Markets and mysticysm

[Glenn]

Yes, I agree. Disorder within Order.

Not quite imho. Chaos is a complex mathematical concept, the effects of which can be calculated accurately. What appears to be noise or disorder is not noise at all.
Glenn

 

[new_trader]

Not quite imho. Chaos is a complex mathematical concept, the effects of which can be calculated accurately. What appears to be noise or disorder is not noise at all.
Glenn

Yes, perhaps apparent disorder within order would be better? Like a Mandelbrot set.

 

[Paul71]

Paul71,

“the law of money flows”

An article in the International Herald Tribune a few weeks ago reported fund managers as saying they have enormous sums of uninvested funds because the markets lack the capacity to absorb them.

This week a survey (reported in IHT) in China revealed that an ever-increasing number of people intended to invest in the markets. I suspect this will be repeated in many countries. So, do we have a one-way trip?

Grant.

Grant.

To me, this suggests the markets have limits (money flow wise). But obviously the ordinary investor in China does not know this.

Would you agree?

It also suggests the markets need to 'attract' fresh investment.

Ground floor please.

 

[timm]

Paul71,

“the law of money flows”

An article in the International Herald Tribune a few weeks ago reported fund managers as saying they have enormous sums of uninvested funds because the markets lack the capacity to absorb them.

This week a survey (reported in IHT) in China revealed that an ever-increasing number of people intended to invest in the markets. I suspect this will be repeated in many countries. So, do we have a one-way trip?

Grant.

Uninvested funds. I don't believe there is such a thing. If it's deposited in a bank account, it will be lent out or invested by the bank. As long as the money supply expands asset prices will increase.

 

[timm]

Timm,

“No two people will have the same level of knowledge about the market.”

But the majority of the major players will, unless Morgan Stanley relies only on teletext, for example.

How is it that the broker recommendations for any stock are all different then?

“predict emotions and guess how others might predict the future.” That’s one tall order.

Grant.

Yes it is but people do tend to react similarly given a the same stimuli. They don't act randomly. Look at how people behaved before in the same situation and you can predict their behaviour in the future. That's why we use charts isn't it?

 

[Paul71]

Uninvested funds. I don't believe there is such a thing. If it's deposited in a bank account, it will be lent out or invested by the bank. As long as the money supply expands asset prices will increase.

Darkpools have arisen due to markets not being able to absorb large investment such as funds.

This must prove how 'tight' the markets are, at least at the moment. Not for us lot though.

If the markets are 'algo arbed' up to the hilt, who wins and who loses when the proverbial dung hits the fan i.e. the value runs out?

 

[TWI]

Personally think it is a lot of noise and lot of nonsense that will not be making anybody any money whatsoever.
Some interesting and amusing dialogue along the way however.
This thread somewhat reflects the underlying subject matter.

 

[Patrik]

If price reach a certain level it will snowball, right? From 1 min - weekly. So the crash ended in late 2002, could it be known in 1 min chart year 2000?

 

[Patrik]

By the way, that´s the non mystic version i guess

 

[Profitaker]

The other point I would make in this regard is that non-predictability and randomness are not necessarily the same thing.

Absolutely. The toss of a coin is not random once the coin is spinning, the spin of a roulette wheel is not random once the ball is rolling. But if the observer cannot calculate the outcome then the event may as well be considered random.

 

[Profitaker]

Bertie, you couldn't predict a market if your life depended on it ! Your trading skills are available for all to see in the plain vanilla thread. You are what is known in the trading world as a walking disaster

Now go and do some reading, study, ask questions, back-test, paper trade, and perhaps then you won't be a bag of wind. You might actually talk some substance.

Untill then, shoooooooo

 

[Paul71]

Bertie, you couldn't predict a market if your life depended on it ! Your trading skills are available for all to see in the plain vanilla thread. You are what is known in the trading world as a walking disaster

Now go and do some reading, study, ask questions, back-test, paper trade, and perhaps then you won't be a bag of wind. You might actually talk some substance.

Untill then, shoooooooo

Bertie really has blown 'em. He is a funny and crazy old man.

A real nut job of the internet!

 

[andycan]

I’m not normally given to responding to others views as their views are as valid as mine and rarely is there much to debate – it simply is. But in this case andycan I think you may have misjudged the basis upon which successful automated trading systems are constructed.

They are not a proxy for understanding the markets, they are a byproduct of understanding the markets at their most fundamental level.

i forgot about this post and i would have to disagree with you and i tell you why
the majority of fund management uses a black box system, this black box systems are a complex version of a certain type of indicator widely used by medium to long term traders, the amount of tweaking available is limited, because its a compromise of smoothing to catch very long term trends or making it more sensitive but then having to effectively move in and out of the market more often and having to accept more trading ranges which their system is next to useless in identifying.
mechanical systems have their place as all types of trading but i have yet to see or hear it outperform a discretionary approach.
to have an intimate understanding of the markets at its core requires discretion whist a discretionary trader enters the market at a potential low the mechanical approach requires time and price to confirm that low for the simple reason that their system is always lagging for entry and exits

 

[Paul71]

What else, besides price, gives confirmation?

 

[Paul71]

Can a discretionary method pinpoint better than a mechanical method?

Are there variables to the above question?

 

[Paul71]

Andycan,

What you are trying to say is that discretionary, is better than mechanical, no?

This statement only revolves, and is only applicable to the best mechanical method you yourself could come up with.

It actually has no bearing on anything, but yourself.

Put our little 'game' aside for the moment, i'm willing to be proven wrong, i'm learning.

Thanks.

 

[grantx]

Rhody,

I am referring to prices. When you referred to “the actual structure of the market itself”, are you saying something can be learnt from this?

“non-predictability and randomness are not necessarily the same thing”. I agree with that. But isn’t prediction predicated on non-randomness (there must be a better word)?

Re level of knowledge, I was referring to knowledge disseminated through Reuters, Bloomberg, etc. I’ll go along with your diversity point.

Seems to me we are left with random price fluctuations reflecting a general lack of consensus from the major players. Now, how can I (anyone) make predictions on that basis.

Paul,

“Limits” certainly seems to be implied, doesn’t it?

Re the Ordinary Chinese, I doubt whether anything enters into the equation of whether to invest or not – they have excess new money, a new (to the Chinese) system of generating wealth (the stockmarket) with ease, ie no risk.

I think the point is that when the Chinese citizen is looking to invest, warning bells ring. Similar to when the proverbial taxi driver or postman starts recommending stocks.

I think the market needs to attract new companies. There is no shortage of investment bankers looking to bring the next crock of sthi to the market because they know there is a shortage of new investment opportunities.

Timm,

If a fund manager hasn’t invested all his available funds, he has uninvested funds.

“as the money supply expands asset prices will increase”. But not stock prices. How high does a p/e go, yield decline before investors back away? This was illustrated by Japanese equity market in the ‘80’s.

“How is it that the broker recommendations for any stock are all different then?” (From personal experience): Because a client of broker A can’t dump a major line without depressing the price. So he sells it to his broker below the bid, the broker sells to his clients at the offer, takes the spread and charges a commission. So to clear his book, this stock which he wouldn’t touch with a bargepole suddenly becomes the next hot performer. In the meantime, broker B, either pure agency or with flat book needs to generate business so he recommends the same stock as a “sell” (gets the comm’s on the sales) and a switch into a related stock (more comm’s). Ever heard of “churning”?

Grant.

 

[Lightning McQueen]

The Algorithmic Arms Race

Big, big bucks are being spent on algorithmic trading,the financial clout of institutions pushing the envelope with cutting edge computer systems, why are they spending vast quantities of cash on this? maybe they're making a fist load, maybe not.

"In 2006 at the London Stock Exchange, over 40% of all orders were entered by algo traders, with 60% predicted for 2007."

"Financial market news is now being formatted by firms such as Reuters, Dow Jones, Bloomberg, and Thomson Financial, to be read and traded on via algorithms."

One things for sure, technology will consign market mystics and their ilk to the history books. Imagine trying to trade in the real market in any size, mr algo's onto you in a flash blowing you out the water, the only place of safety ironically is spread betting where this sort of thing isn't allowed...allegedly, now thats a thought

Look on your screen and despair

All hail the black box

 

[Paul71]

Hi, Grant, LM.

Here's a thought, and not so much a question. Let's look at flight to quality, consumer needs, interest rates, commodities, and currencies.

Hmmm, this is tricky, but here goes....

What is the optimum way to trade/invest (if there is such a concept)

Here's my view, although it will be bombarded with contra views...

Markets revolve around 'need', money is integeral to these needs (consumers)

Is diversity, incorporating 'flight to quality', the only 'real' way to trade?

Is this the only sensible way to overcome the markets?

 

[SOCRATES]

This has got to be the funniest discussion I have seen on these boards in a very long time. .... I am not quite sure if it is intentional or not, but it is hilarious...