Market Schizophrenia

Yes.

Isn't the flow of money and therefore the price of a security based upon the perception of whether something is under or over-valued?

Is it important to try to backward fit the reason for the money flow?

Their is always greater fool theory though right?

I think the perception of whether its over or undervalued depends upon the circumstance, news can give the impression that the circumstance has changed.

I think its important to know why something happened, so you can understand it better.
 
Im not sure news can effect value, all im concerned about is price, but isnt price all that matters really?

Maybe not....

Let's say a company has 100,000,000 shares outstanding.

The shares open one day @ $25

On that day there are 1,000,000 shares traded

950,000 shares trade between $25-26

Up to the close, price moves up and reaches $32 with just 100 shares traded @ $32.

Has the market really decided that this is 3.2 billion dollar company just because 100 shares got traded @ $32?

Is the opinion of those people that traded 950,000 shares between $25-$26 irrelevant or is this price range really a better benchmark of what the market thinks the company is worth?

Perhaps price isn't the most important thing...
 
Their is always greater fool theory though right?

I think the perception of whether its over or undervalued depends upon the circumstance, news can give the impression that the circumstance has changed.

I think its important to know why something happened, so you can understand it better.

Can you accept that you will never really know why the price moved?
 
Maybe not....

Let's say a company has 100,000,000 shares outstanding.

The shares open one day @ $25

On that day there are 1,000,000 shares traded

950,000 shares trade between $25-26

Up to the open price moves up and reaches $32 with just 100 shares traded @ $32.

Has the market really decided that this is 3.2 billion dollar company just because 100 shares got traded @ $32?

Is the opinion of those people that traded 950,000 shares between $25-$26 irrelevant or is this price a better benchmark of what the market thinks the company is worth?

Perhaps price isn't the most important thing...
Sorry, i meant with a veiw to the effect of news, i actually do use fundamentals, i think i may have backed myself in a corner here, i was trying to explain that value is fixed but news moves price and thats all that really matters when one enters a trade, what the price is at the given moment all the news needs to do is move the price.. as for me i always get an idea of value before i take a position..

btw thats quite an epic gap up lol.
 
Can you accept that you will never really know why the price moved?

Yes and no, i will always try to find out what moved it, sometimes i will be wrong sometimes i will be right, news moves the price i believe that, but the equation is far too complex, involving sentiment news fatigue economy trend ect. but i do accept i can never truely know, well unless i start running a hedge fund and buy a few hundred thousand of s&p e mini's then i will know for sure :p
 
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all i saw was a lovely RTM bounce from Camarilla Weekly S3 at 1348 ........ ?
 
I used to subscribe to The Economist and other business stuff, and read the newspaper religiously. Now I've done away with all that and haven't noticed the difference, to be frank.

"Decanter" magazine is always worth a read each month :)
 
Yes and no, i will always try to find out what moved it, sometimes i will be wrong sometimes i will be right, news moves the price i believe that, but the equation is far too complex, involving sentiment news fatigue economy trend ect. but i do accept i can never truely know, well unless i start running a hedge fund and buy a few hundred thousand of s&p e mini's then i will know for sure :p

LOL - I think that is the point I was trying to get across to you. It's not about TA, FA, or any other church used to determine how to trade. The basic premise is that nobody really knows what causes any of this stuff to go on. Bloomberg and the news agencies are genuinely clueless and I suspect fading their analysis is profitable (although I have never tried to do this).

Although you have a view, it it not necessarily right. Nor is it necessarily wrong. Truth is none of us know for sure.
 
LOL - I think that is the point I was trying to get across to you. It's not about TA, FA, or any other church used to determine how to trade. The basic premise is that nobody really knows what causes any of this stuff to go on. Bloomberg and the news agencies are genuinely clueless and I suspect fading their analysis is profitable (although I have never tried to do this).

Although you have a view, it it not necessarily right. Nor is it necessarily wrong. Truth is none of us know for sure.
yeah there are too many players in such a large ocean to every really be able to know, its why i dont like charts, because every time it works 3 other times it doesnt. i do believe the breaking news effects, not bloomberg news, but if draghi says something then it changes the game in my veiw, although whether the same moves would have been made without draghi is unknowable. But i know what you are saying only thing you can do is let the losers die and winners run, that way in the sea of randomness you will eventually end up on top.
 
LOL - I think that is the point I was trying to get across to you. It's not about TA, FA, or any other church used to determine how to trade. The basic premise is that nobody really knows what causes any of this stuff to go on. Bloomberg and the news agencies are genuinely clueless and I suspect fading their analysis is profitable (although I have never tried to do this).

Although you have a view, it it not necessarily right. Nor is it necessarily wrong. Truth is none of us know for sure.

I agree - but there is also something else going on (or not)....

Maybe nothing at all changed last week, overall the market is moving sideways, and the down move and subsequent up move are exactly what we'd expect to see anyway in the absence of any REAL change in perception.

If you look at it microscopically, you see a big 3 day down move which was then followed by an up move of the same amount. If you zoom out - all you see is a trading range that has lasted 3 weeks. Price is still moving about, it's not going to trade @ 1 price if value is established, it's going to poke around the upper and lower extremes (aka price discovery).

So - my take on the last weeks action is - NOTHING HAPPENED.

7-28-20128-41-46PM.png


Of course, I could be wrong and in fact the collective trading community just did this in the past 3 weeks:
 
The ES is pushed around intraday by large paper buyers and sellers and also large locals, these players can push the market around 10 points no problem so if you are looking for reasons for unexplained intraday swings there you have it. Ben Lichenstein does some excellent live commentary from the S&P pit (|| S&P 500 Pit Squawk ||), you can hear him refer to paper #1 buyer/seller with I believe is Goldman so you get the heads up when these guys are buying/selling.

There are also the large local traders who trade through US prop firms, people like the infamous Igor who did huge volume. It was rumored at one point Kingstree Trading did like 25% of the daily volume on the S&P, not sure if they still do volume but firms like Jump Trading do huge volume. I know a guy who trades 10,000 daily volume on the ES, he trades a 50 lot 100 times a day. These guys have super low commission like sub 50c per round turn which makes it viable to scalp for 1 tick. He makes 0.1 of a tick per trade average, that works out like $12,500 per day but he is employed and doesn't see much of that. You simply cannot trade like he does with a retail commission of $3 per RT.

So whatever the investment outlook these markets are being pushed around, without an understanding and awareness of these players trading the ES is a retail traders nightmare and a pro traders wet dream. lol.

When I was evaluating what instrument to trade I knew I needed to have rock bottom costs and fast execution if I wanted to be truly scalping (by true scalping I mean shooting for 1c or 2c or 1 or 2 ticks on the ES), I looked at the ES, certainly it was a good option but knew I needed to get my costs down to less then 10% of the tick size preferably lower. I managed to cut a deal with a broker where I could get RT's for less then $1 but that would require 10,000 monthly volume and leasing a seat on the exchange for around $600 pm. I ended up no going for the ES and going for stocks instead.

With this true scalping style you get in and can be out within a second, maximum trade length would be 5 mins, as you are generally looking for momentum pushes if it doesn't come quickly you get out, the super low round turn costs allow you to do this, the most important thing is being able to constantly take 1c / 1 tick losers and the training to begin with focusses on this.

I settled on high volume stocks, notably bank of america (BAC) it trades around 200m shares per day and I managed to get a round turn cost of 80c all in on a 1000 share lot. So a 1c move would be $10 for 1000 shares and I am effectively paying 8% of the tick/1c size if you get me. This enable true scalping, so often if I am looking at a high probability 'set up' I can often take 1c winner (equivalent to 1 tick on futures). So far I have only traded 2000 lots, the volume soon racks up, some prop traders are doing 1m+ daily volume. BAC is thick enough to get a 20k or 30k lot off at one price that is about the limit before you start having to break up the order. I joined World Trade Securities and they take a chunky 25% split of my profits but it allows me to compete on that level. Even at 80c per 1000 lot round turn this can go lower, perhaps 40c is possible but I would need to do much more volume.

good trading
 
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When did you join world trade securities, Choccy?

back in May scose. I believe World Trade Securities handle about 3% of the US daily stock volume, they also operate a sub-firm structure so you will have sub firms who clear through World Trade, some are more palatable for non US traders who do not wish to sit their series exams. Some of the sub firms are Capital Traders Group (check Proprietary Trading - Capital Traders Group), JC Trading, Nevis to name a few some offer training some don't. Some training is good some is not. I wont be divulging which sub firm I joined as that's private but all the trades go through World Trade.

There is a reason for stating all this of course lol. If my london office thing ever takes off then the plan would be to trade 8am - 12 European market, then 2.30 - 6 US stocks.

So if anyone is interested just pm me.
 
I think "schizophrenia" is a very apt term, because there are two very distinct facets to the markets:

Supply, meet Demand.

Demand, you, at times, will exceed Supply, there will exist the fundamental tendency (exclusive in human nature) for this to happen most of the time.

But do not underestimate the cunning, quickness, potency and wrath you will face should Supply exceed Demand - and it will.

I do no think the markets are "irrational," rather, I believe the markets are a very rational representation of what might in fact be very irrational human behavior. Of course, when have humans ever been rational in regards to money? So, knowing humans will behave irrationally, we have an immediate impression as to what we can expect . . . and when you know what to expect, you have the opportunity to position yourself most favorably in response to the future.

Excellent posts on this thread. I live for this s#!+!!
 
I know a guy who trades 10,000 daily volume on the ES, he trades a 50 lot 100 times a day. These guys have super low commission like sub 50c per round turn which makes it viable to scalp for 1 tick. He makes 0.1 of a tick per trade average, that works out like $12,500 per day but he is employed and doesn't see much of that. You simply cannot trade like he does with a retail commission of $3 per RT.

You must be mistaken CD, it's not possible to do do this.
 
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