2 basic trading questions

[tomhunter]

Hi

Just got a few basic questions which i couldn't find the answer to myself:


When trading your competing against other investment banks and fund managers etc
are you when you are "buy and hold" investing in companies?


When you trade in a market, ive read they are made up mainly of fund managers and banks
etc but lets take for example the wheat comodities market do companies and people
who arn't speculating price operate in this very same market? Or do you just take little accound for them as they are such a small percentage of trade?

Thank You

ps. Sorry i know they seem like simple q's but they are quite specific and i couldn't find the answer, prehaps its just assumed you'll know them.

 

[Jack o'Clubs]

1st Qn: When you buy or sell who are you buying or selling from? Therefore who are you in competition with?

2nd Qn: Search on here or google for Commitment of Traders Reports.

 

[tomhunter]

1st Qn: When you buy or sell who are you buying or selling from? Therefore who are you in competition with?

2nd Qn: Search on here or google for Commitment of Traders Reports.

thanks alot jack

Just 1 thing, in your answer to the first question, is it because the market price is set by supply and demand of other investors etc then your competing against them. Lets say for example all investors became perfectly logical and emotion was removed and all actions based on thorough technical analysis. Would this mean you could still make money investing but you wouldn't make money from Mr. Market but rather just the companies fundamentals. And therefore mr.market just gives you a extra way of making money?

 

[Jack o'Clubs]

TA isn't the only way to invest using logic and a lack of emotion - fundamental analysis can be just as unemotional an appraisal of the prospects of an investment. All you're trying to do is work out where the market might be mispricing an opportunity, whether that's on a one-minute time-frame as a scalper or a five-year timeframe as a long-only fund manager. How you do that is up to you, and there is no 'right' answer. The only place where you can trade your idea is in the market and therefore the market is the only arbiter of right and wrong and you can argue it is therefore your competitor. Clearly it's the big institutions that move the market so by proxy you are in competition with them.

Of course you could argue that you're really only competing against yourself. It's your own greed/fear and various other hang-ups that dictate your success. The market is completely unconcerned with you as a participant so on another level you're not really in competiton with it at all.

Your follow up question doesn't make sense: all actions based on thorough TA, so you make money through companies' fundamentals? In any case you could have ten investors who were all entirely logical and unemotional in their approach, and all would use different TA and FA methods to come up with different ideas of whether something was a 'buy' or 'sell'. That dynamic makes a market.

 

[tomhunter]

TA isn't the only way to invest using logic and a lack of emotion - fundamental analysis can be just as unemotional an appraisal of the prospects of an investment. All you're trying to do is work out where the market might be mispricing an opportunity, whether that's on a one-minute time-frame as a scalper or a five-year timeframe as a long-only fund manager. How you do that is up to you, and there is no 'right' answer. The only place where you can trade your idea is in the market and therefore the market is the only arbiter of right and wrong and you can argue it is therefore your competitor. Clearly it's the big institutions that move the market so by proxy you are in competition with them.

Of course you could argue that you're really only competing against yourself. It's your own greed/fear and various other hang-ups that dictate your success. The market is completely unconcerned with you as a participant so on another level you're not really in competiton with it at all.

Your follow up question doesn't make sense: all actions based on thorough TA, so you make money through companies' fundamentals? In any case you could have ten investors who were all entirely logical and unemotional in their approach, and all would use different TA and FA methods to come up with different ideas of whether something was a 'buy' or 'sell'. That dynamic makes a market.

Thanks alot again, in your reply to my follow up question, thanks for pointing that out but lets say if the traders were all trading the same way exactly the same then some of the profit potential when compared to a being an investor in a market full of speculators. But investors would still be able to make money at least on stocks, from the company themselves?

(Hypothetical of course)

Thanks

 

[chump]

A market exists because simply there is always more than one way to look the value of anything ..this has nothing to do with something having exactly one right value...it is only 'right' for a particular time and according to the needs at that time of those in the market to buy and sell that item...for example .... a club to beat off my women admirers would be worth more to me than say to you and especially so dependant upon the length of the queue I am having to deal with at any given time ..so if there is one spare for sale I should be willing to pay more for it than you...you see
....profit ,or loss occurs when the differing views on those needs arise...peeps call this arbitrage and it exists in all timeframes ...how you identify it is not the most important issue... but you need confidence that the method you choose does work for you and appeals to your nature.
I don't see the relevance of why it matters who you competing with ...does money from one set of people spend better than the money from another set of people? Does money derived using TA spemd better than money gained using FA ?
A lot is said about the retail trader/investor being the source of the food chain..BUT frankly I think most of the opportunties come from the institutional money..not becasue they are thick ,but because they have constraints that us guys do not have.

 

[chump]

"if the traders were all trading the same way exactly the same"...never happen , this is about making money and winning ...the minute a consensus starts to occur Darwins evolutionary theory will kick in and a group (small) will find a way to extract from it what they need..because money is made by doing something differently ,and not by doing it the same way.

 

[chump]

"limit orders in use." gives it away

 

[tomhunter]

A market exists because simply there is always more than one way to look the value of anything ..this has nothing to do with something having exactly one right value...it is only 'right' for a particular time and according to the needs at that time of those in the market to buy and sell that item...for example .... a club to beat off my women admirers would be worth more to me than say to you and especially so dependant upon the length of the queue I am having to deal with at any given time ..so if there is one spare for sale I should be willing to pay more for it than you...you see
....profit ,or loss occurs when the differing views on those needs arise...peeps call this arbitrage and it exists in all timeframes ...how you identify it is not the most important issue... but you need confidence that the method you choose does work for you and appeals to your nature.
I don't see the relevance of why it matters who you competing with ...does money from one set of people spend better than the money from another set of people? Does money derived using TA spemd better than money gained using FA ?
A lot is said about the retail trader/investor being the source of the food chain..BUT frankly I think most of the opportunties come from the institutional money..not becasue they are thick ,but because they have constraints that us guys do not have.

Thanks chump great help m8