Wall Street = Casino. Minus Sum Game.

[counter_violent]

The problem is that everyone thinks they understand what TA is....nothing could be further from the truth.

 

[Splitlink]

I would go further. I would say that many people teach what they think is TA and many more think that those teachers have more ability than they should be given credit for.

It is very difficult to teach a skill. Only the apprentice becomes skillful and that, normally, takes many years.

 

[D70]

That's a very interesting way of looking at things.

One of the things I look at now, which occurs every few weeks would be the provision of a service too. That's me buying things from institutions that didn't want those things in the first place. They just got saddled with them.

This sounds like a poor service to provide but it's actually a decent trade.

Hi DionysusToast,
I think you are spot on here.

Buying or selling to "institutions" is an awesome service.

As an example. Many people close out positions at the end of the day, or end of a week. Buying those positions off them and selling them back to them the next day / next week is providing a service that is a profitable one. You are effectively being paid a premium to hold that risk overnight. A trade many dont want to do. Which is why it is a good one!

This, in my opinion, is how you make money, provide a service.

And it makes me grin regarding the chat about trading "teachers". Why do they teach?? Most peoples aim is to trade so they can have more time to do things they enjoy, i am sure teaching others isnt one of those things.... so to me, all trading coaches/ teachers are somewhat dubious! The only explanation in defence of them is that maybe they do it because they want to be loved / respected / prayed to... and so on. Maybe they dont get that in their day to day life so fill the gap by selling their trading ideas?

 

[Splitlink]

Hi DionysusToast,
I think you are spot on here.

Buying or selling to "institutions" is an awesome service.

As an example. Many people close out positions at the end of the day, or end of a week. Buying those positions off them and selling them back to them the next day / next week is providing a service that is a profitable one. You are effectively being paid a premium to hold that risk overnight. A trade many dont want to do. Which is why it is a good one!

This, in my opinion, is how you make money, provide a service.

And it makes me grin regarding the chat about trading "teachers". Why do they teach?? Most peoples aim is to trade so they can have more time to do things they enjoy, i am sure teaching others isnt one of those things.... so to me, all trading coaches/ teachers are somewhat dubious! The only explanation in defence of them is that maybe they do it because they want to be loved / respected / prayed to... and so on. Maybe they dont get that in their day to day life so fill the gap by selling their trading ideas?

But that does not make the market a casino. It is only a casino if the individual trader makes it so. If the market provides a service it is the individual who treats it as a casino, if he wants.

 

[DionysusToast]

But that does not make the market a casino. It is only a casino if the individual trader makes it so. If the market provides a service it is the individual who treats it as a casino, if he wants.

Well - there are some parallels.

- the house does not lose. As in roulette, blackjack etc - they have an edge.
- some punters may win. Overall the majority must lose.
- when discussing psychology of trading, especially when trying to outguess what the 'masses' will think and do, the implication is that you can outhink your opponents. A bit like poker
- there's a bunch of bottom feeders selling courses, books, mentorships - showing how to beat the house, which they would do themselves if it were possible for them

I would say that in order to beat the house, you really have to do something different to what all of those courses, web sites, ebooks preach. You also have to fully understand that the house has the egde and you also have to understand that the money you win will come from other players and not the house itself.

I think you have to grasp discretion with both hands, pull it close to you and give it a big hug because that's where your edge is.

I was scared of actually making a decision on my own merits and also looked for something mechanical to trade off. The thing is - the discretionary part is actually not very hard, probably even easier than undersanding all of the technical stuff.

 

[DionysusToast]

The problem is that everyone thinks they understand what TA is....nothing could be further from the truth.

Why not educate us then ?

 

[Splitlink]

Well - there are some parallels.

- the house does not lose. As in roulette, blackjack etc - they have an edge.
- some punters may win. Overall the majority must lose.
- when discussing psychology of trading, especially when trying to outguess what the 'masses' will think and do, the implication is that you can outhink your opponents. A bit like poker
- there's a bunch of bottom feeders selling courses, books, mentorships - showing how to beat the house, which they would do themselves if it were possible for them

I would say that in order to beat the house, you really have to do something different to what all of those courses, web sites, ebooks preach. You also have to fully understand that the house has the egde and you also have to understand that the money you win will come from other players and not the house itself.

I think you have to grasp discretion with both hands, pull it close to you and give it a big hug because that's where your edge is.

I was scared of actually making a decision on my own merits and also looked for something mechanical to trade off. The thing is - the discretionary part is actually not very hard, probably even easier than undersanding all of the technical stuff.

I'll agree to disagree with you on this, as I see that we are both poles apart. Do you remember the crash of Barings and the Leesom business? Leesom was a "professional" who got greedy. It happens all the time.

 

[everyonerich]

everyonerich...

I am not saying that no-one makes money. In fact, the financial industry always makes money.

For every money manager that has made money for the past 5 years, there are hundreds that failed. By the laws of probability there will be some that make money forever just by sheer luck.

The thing is - those that failed are out of business, are no longer trading. A lot of what you see with succesful money managers is simply the survivors. Also by sheer luck, these people may continue to make money for decades or suddenly stop. It's the nature of survivorship bias that it appears that a higher percentage of people are making money because there's no sight of the losers.

Now - of course there will be people making money because they are skilled. The problem you have is in determining those that made it through skill and whose methods are still relevant and those who made it through sheer luck.

For someone to manage my money, I would want to know:
- how they manage it in detail
- what kind of risks they think they are taking and why
- what changes have gone on in their organisation in terms of mangers
- why they are managing other people's money instead of their own

It is unlikely that they would provide this information in sufficient detail to satisfy me.

Then you could make an assessment (albeit a bit crude) on whether you think this bunch of people, following the same methods have a chance of continuing to make money. You also have to look at how they assess risk as there have been some stupendous mistakes in risk analysis of late.

i've highlighted your words in red, the reason is because conservative and low return.

around 3 -4% gain monthly.

lowest drawdown was -1.51% and -1.0%

 

[barjon]

DT

There are two themes running here. One about the minus sum game and the other about whether TA "works".

minus sum game

You seem to be putting all the different kinds of fruit into one big basket and drawing conclusions without regard to the individual fruits.

In the equity markets (the underlying not all the various proxies) it is money flow that sets the overall expectancy. If there is an influx of new money then prices must rise. There will be winners and losers but an overall positive expectancy, although not as much as there should be because of the new money siphoned off by the industry by way of "charges".

Similarly, when money is removed from the market prices must fall. There will be winners and losers but an overall loss which will be greater than it should be because of those industry "charges".

Over the long term, economic growth (and a bit of money printing ) has ensured a constant influx of new money - despite the occasional blip - and that is why there has been an upward bias in share prices for over 200 years.

That's how I see it anyway.

TA

In my view TA "works" only to the extent that it gives people a reason to enter. The real skill lies in how people manage that trade from that point forward.

good trading

jon

 

[DionysusToast]

Barjon

Minu Sum - whatever market, whatever the direction, the house wins. It's very simple. Take this website for instance, it generates revenue from advertising and the advertisers take money from investors. What market conditions exist where this site and its advertisers do not make that revenue ?

Let's all just be aware that the spread, salaries, commissions etc. are all part of the house edge and the reason that everyone cannot win. The house has an edge.

TA - TA may well give you a reason to enter - the problem is, if you don't even take a peek at the fundamentals, you would have to be a fool to place anything other than a day trade. Let's say TA gives you a perfect swing entry on the stock, yet in 3 days time that stock had an earnings announcement. Are you saying such an event should be ignored.

 

[Splitlink]

TA - TA may well give you a reason to enter - the problem is, if you don't even take a peek at the fundamentals, you would have to be a fool to place anything other than a day trade. Let's say TA gives you a perfect swing entry on the stock, yet in 3 days time that stock had an earnings announcement. Are you saying such an event should be ignored.

Yes, Sir, that is the fact of the matter.

 

[barjon]

...............TA may well give you a reason to enter - the problem is, if you don't even take a peek at the fundamentals, you would have to be a fool to place anything other than a day trade. Let's say TA gives you a perfect swing entry on the stock, yet in 3 days time that stock had an earnings announcement. Are you saying such an event should be ignored...............

dt

You're right, of course. No, I'm not saying that. I'm just saying that TA is a respectable way of deciding to take a trade. Even if you had ignored the upcoming earnings announcement of your example your TA would soon tell you what "the market" thought of it and help decide your exit.

To some extent I would argue that entering a trade is the easy part - you can do it with a coin toss if you want - albeit that a well-judged entry is important. For me anyway, the far more difficult skill is in managing the trade from there and deciding when to cut loose.

When I look to see how I differ from traders I know that are much more successful than me I find a much greater disparity in what they take from a trade (exits) than in where they decided to take that trade (entries). Their exits are much more elegant than mine, giving them smaller losses and greater gains.

good trading

jon

 

[DionysusToast]

jon

I would hope that any newbies on board don't take your comment on upcoming earnings too seriously.

The earnings does move a stock and the guidance even more so. If you are in a stock and the earnings/guidance goes against you, the stock can easily gap up/down a few dollars right past your stop loss making toast of your risk profile for the trade. Of course at the earnings date, the big drop in price will tell you the earnings were crap - but your loss on the position will do as good a job as that. You can't trade in the rear view mirror.

If you tell me that you trade stocks across earnings dates based on pure TA alone, I simply wont believe it. I would believe that you made an off the cuff comment on earnings being predictable by TA but you'd only need to trade that for a few weeks before you changed your opinion. I know I did!

In my opinion, you absolutely cannot swing trade a stock with earnings coming up and get it right based on TA alone. This is gambing in it's purest form.

Now - I do know someone that trades an 8-figure account on earnings. He has 2 people working for him. Those 2 people do nothing other than build a picture for him of every stock that is about to announce earnings. These 2 people have no training at all in either fundamental analysis or technical analysis. He tells them what kind of info to collate, how to analyze it & then give him the information. All of the information they look at is things you would not see in the price chart - short info, peer performance, insider info and a bunch of other stuff. They build a picture of the stock and then make a call on which way earnings will go. To say he's a succesful trader would be an understatement.

Me - I stay clear of earnings dates because they are too unpredictable for me. This is something someone else does very well but that doesn't mean I should jump on it. I can't follow what someone else does. I need to have my own niche.

 

[barjon]

dt

You got me wrong again. I did start off by saying you were right!! I then said "Even if you had ignored .....". I certainly wasn't advocating trading shares across earnings based on TA. Yes, I use TA but, like you, I steer clear of earnings dates as well as other important announcement dates.

good trading

jon

 

[DionysusToast]

Sorry Jon - I'm only posting at this time 'cause of jet lag.

I have a habit of disagreeing with people that agree with me... :innocent:

 

[Xeno]

the problem is, if you don't even take a peek at the fundamentals, you would have to be a fool to place anything other than a day trade.

And there's the rub. You are aware that some people do actually day trade? And use exclusively TA for it. Yet you dismiss pure TA across the board.

 

[Prawnsandwich]

jon

I would hope that any newbies on board don't take your comment on upcoming earnings too seriously.

The earnings does move a stock and the guidance even more so. If you are in a stock and the earnings/guidance goes against you, the stock can easily gap up/down a few dollars right past your stop loss making toast of your risk profile for the trade. Of course at the earnings date, the big drop in price will tell you the earnings were crap - but your loss on the position will do as good a job as that. You can't trade in the rear view mirror.

If you tell me that you trade stocks across earnings dates based on pure TA alone, I simply wont believe it. I would believe that you made an off the cuff comment on earnings being predictable by TA but you'd only need to trade that for a few weeks before you changed your opinion. I know I did!

In my opinion, you absolutely cannot swing trade a stock with earnings coming up and get it right based on TA alone. This is gambing in it's purest form.

Now - I do know someone that trades an 8-figure account on earnings. He has 2 people working for him. Those 2 people do nothing other than build a picture for him of every stock that is about to announce earnings. These 2 people have no training at all in either fundamental analysis or technical analysis. He tells them what kind of info to collate, how to analyze it & then give him the information. All of the information they look at is things you would not see in the price chart - short info, peer performance, insider info and a bunch of other stuff. They build a picture of the stock and then make a call on which way earnings will go. To say he's a succesful trader would be an understatement.

Me - I stay clear of earnings dates because they are too unpredictable for me. This is something someone else does very well but that doesn't mean I should jump on it. I can't follow what someone else does. I need to have my own niche.

A basic principle of trading on the basis of TA is to stay out of market when earnings are due out.....for obvious reasons. Now, after earnings are out TA can be used to enter a position...entry when price retraces to a moving average etc....its not a case of one or the other of TA / fundamentals being right or wrong, both can be effective when used at the right time and in the right way...

 

[DionysusToast]

I day trade too. Guess what I use to identify which stocks will be movers for the day ?

That's right... fundamentals.

Guess which types of stocks I don't trade around 10:30am est on Wednesdays ????

Anyway - the point about TA is this:

- There is an industry geared around taking money from traders.
- The same industry is teaching you to trade using pure TA
- Most teachers of TA are not profitable traders

Books exist to sell books
Trainers exist to sell training
Brokers exist to charge fees
Market makers/specialists exist to take the spread (ok - simplified)
Web sites/forums exist to sell courses/advertising

With all of the money they are taking from investors - what makes you think they want to reduce the pot by telling you what it would take to be consistently profitable ?

Why is no-one talking about the drivers behind a rush of selling & buying ? Why is all the focus on TA ?

Why not take away the distinction between technicals & fundamentals and take a holistic approach ?

1 - people think it's too hard
2 - you won't be encouraged to because, it will generate less trades/fees & you may start taking money from the house

 

[montmorencyt2w]

Yes, it's probably not surprising that spreadbetting companies are falling over themselves to provide clients with information and training about TA, and more indicators than you can shake a stick at.

I imagine they do not do this out of a sense of philanthropy, but I could of course be mistaken.

 

[DionysusToast]

A basic principle of trading on the basis of TA is to stay out of market when earnings are due out.....for obvious reasons. Now, after earnings are out TA can be used to enter a position...entry when price retraces to a moving average etc....its not a case of one or the other of TA / fundamentals being right or wrong, both can be effective when used at the right time and in the right way...

I agree - and earnings are just about THE most basic piece of fundamental information to take into account.

Now - there is a lot more going on than just earnings. Most of it is simply not discussed though - because a lot of it relates to how company insiders/underwriters/funds do things to 'nudge' the price of securities to their benefit.

For day trading, an understanding of the role of the Specialists and Market Makers reveals some insights into price behaviour that would seem counterintuitive to someone that was unaware of the service they provide and how they protect themselves from getting steamrollered. Again, topics that are not oft discussed.