What are your beliefs? What do you think drives markets?

[FulcrumTrader]

The pattern I see repeat all the time in the futures markets is price running back and forth from one zone of resting supply to the next, over and over again. Commercials after building their positions will frequently drive price to a known area of resting counter supply. They drive price to these targeted levels to turn the counter supply into a group of weaker hands to in turn be utilized as an exit for their large held positions. This pattern is the norm repeated on micro and macro scales day after day and it is actually fun to watch (sorry weaker hands!).

 

[Dacamic]

I do believe that you have to at least not trade contrary to your belief system as doing so will probably end up in tears.

Beyond that, all of the above are potential belief systems, and not necessarily mutually exclusive.

Ditto.

 

[meanreversion]

I like the reply about mood driving the market. The market is, after all, a collection of individuals each responding to THEIR own belief system, whether that be a technical system, a hunch, a tip, a guess, whatever. But the underlying sentiment will drive the market unless there is compelling reason for sentiment to change.

Right now, people are bullish and ignoring bad news, focusing only on the good, and looking for chances to buy dips. This is a 180 degree turnaround from March, when equities were on their knees and people ignored all good news.

My belief is that at any given point in time, market participants are more inclined to either buy or sell, depending on sentiment. If you can identify the "mood", then the probability of profitable trading lies in going along with this sentiment - the trend is your friend. BUT not when it's at the end, i.e. be quick to get out and reverse the direction of trading as the sentiment changes.

 

[Technically Fundamental]

I like the reply about mood driving the market. The market is, after all, a collection of individuals each responding to THEIR own belief system, whether that be a technical system, a hunch, a tip, a guess, whatever. But the underlying sentiment will drive the market unless there is compelling reason for sentiment to change.

Right now, people are bullish and ignoring bad news, focusing only on the good, and looking for chances to buy dips. This is a 180 degree turnaround from March, when equities were on their knees and people ignored all good news.

My belief is that at any given point in time, market participants are more inclined to either buy or sell, depending on sentiment. If you can identify the "mood", then the probability of profitable trading lies in going along with this sentiment - the trend is your friend. BUT not when it's at the end, i.e. be quick to get out and reverse the direction of trading as the sentiment changes.

Sentiment ultimately means diddly-squat IMO. Execution = supply/demand.

 

[meanreversion]

Isn't supply and demand driven by sentiment? The ultimate end user will base his/her decisions not only on financial necessity, but also how they feel.

 

[meanreversion]

Or in other words, why do trends exist? Isn't a trend just the market manifestation of sentiment..?

 

[Technically Fundamental]

Trend = supply:demand

Isn't supply and demand driven by sentiment? The ultimate end user will base his/her decisions not only on financial necessity, but also how they feel.

Depends... What if they base on just PA. Or are contrarian. Or fade moves because they have the resources. Supply demand ftw!

 

[ian23]

Supply and demand depends on sentiment, if people feel positive they are willing to buy at a higher price cause they believe the price will move in the direction they want and sellers will hold out for a better price because they see the market moving in their direction. If the mood shifts negetive the buyers will want to try and pick up bargins/ pick the bottom and sellers become desperate and sell at any cost in fear of loosing to much of their profit or capital. So it is sentiment in the end that makes the market trend or consolidate at a certain price level in my opinion. And mind you it may not allways be rational as far as you could see and one can never really predict the market reaction to news.

 

[Technically Fundamental]

Supply and demand depends on sentiment, if people feel positive they are willing to buy at a higher price cause they believe the price will move in the direction they want and sellers will hold out for a better price because they see the market moving in their direction. If the mood shifts negetive the buyers will want to try and pick up bargins/ pick the bottom and sellers become desperate and sell at any cost in fear of loosing to much of their profit or capital. So it is sentiment in the end that makes the market trend or consolidate at a certain price level in my opinion. And mind you it may not allways be rational as far as you could see and one can never really predict the market reaction to news.

No


We've already established that market makers ease the transition of price from one area of high activity to another area where more volume is likely to move and provide liquidity to those who want to buy at whatever price as long as it fits into their scheme.

Plus you have to consider traders who just want to get a kickback from the exchange and they will move a serious amount of weight.

I suppose this will all differ from market to market though.

 

[Technically Fundamental]

I said supply and demand not buy/sell volume. As I said earlier there are many factors that can affect supply and demand.

look at recent export (supply) and imports (demand) they are going up because people have destocked (supply) and are now getting new orders (demand) not because business is recovering especially but the world doesn't stop (supply and demand)...just an idea though.

 

[Glenn]

Or in other words, why do trends exist? Isn't a trend just the market manifestation of sentiment..?

Markets, just like the weather, are driven by Chaos Theory. Initial conditions spark things off and pre-determine what comes later, and when - The Butterfly Effect. It all appears random but it's not.
This is how I have traded for years. It's hard work and difficult and can't be automated, but it's also totally spooky.
Indicators are useless most of the time. When you can see the next turn coming and look what indicators are saying, you realise that they mostly have no meaning other than being a rear-view mirror.
What people call sentiment, supply and demand, MM behaviour etc are just responses, not causes. The cause for a rally, reversal, gap, acceleration, or consolidation was determined way before it ever started, as was the actual time when it would start and end.
OK I'm sure this sounds like balony, and especially because I'm not about to explain how to do it. You'll just have to believe me and save yourself the effort of looking elsewhere..... or not
I'm not saying this is the only way to trade, of course it isn't, and for those who have a successful method, stick to it, because this way is hard graft and ideally you need two people to do it, but it is what moves the markets.
Glenn

 

[GladiatorX]

waste of time with you isn't it, read the whole thing first, the bit where i say it is obvious is supply and demand, whats the difference between demand and buying? I mean would you rather be right than have a clue what your talking about?

Ummm... I'm sorry but the difference between buying and demand is absolutely massive.

 

[0007]

What people call sentiment, supply and demand, MM behaviour etc are just responses, not causes. The cause for a rally, reversal, gap, acceleration, or consolidation was determined way before it ever started, as was the actual time when it would start and end.

Agree.

 

[GladiatorX]

well explain then...
also i didn't say they were different...

Yeah... Exactly, you said they were the same pretty much.

If you don't know the difference between demand and buying, then you clearly have no idea how the market actually moves... You probably think the market moves up because of more stock has been bought than sold

Buying and selling always matches - Demand and supply doesn't.
It would take me a while to explain and i am busy, maybe private message me and i will get back to you when i can.... Just start trying to learn what actually causes an up or down-tick.

 

[Technically Fundamental]

waste of time with you isn't it, read the whole thing first, the bit where i say it is obvious is supply and demand, whats the difference between demand and buying? I mean would you rather be right than have a clue what your talking about?

How is an export supply? How? makes no sense. How is destocking supply? I mean you've completely ignored the point of the example, that something can only go down so far, yes that is demand and supply, but again i was referring to another point about the recent equities rally, suggesting why it happened possibly in the first place, but also how it continued for questionable reasons, ie confidence multiplier.

i was responding mainly to the bit where you said it wasn't sentiment. Whats the point as you seem to choose to make an easy argument that couldn't possibly be wrong rather than saying anything useful...

There's no need for all this "you want to be right" or how I'm a "waste of time" talk. I just approach things differently and prefer to think in terms of supply and demand. There's no need to start moaning because I have my own views and am not coming around to your way of thinking. Anyway you only have to look at how OPEC operate to know I'm talking sense. IMO in the long term sentiment is negligible because fundamentals can change on a daily basis. A trend could end right now on some really bad news and the only thing that would be affecting the market would be how many buyers who have been holding are willing to offload right now.
In regards to imports and exports... Imports are demand for produce of another country and the inverse is true of supply no? It's my thinking that as these both affect GDP, sector performance, and the performance of individual companies and possibly even the supply of an instrument as investment it will in turn have an affect on the market.

What's happening here is you're saying supply and demand should be used to gauge sentiment and I'm saying sentiment should be used as an indicator in likely supply and demand no need to hate each other bro.

 

[Technically Fundamental]

Markets, just like the weather, are driven by Chaos Theory. Initial conditions spark things off and pre-determine what comes later, and when - The Butterfly Effect. It all appears random but it's not.
This is how I have traded for years. It's hard work and difficult and can't be automated, but it's also totally spooky.
Indicators are useless most of the time. When you can see the next turn coming and look what indicators are saying, you realise that they mostly have no meaning other than being a rear-view mirror.
What people call sentiment, supply and demand, MM behaviour etc are just responses, not causes. The cause for a rally, reversal, gap, acceleration, or consolidation was determined way before it ever started, as was the actual time when it would start and end.
OK I'm sure this sounds like balony, and especially because I'm not about to explain how to do it. You'll just have to believe me and save yourself the effort of looking elsewhere..... or not
I'm not saying this is the only way to trade, of course it isn't, and for those who have a successful method, stick to it, because this way is hard graft and ideally you need two people to do it, but it is what moves the markets.
Glenn

Someone loves Livermore lol

 

[Rhody Trader]

Markets, just like the weather, are driven by Chaos Theory. Initial conditions spark things off and pre-determine what comes later, and when - The Butterfly Effect. It all appears random but it's not.

While I agree that markets are probably best explained by Chaos Theory (among those that I'm aware of currently) you can't actually say the markets are "driven" by Chaos Theory. To quote a professor friend of mine:

"Chaos theory can be used to model and potentially explain markets and market participants, but a theory cannot drive anything -- only replicate and hence explain reality."

 

[Technically Fundamental]

While I agree that markets are probably best explained by Chaos Theory (among those that I'm aware of currently) you can't actually say the markets are "driven" by Chaos Theory. To quote a professor friend of mine:

"Chaos theory can be used to model and potentially explain markets and market participants, but a theory cannot drive anything -- only replicate and hence explain reality."

But wouldn't that come full circle when said models are used by institutions?

 

[cr6196]

I think the discussion what drives markets rather than how to interpret the markets? So what drives the markets supply and demand, yes, but also sentiment, trust etc. Pointless tho.

 

[barjon]

what drives markets? Money flow
what drives money flow? Perceived monetary gain/loss.
what drives perceived monetary gain/loss? Sentiment
what drives sentiment? Forecast economic conditions
what drives forecast economic conditions? Economic conditions
what drives economic conditions? Money flow