I want to believe that it is not random, but this argues against me

[Paul71]

The only time he lost money was when he broke his rules.

Why did he break his rules? Livermore liked being the big shot on the street, simple as, greed for noteriety? He could have walked away anytime he wanted without losing big right at the beginning and never had to work again. Livermore was an addicted gambler, Tom. Take the rose coloured glasses off and smell that coffee matey.

 

[Martinghoul]

Biggest single consistent edge in trading is same as in gambling interestingly. Be the house.

Well, on a shorter horizon, I'd say that there's definitely excess risk-adjusted returns if you're a liquidity provider. However, it's not so clear to me that it's true on a longer horizon (last year probably destroyed a decade of outperformance).

 

[GammaJammer]

Depends who you talk to. Not in my world Martin fyg. Remember that just because the banks did their cods so spectacularly, doesn't mean all departments fared poorly.

 

[gooseman]

Well, on a shorter horizon, I'd say that there's definitely excess risk-adjusted returns if you're a liquidity provider. However, it's not so clear to me that it's true on a longer horizon (last year probably destroyed a decade of outperformance).

short rates had a bumper year last year.

 

[GammaJammer]

yeah - lets all wade into martin

 

[Martinghoul]

yeah - lets all wade into martin

Yeah, guys, I know you all did fantastically well this year, as bid/offer's wide and still everyone (including meself) is in a hurry to take advantage of what they feel are wondrous opportunities (whether you get paid for this is another question; sorry, couldn't resist this ). All this means is that you're offering the right risk-adjusted liquidity (as I understand it, you mkt-make in very liquid mkts).

However, a whole bunch of RV funds that were just glorified liquidity providers in various slightly more esoteric mkts got absolutely killed last year (this, unfort, includes my shop).

 

[zupcon]

Depends who you talk to. Not in my world Martin fyg. Remember that just because the banks did their cods so spectacularly, doesn't mean all departments fared poorly.

Isnt that exactly like saying 20 individual traders took random entries based on the toss of a coin, the majority did their cods, but a couple came away smiling

 

[gooseman]

Yeah, guys, I know you all did fantastically well this year, as bid/offer's wide and still everyone (including meself) is in a hurry to take advantage of what they feel are wondrous opportunities (whether you get paid for this is another question; sorry, couldn't resist this ). All this means is that you're offering the right risk-adjusted liquidity (as I understand it, you mkt-make in very liquid mkts).

However, a whole bunch of RV funds that were just glorified liquidity providers in various slightly more esoteric mkts got absolutely killed last year (this, unfort, includes my shop).

sorry to hear it mate.

stuck with positions, no bids anywhere.

 

[GammaJammer]

Isnt that exactly like saying 20 individual traders took random entries based on the toss of a coin, the majority did their cods, but a couple came away smiling

Not at all. Martin had a better idea of what I'm saying I think zup. And he's also entirely right about the plight of other, less traditional 'liquidity providers'.

My main point was more that people (general public particularly) tend to see a bank losing huge chunks and equate that to every department in every centre simply blowing up. Whereas what actually happened is that many departments, with FX being a well publicised one, had banner years at many shops, only to see their profits dwarfed by others' losses and their bonios being slashed and in many cases doughnutted. Which if you've slogged your guts out to make some ok money for your employer despite challenging market conditions not of your making is frustrating to say the least.

 

[GammaJammer]

Yeah, guys, I know you all did fantastically well this year, as bid/offer's wide and still everyone (including meself) is in a hurry to take advantage of what they feel are wondrous opportunities (whether you get paid for this is another question; sorry, couldn't resist this ). All this means is that you're offering the right risk-adjusted liquidity (as I understand it, you mkt-make in very liquid mkts).

However, a whole bunch of RV funds that were just glorified liquidity providers in various slightly more esoteric mkts got absolutely killed last year (this, unfort, includes my shop).

Sorry to hear that Martin btw.

Incidentally, as regards offering the right risk adjusted liquidity (which is a good point) I think the reason that the bigger shops did well in FX is that they have a very large and therefore statistically representative sample of what their customers are doing and what therefore the right response is. Plus they can ride out more of the 'luck outliers' if that makes any sense. Plus they can afford better toys.

 

[Martinghoul]

Indeed, GJ... I can think of a few other reasons, but that's a conversation for another thread, possibly.

I am just thinking out loud about whether there's, generally speaking, arbitrage in liquidity provision (risk-adjusted, as usual). In general, its presence does make some sense, as all the end-users of the banking system effectively pay liquidity providers a fee. Since liquidity providers are an oligopoly, this fee is abnormally high.

 

[GammaJammer]

I think now we need to be product specific as the metrics on all of this will vary wildly.

 

[oiltanker]

if it was totally random why does insider info work?

 

[oiltanker]

i quite like this

...The failures of efficient market theories notwithstanding, the great problem for behavioural finance is its inability to offer useful predictions about the future direction of the stockmarket. One of the reactions to this has been the expansion of economics into so-called econophysics...

...The basic elementary unit of physics is a mindless, unthinking atom....

The Psy-Fi Blog: Econophysics, Consciousness and Cosmic Karma

 

[glyder]

if it was totally random why does insider info work?

I don;t think insider info always works.

(I say this without any reference on the point of randomness, just that inside info
can be no more reliable than a good pin bar or other decent set up).

Edit: I know I'm sticking my neck out saying this.
Its less proveable either way than the randomness theories.
But its what I think

 

[oiltanker]

wouldn't trading pin bars be illegal then?

 

[GammaJammer]

I don;t think insider info always works.

(I say this without any reference on the point of randomness, just that inside info
can be no more reliable than a good pin bar or other decent set up).

Edit: I know I'm sticking my neck out saying this.
Its less proveable either way than the randomness theories.
But its what I think

well that's cos there's info and there's INFO

 

[glyder]

well that's cos there's info and there's INFO

thats true.
some will def be better than others.
some inside info is clear as a bell and a 90% dead cert on its impact.
Much of it is not that way and requires interpretation.... so reduces its value
the market may interpret it differently to the inside trader when it is eventually released

I've often wondered about the hit ratio...if insider deals could be monitored,
would an inside trader beat a trader who can beat the 'randomness' of the market by their own ability.?
I doubt it.

 

[GammaJammer]

I don't. I don't doubt it for a second. Informational edge is a huge huge advantage.

 

[glyder]

wouldn't trading pin bars be illegal then?

that day may come.!!
How will they regulate for that?
I'd like to see it!!!