Sluggish Market & Ant Theory

RUDE

Ducatti, do you 'buy' more than you 'sell'?

About 50% of both.
However I only post my Long equity trades as these can be easily followed on the forum.
When I short sell I am in an arbitrage situation, and no-one could follow the trade, so I don't bother posting them.

Ducatti, does your FA rely on short term, mid term or long term analysis?

All three, depends on the situation obviously.

SOCCY........................You're back

Come on, you want a drink with me really...........it's Christmas

LION

Judging from the posts that Ducati makes, it would be fair to assume that he buys more than he sells. On the other hand, I sell more than I buy and I do not use charts for entry or exit as they are of no relevance to a TRUE fundamental trader.

Based on what I post, that is an accurate appraisal.
Charts.........chuck 'em in the bin.

cheers d998
 
ducati998 said:
RUDE



About 50% of both.
However I only post my Long equity trades as these can be easily followed on the forum.
When I short sell I am in an arbitrage situation, and no-one could follow the trade, so I don't bother posting them.



All three, depends on the situation obviously.

SOCCY........................You're back

Come on, you want a drink with me really...........it's Christmas

LION



Based on what I post, that is an accurate appraisal.
Charts.........chuck 'em in the bin.

cheers d998
ducatti, aw, alright then, we'll see....
icon10.gif
 
SOCCY..........

A happy ending.
But in all seriousness, the negativity needs to stop. I will cease and desist with the negativity on my side as of now.

If you do not like or agree with what I post, that is fine, feel free to criticise, however, just have a point to make.............just posting rubbish does not advance the discussion in any shape or form.

Its rubbish because..................XYZ.
And I can then reply in a likewise manner.

See you Christmas time
Cheers d998
 
SOCRATES said:
First of all markets are not random, but they appear to be perversely random, in the same way that someone at a busy railway station and not in possession of a timetable would percieve the comings and goings of trains and arrivals and departures of passengers as random. There is order in everything.
The ability to discern what is random and what is not depends upon the perception of the observer.

Markets are not efficient or inefficient, they just are what they are.I will concede that a market which is not liquid and therefore not effectively tradeable can be percieved to be inefficient, but any sensible trader is patently going to avoid buying something that will present difficulties in getting rid of later on, and vice versa.

All these annoyingly silly postulations of ducatti arrive as a consequence of not accepting the inefficiency of the inept or unskiled trader. You never hear of really skilled traders grumbling about this or that "inefficiency" as he calls it.

Efficient traders are able to confront, and furthermore are wise enough to protect their postures with the use of stop loss precautions. None of this is gambling as he thinks. It is because it is a solid protection against complacency.

Now there are two sides to this.

The inefficient traders have to use a stop in fear that they are consistently wrong.

The efficient traders use stop losses, because, being accustomed to being consistent winners, are apt to suffer an occasional information shock when the outcome they expect is not the one that the market unexpectedly delivers.

And that, is the blunt truth, ants or no ants.


exactly!!

market efficiency (or not) is for academics. academics dont make much money.

this is a great observation though socrates - the efficient and the inefficient trader! a much more useful description.
 
CharlieChan,

Your assertion that academics do not make money is not entirely accurate. Many academics have been recruited by Wall Street firms over the years due to their ability to make money.
 
ducati998 said:
Tuffty



Agreed, there is an inconsistent, consistency to the markets, which just brings us back very briefly to our 3 possible market philosophies...............

1......Technical analysis.........utilises stoploss method ( includes mechanical systems )
2......Quantitative analysis........does not use stoploss
3......Fundamental analysis.....does not utilise stoploss.

All seek to exploit market inefficiencies.
2 /3 as part of the methodology actively seek market inefficiency.

Technical analysis, via possibly oscillator studies also seeks statistical inefficiency ( bollinger bands are one example )

.....

YAWN

......

WHY ON EARTH COULDNT A FUNDAMENTAL TRADER USE A STOP LOSS?

YOU REALLY DONT THINK MUCH DO YOU!!! its ok - perhaps you are tiered. i am quite tiered too after all the action following fomc numner!

may i respectfully suggest you purchase a book called 'trading for dummies' you may just learn something - but then again......
 
SOCRATES said:
Complete and utter misguided rubbish from beginning to end once again.


this chap really is hilarious!!

i have no problem with people wanting to learn. sure, we all had to start from scratch. well all knew zilch at the beginning.

but to take a stance and pretend you know what you are talking about and assume some position of authority while talking complete gibberish is simply a crime.

please - ducatti - give it up mate. i say this with the deepest hart felt sincerity. you really do know nothing at all. i am sorry if i appear to be harsh. what do you gain from this?

all of your statements are just nonsense. utter rubbish. do you post this for self amiusement or something?

anyone who has been in the business for more than a year or so knows what i say is true.
 
ducati998 said:
SOCCY..........

A happy ending.
But in all seriousness, the negativity needs to stop. I will cease and desist with the negativity on my side as of now.

If you do not like or agree with what I post, that is fine, feel free to criticise, however, just have a point to make.............just posting rubbish does not advance the discussion in any shape or form.

Its rubbish because..................XYZ.
And I can then reply in a likewise manner.

See you Christmas time
Cheers d998
This space is reserved pending a public announcement in the morning.


Here is my statement :~

Many members and visitors, for many different reasons, come to this website to read what is posted. A handful are truly accomplished traders and investors who do what has to be done on a professional basis as the consequence of deep knowledge understanding and experience which if you like amounts to expertise.

There are different categories of visitors and readers, from the highly accomplished right down to absolute beginners.

But everybody reads what is posted.

Some of us are able to pinpoint the fine dividing line that divides sense from nonsense.

Others are not able to do this owing to lack of information, understanding, knowledge and experience. This is not stupidity, this is as a consequence of not having the correct information. the correct facts.

Therefore posting in a public forum in discussion of a serious topic confers upon the poster a great responsibility.

This is because it is very easy for people who are not accomplished and experienced, underpinned by deep knowledge and understanding, which as I say above amounts to expertise, to become totally misled and confused.

As this topic is so unforgiving, there is no room for errors.

Therefore there is a moral responsibility that the serious poster must excercise not to mislead and confuse beginners and others not able to make sound judgements as to the validity and verity of what is posted.

This implies that material which is offered seriously has to stand up to the most rigorous scrutiny in order for it to be categorised as such.

It is no good just to ventilate opinions. I personally never have opinions, but I do hold views.

Elsewhere I have explained the difference between the two. But I am happy to explain it yet once more.

An opinion is a pronouncement made as a consequence of the pronouncer expressing a thought but contained within that thought lies an emotion. An emotion is the by product of personality. The problem with an opinion is that it is tainted by the frame of reference of the pronouncer which may or may not be correct.

A view is a pronouncement made as a consequence of the pronouncer expressing a thought, but the difference is that the thought is stripped of emotion, this is because personality is not allowed to attach itself to a view nor to taint it with emotion.

You can now logically deduce that an opinion is a tainted pronouncement whereas a view is an untainted pronouncement.

You can now understand that a view is an impartial judgement.

This impartial judgement can only be enacted if the judge is properly equipped to do so.

Now we see that not everyone can be a judge.

This is because for the purposes of this explantion a judge cannot succumb to being the arbiter of fashion, or the instrument of politics, or the servant of acquiescence, or the carefree holder of an opinion.

A judge can only be so if he is properly equipped with the correct relevant frame of reference.

This correct frame of reference must be unassailable, in the sense that it must be able to stand up to the most ferocious debate, and be proven, without doubt to be correct.

This brings us to the crux of the matter.

It is not fair, morally justifiable, intellectually defensible, or socially acceptable, or commercially honest to put forward ideas in an arena as dangerous as this one that are not views, and for these views to be the result of and underpinned by irrefutable supportable evidence that they are the correct ones.

All else is very dangerous.

This is because ordinary people do not have the expertise to be able to in practicality discern correctly the differences that exist between fact , fiction and faction.

The dangers are that those of us who are truly in possession of an edge, or several edges for that matter, have acquired them as a result of a long struggle over many years at great cost, therefore you must understand that what is truly an edge is and must be jealously guarded, and it is, because if you ask any expert to put his hand on his heart, he is sure to admit it.

The problem is, that poseesion of a true edge ( which is not just tactical proficency but much much more) also places upon the beneficial holder of that edge a different kind of responsibility which is an acute moral one. It also places the edge holder under pressure.

The moral and humanistic temptation is to step in immediately when it is seen that dangerous avenues of behaviour or even thought are opened up irresponsibly and to squash these to prevent harm being done.

But you must understand that on the other hand there is a limit to which this can be taken, for the reasons I express above.

In all sincerity, I will tell you it is not prudent for you to stray into scenarios within arenas with which you are not totally familiar, and of which you are not a total master, because it is dangerous. It is very dangerous to lead people into muddled thinking and not morally defensible or fair. Is that understood ?

Now then, I do not bear you any animosity whatsoever. I am happy to buy you a beer if and when we ever do meet.

Kind Regards.
 
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ducati998 said:
Rude




Bollinger Bands utilise standard deviations, a statistical construct ( mathematical ), therefore yes, it is trying to measure "inefficiency" in a mathematical context & construct.

TRIN....which measures the # of advancing issues against the # of declining issues, is an interesting one, as logically you should not infer a measurement of "inefficiency" to this measurement.

However, that is almost exactly how it is used.
Now the difference, is in their application.................in THEORY, Bollinger Bands as a statistical measurement should not require a stoploss.


cheers d998


tosh.

ducatti - i am actually beginning to feel sorry for you now.

here goes - pay attention.

bollinger bands react to PRICE. price does not react to bollinger bands.

if the big money are not using bollinger bands, then they will not know (or care - another chapter though) where the bands are so the bands will have NO impact at all upon price.

if you knew anything about bollinger bands, you would know that a tag of the bands in a trending market is in fact a CONTINUATION signal, not a reversal signal - and you didnt have a stop eh!!

back to the drawing board i guess.

have you received a margin call recently? or did you blow out a long time ago?

good luck.

xxxx
 
CharlieChan,

Why use a stop loss unless you have not reached a proper conclusion as to what fair value is? Once this has been ascertained all you need to do is sit back and wait, the price will reach fair value. Placing a stop loss means/implies that one's judgement is suspect and the analysis is flimsy.

There is no need to resort to personal abuse just to make a point. One might infer from the tone of your posts that Ducati stole your childhood sweetheart or that you are simply one of those chaps that would pick a fight in an empty room.
 
Ducatti, answers, we need straight answers! That is all (and don't try to reverse it), not now, not at this point. It would become you.
 
LION63, come on, it's not your thread to answer! We are just asking questions!
 
Rudeboy, you are starting to sound like some of the members that decided to exclude others from their threads by making them 'Private'. However, this is a Public Thread and I am sure that you do not want to join their illustrious company. Besides, I thought that Ducati998 started the thread and placed it in the PUBLIC FORUM for all and sundry to view and post.

Correct me if I am wrong but all I am doing is referring to a couple of posts here and there and making my observations. Could it be that those that oppose what Ducati is putting forward do not want anyone else that is like minded to respond? Could the motive be that once a couple of people echo what he is saying, he can no longer be ridiculed as a fruitcake?

If I am given any valid reason not to post on the thread I will desist.
 
LION63, you are entitled to your opinion, like anybody else. But it was your own post that was cynical and presumptuous.
 
charliechan

WHY ON EARTH COULDNT A FUNDAMENTAL TRADER USE A STOP LOSS?

Because we manage risk in a completely different manner.

bollinger bands react to PRICE. price does not react to bollinger bands.

Standard deviation is a measure of volatility, which is "price movement".
The point being that as the bands expand with increased volatility, so the standard deviation increases.

Now, with a gaussian curve, you expect a reversion to the mean. So the greater the value of the standard deviation, the greater the probability of price reversing, and a return to the mean.

Somewhere on this thread, we talked about fat-tails and this has relevance in the market, as there is a far greater incidence of said tails than could reasonably be expected.

Thus, the underlying uncertainity of technical traders of the reliability, as they encroach into "Quant" territory. Fetteredchino's system is based on this quant strategy, and he may expand on it.

if you knew anything about bollinger bands, you would know that a tag of the bands in a trending market is in fact a CONTINUATION signal, not a reversal signal - and you didnt have a stop eh!!

There are any number of ways to trade BB.
We were actually discussing the underlying philosophy, and how it relates to a macro-view of markets as a generalised, unspecific at the moment view. That is to say their construct, and what exactly they were designed to show. By understanding what you are looking at, you will have some choices as to how you may apply them to a trade.

RUDE

You always get a straight answer.

As LION has already indicated, this is a PUBLIC thread open to all, no hiding here. It would certainly behoove you to expose yourself to some of the concepts and ideas that he places in front of you, as it will give you a different perspective that will illuminate how other market participants view the market. That can only be of benefit, even if you only ever trade in a technical manner.

What question are you referring to CC, or one of your own ?

cheers d998
 
Ducatti, i do not ridicule your method or understanding, far from it. Here is my question, though. You can only answer YES or NO. Are you for real?

Ducatti, who makes the first move? FA or TA? Or does it boil down to money management?

You can put TA and stops at arms distance for all you like. But, your real reason for choosing the way you trade is because you could never make it short term! That is the deep rooted psychological reason for all this?

It is no bad thing! Just self awareness!
 
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RUDE

You must suffer narcolepsy during daylight hours.

Ducatti, i do not ridicule your method or understanding, far from it. Here is my question, though. You can only answer YES or NO. Are you for real?

Only you can answer that question for yourself.

Ducatti, who makes the first move? FA or TA? Or does it boil down to money management?

It varies on the stock.
In a value stock, FA.
In a speculative stock TA.

Money management is as relevant for both, but in different ways.

You can put TA and stops at arms distance for all you like. But, your real reason for choosing the way you trade is because you could never make it short term! That is the deep rooted psychological reason for all this?

Actually, I was a pretty good daytrader.
I used to post all my trades live. When the site comes back on line, I'll post you the link. I think my best one was a trade on NQ, that I swung overnight as a short, about $10K profit.

However, I took some hefty hits as well. It was however the lack of control in daytrading that really made me look for a better way.

I am analytical, and technical trading is nothing more than fast decisions, and the ability to shrug off losses, and jump back in. It is professional gambling. It is not for everyone.

In almost the last two years now, as a fundamental trader ( investor ) I have not lost any money, none, zero. That in of itself should be all you need to know. That is the secret, if there is such a thing, learn how not to lose money...........only then will you make money

cheers d998
 
Some of you seem cynical about the relevance of all of this.
Can I express some of my ideas as to why the efficient market hypothesis (EMH) is relevant.
Apologies in advance for some of the repetition, but I think some of the ideas would benefit from going over them again.


What is an efficient market?

An efficient market is one in which future prices can not be predicted whether by TA, FA or any other means. Changes in prices are determined by real news events. 'Real news' by its very definition can not be predicted in advance.

Why does it matter?
All active participants in genuinly efficient markets are mere gamblers. They have no means of predicting where prices will go.

Are the markets efficient?
All of us here would agree that the answer is no. The problem is how do you show this? I've pointed out previously that the fact that active participants make money in the market is not sufficient proof. People frequently win billion to one lotteries (luck happens). A normal distribution of random returns has tails, a few big winners, a few big losers and the majority somewhere in between.
A better test of market efficiency is the availability of risk free profits. If you are taking profits with no risks then by definition you are not gambling.

Are risk free profits available?
It would seem that the answer is yes. This is what a pure hedge fund does for a living (I realise that the majority of hedge funds don't trade pure arbitrage, but I would argue that the consistantly sucessful ones make the majority of their money from various forms of arbitrage).
Just as hedge fund returns are not consistant over time, in my opinion, market inefficiency is not stable over time. I would argue that technology is increasing market efficiency as data processing speeds increase, automated trading scans the market for arbitrage opportunities and the amount of hedge fund money chasing arbitrage profits also increases. Anecdotal evidence suggests that arbitrage opportunities appear to be getting fewer in number and size as time progresses. 25 years ago it was possible to buy a gold in London and simultaneously sell it in New York at a higher price. Try doing that now.

Why are markets inefficient?
Human behaviour seems to be the short answer. We don’t always act rationally. We’re affected by emotions such as greed and fear. By itself, this doesn’t necessarily mean markets can’t still be efficient.
A lot of irrational behaviour is normally distributed with a mean of 0. In other words, one bunch of stupid actions simply cancels out the effect of another bunch of stupid actions.
However, there is one irrational behaviour type that by definition doesn’t get cancelled out. Herding , acting like sheep and blindly following the latest trend. We all want to fit in and stay with the crowd. It gives us a feeling of security being part of the tribe. Does this not explain why bubbles form? People are buying or selling for no other reason than because everyone else is doing it. Prices move away from their rational valuation simply because everyone is buying and nobody is selling. Demand outstrips supply.

What does this all mean to you as a trader?

If markets are efficient you are nothing but a gambler irrespective of what system you use.
If markets are inefficient, then by better understanding how and why they are inefficient may make you a better trader irrespective of what system you use.

How do I make money from all of this?
Well that literally is the million-dollar question. Lets focus on this.

I’d like to continue later with an exploration into the relevance of ants to the markets.

While I encourage you to point out the error of my ways, I would ask you to bear in mind that I am an Australian and I'm therefore somewhat sensitive to personal criticism.
 
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Mr D,
I'm not sure we really have this stop issue clarified hence the questions keep coming...

You enter a trade without a stop 'loss' ,but your approach will use a stop to exit based upon a change to your calculated fair value and dare I say that that stop to exit could also be a stop loss...so if your fair value calc never found profit in the trade and at some future time your 'fair value' calc no longer held then you would exit ...is this right ? and yes if that is so I can also understand why you have not lost money for two years because a change to 'fair value' is unlikely to be a tomorrow event.


I ask this because my brother who was a chartered accountant for 30 + years held blue chip stock and a few years ago this stock made made an all time high then over 2 to 3 years it lost 50% of share price and he still did not sell...I asked him why and he said (apart from CGT issues) why should he when at this low price it was well below value and worth so much a share..well this stock took out it's alltime high this year and ,arched on a further 23% to make a new all time high ...I then asked him why did he not sell and he said it was now fair value !
I may say that because of the asset allocation involved , his fundamental approach to the investment and his temperament he did not and does not lose any sleep over this investment.

My question to you is based on the fact that I know my brother would have sold at any time had his calc of 'fair value' told him to. Where I have used the term "investment" I do so interchangeably with the term long term trade ..just for clarity.

The issues are asset allocation , time and temperament or I think it is....when these are in line the 'normal' concept of stop loss does not apply in the way many short term traders define it hence the apparent diverse views we have got here...nontheless I think it misleading to say there is no stop loss..there is one ,but the basis is 'fair value' hence the timeframe is going to be long if it applies at all !
 
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