Price vs Value

[DionysusToast]

I was wondering if our esteemed members had any thoughts on Price and Value.

Now - I'm not necessarily of the opinion that value can be derived through value areas ala James Dalton + Market Profile, although I do think those areas may be relevant in terms of understanding where people's positions may lie.

I would guess we all mostly agree on how you derive price - but how do you derive value?

 

[12WBT]

For SP500

Forecast operating earnings together with US ten year bond yields.

So below 1972 was value.

 

[DionysusToast]

For SP500

Forecast operating earnings together with US ten year bond yields.

So below 1972 was value.

OK - so why is 1972 value?

I'm not saying it isn't - just that whilst a picture may be worth a thousand words, I think 1,100 may be needed.

 

[Jason101]

I think that value can only be derived retrospectively.

 

[Forexmospherian]

As a short term intraday FX trader - Price is important - but value does not effect my reasons to buy or sell in any session

 

[DionysusToast]

I think that value can only be derived retrospectively.

Well - I guess that could be true depending on what you think Value is.

There doesn't have to be one definition of it.

I might find apples cheap at 20p and someone else might find them cheap at 75p.

Value doesn't necessarily have to be globally accepted.

 

[DionysusToast]

As a short term intraday FX trader - Price is important - but value does not effect my reasons to buy or sell in any session

So at no point is there ever a price you deem to expensive or cheap?

If you miss a long trade because the market moves away before you get in - will you chase it indefinitely?

 

[Mr. Charts]

For an intraday trader like myself:

price = reality

value = variable relativity

 

[Forexmospherian]

So at no point is there ever a price you deem to expensive or cheap?

If you miss a long trade because the market moves away before you get in - will you chase it indefinitely?

If price was at a new yearly / decade / century high - so looking expensive and my technical short term set up said buy for 15 -30 pips - I would buy

If price was at a yearly / decade / century low and deemed un believably cheap - but my technical short term set up said sell more - I would still sell

Fundamentals for me do not come into my main equation - only next 21 to 30 minutes of technical price structure on a tick or one minute chart

Regards

F

 

[barjon]

Blimey!! That's a topic and a half, toastie.

I think you can look at some long term experience and relationships - dividend yield; equity dividend yield vs bond yield - to give something of an objective base to "value" which is essentially a subjective matter.

A friend of mine used to trade Nat West Bank (when they stood alone) on a "value" basis. Better than x% yield he was just a buyer (although hopping in and out as well as building a longer term position) and just a seller when worse than y% yield. No shorting for the public in those days, of course, but he would be hopping in and out with shorts were he still operating today.

 

[DionysusToast]

Here's 2 very different ways of looking at it:

If price was at a new yearly / decade / century high - so looking expensive and my technical short term set up said buy for 15 -30 pips - I would buy

If price was at a yearly / decade / century low and deemed un believably cheap - but my technical short term set up said sell more - I would still sell

Fundamentals for me do not come into my main equation - only next 21 to 30 minutes of technical price structure on a tick or one minute chart

Regards

F

Value = price compared to other prices of the same instrument.

Blimey!! That's a topic and a half, toastie.

I think you can look at some long term experience and relationships - dividend yield; equity dividend yield vs bond yield - to give something of an objective base to "value" which is essentially a subjective matter.

A friend of mine used to trade Nat West Bank (when they stood alone) on a "value" basis. Better than x% yield he was just a buyer (although hopping in and out as well as building a longer term position) and just a seller when worse than y% yield. No shorting for the public in those days, of course, but he would be hopping in and out with shorts were he still operating today.

Value = Price combined with another element to (yield) to come up with a value measurement.

Obviously yield is market specific. You'd need to use some other non-price element in different markets.

In the real word, let's say you wanted to buy a little 1.4 litre shopping trolley-like Mazda. Would you be happy with the price you paid if it was in line with what other people were paying for Mazdas?

Maybe yes.

Would you still be happy if your Mazda was priced 5x the price of a BMW 528i MSport, a Mercedes CLA250AMG and 4x the price of a Range Rover Evoque and 10x the price of a Ford Fiesta?

I'd say possibly not.

Does that mean price alone is not enough?

 

[DionysusToast]

For an intraday trader like myself:

price = reality

value = variable relativity

True - there is no agreed upon method of saying what value is but price is absolute.

 

[ABTrading]

You didn't really specify what markets you were referring to when you asked about price vs value. But in the equity world, a value stock is usually considered to be a stock that is priced less that its peers in the same sector based on P/E, P/S or other standard measurements of stock value.

 

[Jason101]

Well - I guess that could be true depending on what you think Value is.

There doesn't have to be one definition of it.

I might find apples cheap at 20p and someone else might find them cheap at 75p.

Value doesn't necessarily have to be globally accepted.

True, I hold for weeks and months, so I would be happy to buy at the upper end of a daily range, while an intra day trader, would never see that as value.

Incidentally because I buy on pullbacks I am not necessarily saying the price is at value for the current market. But that the price is at value compared to the point I have decided am wrong in my trade i.e. value to my own personal stop loss distance.

 

[12WBT]

OK - so why is 1972 value?

I'm not saying it isn't - just that whilst a picture may be worth a thousand words, I think 1,100 may be needed.

Sorry mate forgot to finish off got called away.
SP over 100 year average P/E is 15.7

@1972 at that moment we were sitting @ 15.3
So any thing below that is finding longer term value.
With that last sell off we got down to around 11 P/E

Since we come back up again we are sitting around 19.5 P/E.
Which seems the norm at the mo with the low bond yield.

This is for investing, and yes we can over shoot the down and upside on P/E as per chart.
It's not perfect but give's me something to work off.

 

[12WBT]

Also do about 10 to 30 scalps a day.
Got me thinking and not sure how I find value in this.
Maybe S/R levels on different time frames, i.e tick to daily charts.
Have to think more about that one.

 

[gerryg]

Also do about 10 to 30 scalps a day.
Got me thinking and not sure how I find value in this.
Maybe S/R levels on different time frames, i.e tick to daily charts.
Have to think more about that one.

What about trading costs? Making 12 trades on Hot forex (scalping too) with micro lots I get about 30 USD daily. Do you trade on breakouts of support are resistance levels right?

 

[12WBT]

What about trading costs? Making 12 trades on Hot forex (scalping too) with micro lots I get about 30 USD daily. Do you trade on breakouts of support are resistance levels right?

Not on forex doing index markets.
Mix of direct market and market maker.
1 spread with M/M or 12 buck average turn around on direct.
Trade a lot of styles, long hours looking and focusing on a chart with scalps.

 

[DionysusToast]

Sorry mate forgot to finish off got called away.
SP over 100 year average P/E is 15.7

@1972 at that moment we were sitting @ 15.3
So any thing below that is finding longer term value.
With that last sell off we got down to around 11 P/E

Since we come back up again we are sitting around 19.5 P/E.
Which seems the norm at the mo with the low bond yield.

This is for investing, and yes we can over shoot the down and upside on P/E as per chart.
It's not perfect but give's me something to work off.

Good stuff. I do understand that P/E would perhaps not be the best thing to use day trading but conceptually it is a non-price measure - but also - it's compared with P/E of other things on sale.

Like you wouldn't pay 3x the price of a BMW 5 series for a Mazda shopping trolley.

 

[DionysusToast]

You didn't really specify what markets you were referring to when you asked about price vs value. But in the equity world, a value stock is usually considered to be a stock that is priced less that its peers in the same sector based on P/E, P/S or other standard measurements of stock value.

I don't think it matters which markets.

If it' subjective, that implies that we can all use different things anyway.

But is there some commonality amongst the methods people use to determine value across all markets?

Is there a common theme?