted all of my time and effort into judging the supply and demand situation...That's it. If you think I've been wasting my time because you're buying into this "infinite supply" garbage, that's fine.

Talk about overcomplicating an impossibly simple concept...I despair for any newbie reading this thread...

Anyway, I really have nothing more that I want to contribute.

 

[new_trader]

n_t,
Look through your own posts. It's in black and white for all to see that you are quick to dismiss fellow contributors for writing BS, possessing half a brain and being senile etc. How do you think people feel and how do you expect them to react when they're on the receiving end of such comments? That's a rhetorical question btw - please don't reply to it.

Your point of view is every bit as valid as everyone else's and, if you care to share it, that it will enrich the debate for the benefit of all concerned. But, please respect the views of others and accept that they may think differently to you on some issues. And, if you do think someone is posting BS, politely point out what you regard as the error in their logic (for example - as DT did with my earlier post) and then provide what you think is a better explanation. That way, you'll get the respect of fellow members and your contribution to T2W will be worthwhile.
Tim.

Tim, I still can't fathom how anyone can say with a straight face that supply and demand is interchangeable with buyers and sellers. It seems so...esoteric! If you asked people, "what does more buyers than sellers mean" I would say that more than 90% would answer it means the quantity of participants and not the quality of participants.

I know I am belabouring the point, but I can't help it. Maybe it is my failing...but I just can't get past that issue at the moment. I have read and re-read what was discussed.

 

[barjon]

Nothing funny about supply and demand Jon, but how would you know unless you've spent years studying the tape of one instrument. Have you done that? I doubt it very much judging by the utter nonsense you've written. When I watch the market, I don't think to myself, "Hey, that's Goldman Sachs".."Hey that's a fund manager" etc. I have devoted all of my time and effort into judging the supply and demand situation...That's it. If you think I've been wasting my time because you're buying into this "infinite supply" garbage, that's fine.

Talk about overcomplicating an impossibly simple concept...I despair for any newbie reading this thread...

Anyway, I really have nothing more that I want to contribute.

Well, there you go again you see. Nothing constructive, just condemnation in the usual insulting terms.

You said in an earlier post So you are judging me on things I've never explained....nice one Jon. - Yes, I've made a judgement alright but I wouldn't want to incur the wrath of our moderators by expressing it here.

 

[rsh01]

I suggest he completely ignore supply and demand 'cause it's got fook all to do with it.

In futures, there is infinite supply.

the most ignorant comment on here so far, including the OP, & all of mine.

besides the context was the apple market, as an analogy to the fx market.

 

[bustech]

Apples for sale.

http://www.domain.com.au/Property/For-Sale/Vacant-land/TAS/Geeveston/?adid=2009163243

Too cold for me in Tassie, I won't be able to meet the demand.

 

[cablemonster]

I know I am belabouring the point, but I can't help it. Maybe it is my failing...but I just can't get past that issue at the moment. I have read and re-read what was discussed.

that's ok at least there is a glimmer of hope for all of us that maybe just maybe you have an inkling that you come across as a tool. the internet is littered with people arguing pointless crap. Barjon has explained what he meant, end of.

now would you kindly explain your take on demand and supply after studying the tape for so long, that would be constructive.

 

[new_trader]

And what's wrong with thinking of it in terms of buyers and sellers.

Because people who think in terms of buyers and sellers make the mistake of thinking quantity of participants rather than quality of participants, hence why some come to the erroneous conclusion than more sellers(quantity of participants) than buyers(quantity of participants) will push the market down.

Whilst for each transaction there is a buyer and a seller, supply overwhelms demand when there are more who WANT to sell than there are who are prepared to buy. Those would be sellers must offer at lower and lower prices to tempt the reluctant buyers, hence the movement.

Again, anyone reading this is likely to interpret "more who WANT to sell than there are who are prepared to buy" to mean more participants who want to sell instead of thinking the amounts they want to sell.

I hope you appreciate my contribution Jon. This has been an interesting discussion.

 

[Shakone]

Buying contracts then unloading those same contracts, then buying some more and unloading them and increasing volume isn't testing whether the supply of something is large or infinite. The statement was that supply is infinite.

What is supply dependent on? At least one thing it's dependent on is price. It doesn't make a lot of sense to talk about supply without also mentioning price. In order for there to be supply, someone or some people need to be willing to supply it, at a particular price.

Is there anything contentious in the above?

 

[cablemonster]

Buying contracts then unloading those same contracts, then buying some more and unloading them and increasing volume isn't testing whether the supply of something is large or infinite. The statement was that supply is infinite.

What is supply dependent on? At least one thing it's dependent on is price. It doesn't make a lot of sense to talk about supply without also mentioning price. In order for there to be supply, someone or some people need to be willing to supply it, at a particular price.

Is there anything contentious in the above?

you are still confused between the supply of an underlying quantity of something and the supply of futures contracts available to trade on that underlying something. until you get passed this point you cannot move forward.