Wall Street = Casino. Minus Sum Game.

This is a discussion on Wall Street = Casino. Minus Sum Game. within the General Trading Chat forums, part of the Reception category; Originally Posted by DionysusToast Step 1 - People buy a stock based on fundamentals, this is the start of the ...

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Old Jan 28, 2010, 11:49am   #241
 
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Re: Wall Street = Casino. Minus Sum Game.

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Originally Posted by DionysusToast View Post
Step 1 - People buy a stock based on fundamentals, this is the start of the move
Step 2 - The more savvy technical traders jump on the move
Step 3 - The trend is your friend traders jump on
Step 4 - People at step 1 get out.

TA is all about following a move.

If TA is about psychology, then how do swings S&R points created in times of war/crisis have any bearing on the psychology of traders later on ?

Thing is - it's the news that moves the stocks and the news will have a different psychological impact depending on what it is.

You have already stated that OF COURSE you watch the news, which means the news must move markets, otherwise you'd ignore it. Yet - how TA many people consider the news that created the moves that are looking at in the past ? I would guess not many.

So - how can current news be relevant and past news not relevant ? Hoe can it reflect psychology without considering the state of the economy, consumer confidence, wars, disease at the time ? Do these things have no impact on the state of mind of investors ?

It makes no sense.
DT

I think you've got your tongue in your cheek a bit

Why guess what impact some news is going to have on the market when you can watch the price action telling you? You don't have to know what the news is to know that something's afoot.

So far as swing s/r created in times of crisis is concerned. mmm, well maybe that's the point where people trapped by the crisis event breathe a sigh of relief and bail out when price gets back to their entry point. If there's enough of them it may be enough to tilt the balance, or it may not.

good trading

jon
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Old Jan 28, 2010, 1:32pm   #242
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Re: Wall Street = Casino. Minus Sum Game.

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Originally Posted by Xeno View Post
And that's a good point. All I'm saying is that if your skill, knowledge and success is in pure TA systems, your return on investment (in the broad sense) is not likely to be bigger by incorporating an FA filter instead of improving your existing system with more TA, or writing a new one.

I have nothing against FA - in fact I'll quite happily use it in some automated systems - but it's not that easy to backtest an FA filter, and some people like their systems to be properly backtested
Why would one backtest FA?

Either the company is healthy, or it is not. Scanning a database and selecting shares by elimination of heavy debt, earnings growth and other items is not difficult. After that, one can read through the reports and assess the sector's future prospects. Takes me a few hours per week and, although I am no accountant , I don't seem to pick any duffers.
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Old Jan 28, 2010, 1:40pm   #243
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Re: Wall Street = Casino. Minus Sum Game.

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Why would one backtest FA?

Either the company is healthy, or it is not. Scanning a database and selecting shares by elimination of heavy debt, earnings growth and other items is not difficult. After that, one can read through the reports and assess the sector's future prospects. Takes me a few hours per week and, although I am no accountant , I don't seem to pick any duffers.
Because according to this thread, everything apart from price/vol/time is FA, and that includes some things that are backtestable.
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Old Jan 28, 2010, 1:49pm   #244
 
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Re: Wall Street = Casino. Minus Sum Game.

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Originally Posted by barjon View Post
DT

I think you've got your tongue in your cheek a bit

Why guess what impact some news is going to have on the market when you can watch the price action telling you? You don't have to know what the news is to know that something's afoot.

So far as swing s/r created in times of crisis is concerned. mmm, well maybe that's the point where people trapped by the crisis event breathe a sigh of relief and bail out when price gets back to their entry point. If there's enough of them it may be enough to tilt the balance, or it may not.

good trading

jon
Here's the thing Jon - which people ?

The Mutual Funds ?
The ETFs ?
Market makers/specialists ?
Technical traders ?

I doubt any of the above would be 'shaken' psychologically in this way.

In this case - who's left ? Who are all these people ? For the theory to fit, the TA traders would have to be a silient minority with their 'inside knowledge of crowd psychology' watching and waiting for the 'masses' to do their thing at these psychological pain points. If the TA traders aren't in a minority, they would overpower the moves that these 'psych traders' make ?

There is no evidence to support this case. There is however lots of evidence to suggest that the masses moving the price at these points are the technical traders themselves.

Could it not be that the prevelance of TA traders are causing this action in the first place ?
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Old Jan 28, 2010, 2:00pm   #245
 
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Re: Wall Street = Casino. Minus Sum Game.

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The terrible irony of it all is that about an hour later, I took one of the dimmest trades I've done for a while thus exercising my 'finely honed' discretion in a completely cr@p way.
That's because you weren't using your discretion in the "right way" ....
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Old Jan 28, 2010, 2:12pm   #246
 
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Re: Wall Street = Casino. Minus Sum Game.

DT

I think it would be fair to say that there are a lot of eyes looking as price arrives at these points, but It doesn't really matter who is moving the thing at them as long as it moves and you're in a position to take advantage from it. Technical traders are themselves part of the "psychological crowd" aren't they?

good trading

jon
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Old Jan 28, 2010, 2:23pm   #247
 
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Re: Wall Street = Casino. Minus Sum Game.

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DT

I think you've got your tongue in your cheek a bit

Why guess what impact some news is going to have on the market when you can watch the price action telling you? You don't have to know what the news is to know that something's afoot.
Ergo, purely TA/price-action traders must by definition always be reactive.

Quote:
So far as swing s/r created in times of crisis is concerned. mmm, well maybe that's the point where people trapped by the crisis event breathe a sigh of relief and bail out when price gets back to their entry point. If there's enough of them it may be enough to tilt the balance, or it may not.
Ancillary discussion: Does S/R really exist in any case?
"There is no such thing as support in a falling market" - Discuss.

After the fact, if it "held", it is claimed to be "support". If it didn't hold, what is it then?
Supposedly, it becomes resistance. Well, if it appears to act like resistance, then this appears to be correct, but what if it doesn't? Do we just quietly forget about that one?

Seems like there is a lot of after-the-fact justification when it does work, and/or quietly ignoring of when it doesn't work.
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Old Jan 28, 2010, 2:25pm   #248
 
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Re: Wall Street = Casino. Minus Sum Game.

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DT

I think it would be fair to say that there are a lot of eyes looking as price arrives at these points, but It doesn't really matter who is moving the thing at them as long as it moves and you're in a position to take advantage from it. Technical traders are themselves part of the "psychological crowd" aren't they?

good trading

jon
Wait a second - you just went from "the point where people trapped by the crisis event breathe a sigh of relief and bail out when price gets back to their entry point" to "it doesn't really matter". That's voodoo.

If it's a bunch of people doing something because they think other people are doing something, then there is no psychology involved. Rather, it is a bunch of people acting on a flawed premise. Traditional TA isn't a niche, which is what it would really need to be in order for it to work. As it is, there are so many people using it, that it becomes self-fulfilling.
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Old Jan 28, 2010, 2:32pm   #249
 
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Re: Wall Street = Casino. Minus Sum Game.

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Originally Posted by montmorencyt2w View Post
After the fact, if it "held", it is claimed to be "support". If it didn't hold, what is it then?
Supposedly, it becomes resistance. Well, if it appears to act like resistance, then this appears to be correct, but what if it doesn't? Do we just quietly forget about that one?

Seems like there is a lot of after-the-fact justification when it does work, and/or quietly ignoring of when it doesn't work.

Absolutely. I can see support in the market - it's the one just below all those other potential support areas that failed

Anyway....

Futures - infinite supply market.
Stocks - finite supply, defined by float.

Someone that hasn't brought a stock yet - doesn't have to buy.
Someone that has brought a stock already - DOES have to sell.

Can someone point me to where TA covers the impact of the above ?
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Old Jan 28, 2010, 2:44pm   #250
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Re: Wall Street = Casino. Minus Sum Game.

Hi DT,
Quote:
Originally Posted by DionysusToast View Post
Someone that hasn't brought a stock yet - doesn't have to buy.
Agreed.
Quote:
Originally Posted by DionysusToast View Post
Someone that has brought a stock already - DOES have to sell.
Only if they're traders and, even then, they can time their sale. Those schooled in Buffettology like to buy and hold and hold and hold and hold and . . .
Tim.
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