Where to start with fundamentals?...

[Yuppie]

Consumer Price Index...

So, watching how the market reacts to bad news seems to be the critical factor in determining the strength of the market. But this is obviously not the full story for the fundamentals. From Iraj's post...

The future looks far better with such a LOW interest rate which basically means the mortgage payers will be having extra $ to spend and as a result this should be reflected in the FUTUER CPI .

So, establishing that the markets' reaction to news is the most important factor in helping gauge market strength, we then have the factors that are conducive to a strong market. With a low interest rate, we have mortgage payers having more disposable income. This then permeates through to the future CPI. Now, what is CPI and how does it relate to the market?...

From an online article from Australia...

What is important about the CPI?. The CPI or Consumer Price Index is by definition the measurement of the price change in a basket of consumer goods. The CPI can give a good indication as to how the Reserve Bank will view inflation and what it will do in relation to interest rates. The CPI figure can also affect the stock prices as the market will take a view on a stocks future price with relation to how the CPI may affect an industry sector.

The actual goods within the CPI basket are divided into 11 categories: alcohol and tobacco; clothing and footwear; housing; household furnishings, supplies and services; health; transportation; communication; recreation; education. CPI is simply the measurement of change in the overall cost of these items. If the original basket had a value of 100 and this quarter’s costs have risen to 102 we’ll see a CPI rise of 2%. The increase in CPI is called the inflation rate. So in our example, the inflation rate is 2%. Very simple.

Well, it is a very quick way of determining how much more or less people are spending on a day-to-day basis, and from this figure we can determine the kinds of pressures that the economy is under. If the CPI number rises, it may leave the average household or consumer with less money for discretionary spending. Longer term, it means that wages will come under pressure as employees request higher pay, or look for employment opportunities elsewhere.

So, from this I presume we would be looking for a decrease in the future CPI for confirmation that the market is strengthening. And a simplistic follow-on view from this (just to try and re-affirm my previous posts)... Less has to be spent by consumers on essentials and so there is more disposable income. More disposable income for consumers means more money to spend on non-essential products and services. With this additional spending on non-essential products and services, companies will benefit from increasing revenue, thus more scope for growth, and therefore greater future projected value. Phew!


Magnus

 

[Yuppie]

Easier than initially anticipated?...

From Iraj's last post...

...this kind of analysis is basic and you don't need to be an economist. However this is important if you want to have a swing trade and go for BIG RUNS and make your wealth...

Perhaps this learning of FA is not going to be the climbing mount improbable that I had initially anticipated. At the risk of over-simplifying the topic of fundamental analysis, and how it relates to the trading strategies here in TT, I'm going to make a few assumptions about what level of understanding is required for these strategies to be minimally effective when used with FA (from what I have learned so far):

--> News does not have to be interpreted for what it is, rather, it should be interpreted by gauging the reaction of the market to the news.
--> There is a whole range of news/data (CPI, GDP, Employment Data, Interest rates, ...). The only thing that is really important from these is the figure itself, and what it is relative to the previous figure. One need only have a somewhat basic understanding of what effect the reported news/data should have on the markets - observing what the market actually does is more important.
--> Other markets such as Gold, Oil, etc have an effect on the market. Again, the critical point here is watching what the market does with respect to other markets.
--> Watch what the top fund managers are doing. Listen to the credible analysts/economists.

Perhaps sticking my neck out too much there, but I'm just trying to get a grasp of what's needed.


Magnus

 

[Yuppie]

From Iraj's previous post...

As far as intraday trading is concerned ,, you can keep your eyes on the oil price and if there is any jobless, GDP ,ISM reports give market to digest the news and watch to see if the market is ignoring the news ,, if the news was bad but market ignored it then you have a strong market. Once you establish that then you can use TA for entry which is basically your 10 min indu .

Observing the markets' reaction to news/oil prices/data/etc intraday will seemingly also provide an edge, intraday. However, I am assuming that following the markets intraday, and watching reactions to such factors, will give an additional edge in gauging the strength of the market in general.

PS:-- I am trying to guide you in taking BIG RUNS from stocks using FA + TA. if you expect to become wealthy intra day trading using TA only then you might as well give your money to me to spend it for you in casino royal . USE A PROVEN TACTIC TO MAKE $$$$,, John Paulson took 3BN in 2007 and 1.5BN in 2006 and he used FA than any other methodology . Phil Falcon made 2 BN in 2008 for his firm with James Simons to bag 1.5BN. Any way .. The evidence is overwhelming

Going a bit off-topic here, but... I'm wondering if there is a generally accepted definition here for "wealthy"? A quantatative threshold perhaps? My reason for my curiosity is that there is no doubt in my mind that there are traders who make money intraday trading - using TA only. And, no doubt, a decent living. Now, I can only go on what I read and hear, as I have not been fortunate enough to meet any traders in person - yet!! But I am almost certain that there are TA-only traders who are making very good money. So what I am curious about, especially with Iraj's examples of the top fund managers, does the power of FA + TA (assuming one has the natural and/or learned skills, abilities, and resources required) increase the probably of making big, big money that much more likely? What is big, big money?

The above is really just rhetorical musings along a tangent which I allowed my mind to wander...


Magnus

 

[Yuppie]

Gross Domestic Product...

The following is a short article found on Investopedia...

What is GDP and why is it so important?

The gross domestic product (GDP) is one the primary indicators used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a specific time period - you can think of it as the size of the economy. Usually, GDP is expressed as a comparison to the previous quarter or year. For example, if the year-to-year GDP is up 3%, this is thought to mean that the economy has grown by 3% over the last year.

Measuring GDP is complicated (which is why we leave it to the economists), but at its most basic, the calculation can be done in one of two ways: either by adding up what everyone earned in a year (income approach), or by adding up what everyone spent (expenditure method). Logically, both measures should arrive at roughly the same total.

The income approach, which is sometimes referred to as GDP(I), is calculated by adding up total compensation to employees, gross profits for incorporated and non incorporated firms, and taxes less any subsidies. The expenditure method is the more common approach and is calculated by adding total consumption, investment, government spending and net exports.

As one can imagine, economic production and growth, what GDP represents, has a large impact on nearly everyone within that economy. For example, when the economy is healthy, you will typically see low unemployment and wage increases as businesses demand labor to meet the growing economy. A significant change in GDP, whether up or down, usually has a significant effect on the stock market. It's not hard to understand why: a bad economy usually means lower profits for companies, which in turn means lower stock prices. Investors really worry about negative GDP growth, which is one of the factors economists use to determine whether an economy is in a recession.

This is a very succinct and comprehendable article. I think it can be boiled down to understanding that positive GDP growth would generally show an increasingly healthy, growing economy. And, as we know, a healthy economy is good for the markets. Negative GDP growth is indicative of an increasingly unhealthy, shrinking economy. Obviously not good for the markets.

We should also watch for low unemployment and wage increases when seeing increasing GDP, for confirmation of an increasingly healthy economy.

From this article, GDP seems to be one of the more significant reports to watch out for.


Magnus

 

[firewalker99]

Although most of your post is correct Grey1, there are some flaws in your reasoning.

Once you establish that then you can use TA for entry which is basically your 10 min indu .

I could give you ample examples of people who trade of 1 or 2-minute charts that make quite a profit. And no, they are not scalpers. They often enter on a 1-minute chart but hold on for hours.

PS:-- I am trying to guide you in taking BIG RUNS from stocks using FA + TA. if you expect to become wealthy intra day trading using TA only then you might as well give your money to me to spend it for you in casino royal . USE A PROVEN TACTIC TO MAKE $$$$,, John Paulson took 3BN in 2007 and 1.5BN in 2006 and he used FA than any other methodology . Phil Falcon made 2 BN in 2008 for his firm with James Simons to bag 1.5BN. Any way .. The evidence is overwhelming

The evidence is only overwhelming if you choose to focus on the anecdotal evidence that supports your case. I'm sure you know the fallacy is called cherry picking. Since Feb. 15, at least six hedge funds, totaling more than $5.4 billion, have been forced to liquidate holdings. At least 49 hedge funds closed down in 2007, managing nearly $19 billion in assets.

So basically you're saying that using FA is a proven tactic because three people bagged a big deal on going short in the sub-prime crisis (remember John Paulson for example was nowhere in the Forbes 400 before that trade), despite the fact that numerous other hedge funds using FA lost loads of money?

I'm very interested to see the evidence you are talking about, but we should always remain neutral and objective. By picking out those results that back our case, we are not acting very rationally.

 

[firewalker99]

My reason for my curiosity is that there is no doubt in my mind that there are traders who make money intraday trading - using TA only. And, no doubt, a decent living. Now, I can only go on what I read and hear, as I have not been fortunate enough to meet any traders in person - yet!!

You shouldn't trust what you read and hear. For example, everyone says only 3 or 5% of the traders make money. Has anyone backed that up with a statistical survey?

But I am almost certain that there are TA-only traders who are making very good money. So what I am curious about, especially with Iraj's examples of the top fund managers, does the power of FA + TA (assuming one has the natural and/or learned skills, abilities, and resources required) increase the probably of making big, big money that much more likely? What is big, big money?
Magnus

It's important to keep in mind that the BIG BIG money can't play by the same rules as most retail traders. If you want to unload 10 or 100 cars it usually won't the affect a liquid market. If you want to trade 1000 cars you'll probably won't be able to buy or sell them all at once without affecting the price of the market.

 

[Yuppie]

You shouldn't trust what you read and hear. For example, everyone says only 3 or 5% of the traders make money. Has anyone backed that up with a statistical survey?

Yeah, that "95% of traders fail" type of statistic is bandied around everywhere - but I believe there is some truth to it. My main contention with it is that the "95%" are not in fact "traders" - it is the typical person who comes into trading thinking it is a lot easier that it actual is (me for instance - initially at least, but I've been set straight by Mr. Market, and I'm still here). Most people I believe just give up after they have been bitten (read: lose money/blow account). So the statistic I believe has some truth, but only when re-phrased something like, "95% of people who attempt trading fail".

It's important to keep in mind that the BIG BIG money can't play by the same rules as most retail traders. If you want to unload 10 or 100 cars it usually won't the affect a liquid market. If you want to trade 1000 cars you'll probably won't be able to buy or sell them all at once without affecting the price of the market.

Okay, but would this be the same for a large TA? He would have to play in a different way, whilst still being technical. Or is there some mutual exclusion here?


Magnus

 

[firewalker99]

Okay, but would this be the same for a large TA? He would have to play in a different way, whilst still being technical. Or is there some mutual exclusion here?

Magnus

No, whatever approach you have, if you want to buy or sell a market moving amount of contracts, you'll have to distribute those contracts over different buying or selling points.

What most people overlook however, is that all those billion profit hedge funds start out with millions (or billions) in the first place. How many of the people how trade from home manage to do that? Focusing on their profit in terms of absolute money is of no relevance to the average trader who likes to acquire an extra income or would like to quit his daytime job and live from the markets. What would he be more interested in, acquiring 10-20% returns on yearly basis or acquiring +1000% returns on his capital? The first being the average return of a profitable hedgefund (not the average return of a hedgefund), the second a good estimation of what most technical traders target? In 2004 an article was published that since 1990 hedgefunds have an average annual return of 11.9%.

Trader_dante, well known from his Making Money thread, made 2374% oh his account in 6 months time, he's explained his strategy and approach in depth. Once he starts trading huge size, he obviously won't be able to keep up with this %-gain. But by the time he does, he won't have to. He will have made more than enough money to live very comfortable for the rest of his live. Based on nothing but TA. Yes, at most this is anecdotal evidence too, but I'm using it to illustrate my point. For each case in favour of FA/TA, one opposite can be presented. Basing conclusions on selective evidence is purely speculative, not argumentative.

PS: ABN Ambro ran a CFD trading championship recently, the winner made 1464% profit in a single month. The 10th placed candidate still made +200%, not bad for intraday trading.

 

[Yuppie]

Size...

No, whatever approach you have, if you want to buy or sell a market moving amount of contracts, you'll have to distribute those contracts over different buying or selling points.

Okay, I wasn't sure from your wording in your previous post when you said...

It's important to keep in mind that the BIG BIG money can't play by the same rules as most retail traders.

But, I see you say that it doesn't matter what approach one has, when you starting moving in size, tactics/strategies/methods of getting in and out of trades become more significant in trading. Understood.


Thanks,

Magnus

 

[Yuppie]

Musings...

I'm finding some inner-turmoil and conflict in my head... and it's bugging me...

I have learnt a lot about trading in what I have studied so far. I have only studied TA approaches so far. [Almost] every TA approach has discounted the use of FA - stating something along the lines of, 'it's all in the price' or 'it's all in the chart' (for example, firwalker99's interesting Wyckoff quotes here).

As I stated in a previous post, I can only go by what I (for the most part) read. I have not so far met Iraj. However, from what I have read on T2W from him, and about him, he appears to be immensly successful at trading and has a wealth of experience and knowledge. I find it difficult to discount what Iraj says here with respect to FA.

In this thread I have started trying to learn FA. I was [purposefully] ignorant to it previously, based on what the [successful] traders I have read from said about it. Essentially along the same lines as Mr Wyckoff.

I'm trying to reconcile this - but having difficulties.


Magnus

 

[Grey1]

Although most of your post is correct Grey1, there are some flaws in your reasoning.


I could give you ample examples of people who trade of 1 or 2-minute charts that make quite a profit. And no, they are not scalpers. They often enter on a 1-minute chart but hold on for hours.



The evidence is only overwhelming if you choose to focus on the anecdotal evidence that supports your case. I'm sure you know the fallacy is called cherry picking. Since Feb. 15, at least six hedge funds, totaling more than $5.4 billion, have been forced to liquidate holdings. At least 49 hedge funds closed down in 2007, managing nearly $19 billion in assets.

So basically you're saying that using FA is a proven tactic because three people bagged a big deal on going short in the sub-prime crisis (remember John Paulson for example was nowhere in the Forbes 400 before that trade), despite the fact that numerous other hedge funds using FA lost loads of money?

I'm very interested to see the evidence you are talking about, but we should always remain neutral and objective. By picking out those results that back our case, we are not acting very rationally.

You obviously did not even bother to read any of my posts on when and how I enter and the significance of 10 min INDU in intraday market direction ,,,( get my CD from Trader333 to learn how I trade)

You want evidence on how big money is made then OPEN your eyes ( is your pension fund in the hand of a Technician or a FA ) ,, that is all you have to do ,, A simple GOOG search and research is a basic start.

Come on dont give me that Joe Blog made 3000% in X month story come on i am sure you can do better than that . if any 1 could made that kinda return he would be richer than buffett,, I really think you are dreaming ,, We have a guy here on this BB who claims his losses are 4 cents a trade but takes 1$, $2 run ( R:R of 1: 400 ROFL ROFL ROFL ) or so a trade and is Pming naive traders to buy his course,, FFS come on

TT is about putting forward an objective mathematical/statistical/technical frame work for TA and analysing the market direction based on FA for long term and a mixture of TA and FA for shorter time frame and we have been working on this frame work for years and you suddenly come long and say you got a mate who gets in with 1 MIN and he made a fortune WOHOOOOOOOOOOO ) ,, as i said I am not really interested in your views at all as you publicly said I should have gone LONG IN JAN when they were thinking of CLOSING THE STOCK MARKET IN THE FEAR OF MAJOR CRASH / Even you said you would not go long yourself but lecturing me that TECHNICALLY I should have lol ,, Jesus help me out here lol. I cannot even believe you wrote this publicly and paint it with selling climax terminology to cover the mess. You think we don't know what selling climax is and how it works ?

Again ,, after so many technical error u made in only 1 week ( starting with your JAN LONG call , then your short call as well as a NONE technical Stop loss I am not interested in your views or your posts or you forum . MOVE on mate .. I am sure if people want to know your views they can apply to join your BB.

if you don't move on then I don't have the power to move you on as you are a T2W adviser so I might have to bribe you lol ( joking ) .

click on this link and enjoy the tune .

YouTube - Neil Diamond - Love On The Rocks




Grey1

 

[Grey1]

I'm finding some inner-turmoil and conflict in my head... and it's bugging me...

I have learnt a lot about trading in what I have studied so far. I have only studied TA approaches so far. [Almost] every TA approach has discounted the use of FA - stating something along the lines of, 'it's all in the price' or 'it's all in the chart' (for example, firwalker99's interesting Wyckoff quotes here).

As I stated in a previous post, I can only go by what I (for the most part) read. I have not so far met Iraj. However, from what I have read on T2W from him, and about him, he appears to be immensly successful at trading and has a wealth of experience and knowledge. I find it difficult to discount what Iraj says here with respect to FA.

In this thread I have started trying to learn FA. I was [purposefully] ignorant to it previously, based on what the [successful] traders I have read from said about it. Essentially along the same lines as Mr Wyckoff.

I'm trying to reconcile this - but having difficulties.


Magnus

My man ,

There are 95000 traders on this BB, |Which one of them ever posted their daily performance for 6 month except me. Who has had around 50 people in his house ( 3 people at a time ) and trade live in front of them including one of theT2W ADMINS ( I think his nick is EW or something ) with NONE LOSING DAY .
Who put his neck on line ( as i know people follow my calls ) both in shorting the market in Sep or long call on 17th April. I really feel responsible to give a call because I am not the only one who loses here if i am wrong . People follow and I think they should they own research but they still follow which this puts extra pressure on my back ,,

BY doing that I am trying to pass a message to all members of this BB,. Donot intra day trade ,, wealth comes from FA ,, donot ignore the statistics against the intra day trading ,, NOT MANY PEOPLE COME ON TOP intra day trading ... DONOT throw your money in the BIN .

DO NOT IGNORE STATISTICS. DONOT, DONOT BE A CHUMP .( excuse the language)

if you have to intra day trade then use the methodlogy of those who you KNOW and TRUST .. Donot trust those who claim they are making millions here and there out of TA,

I only use small amount of my total capital which i can afford to lose on intra day trading and I am only after a 500-1500 a day that is if my BAD back allowes me. In my younger days i used to trade 5 days round the clock till i fell ill ,,,

Grey1

 

[Trader333]

....including one of theT2W ADMINS ( I think his nick is EW or something )

I think you may have meant EK1 ?

( get my CD from Trader333 to learn how I trade)

I currently have no more copies sorry


Paul

 

[firewalker99]

Grey1, I understand you feel attacked when someone new comes around and questions long held beliefs. Look at history and science, the road is filled with similar examples. It takes a lot of courage to open yourself to the possibilities that other methods or systems might be equally or even more beneficial then your own. I don't blame you for being critical, but please don't condemn something without having taken the time to look into it. I haven't taken the time to look into your methods, that's why I never said the couldn't work. You automatically assumed a pure TA approach has no chance of succeeding.

All the best in your trading and I'm sure you have a lot of followers which is great. Don't take this the wrong way: I'm not here to tell people they shouldn't use FA. I'm merely saying they are plenty of ways to make a more than decent profit, using TA (i.e. price, not any fancy indicator) alone. At least Yuppie has taken a neutral stand and has opened his eyes to both possibilities.

As for my pension fund... FA obviously, why else did they lose 30billion last year? (tip: try googling 'pension funds lose money'

My last piece of advice:

if you have to intra day trade then use the methodlogy of those who you KNOW and TRUST .. Donot trust those who claim they are making millions here and there out of TA,]

Never trust anyone elses judgement, except for your own. Following someone else's calls without understanding their reasoning is a very stupid thing to do. Find your own truth, not what someone elses tells you is true. I've given people an opportunity to think, what they do with it is not my concern.

From what I understand by Jayjays post, the picture you painted in the last two posts isn't the most neutral one neither... But like I said I'm not here to condemn anybody.

PS: check out the IB Trading Olympiad 2008 results. The two winners managed to triple their account in less than three months. And they were college students. TA my friend, TA...

All the best.

 

[Grey1]

Grey1, I understand you feel attacked when someone new comes around and questions long held beliefs. Look at history and science, the road is filled with similar examples. It takes a lot of courage to open yourself to the possibilities that other methods or systems might be equally or even more beneficial then your own. I don't blame you for being critical, but please don't condemn something without having taken the time to look into it. I haven't taken the time to look into your methods, that's why I never said the couldn't work. You automatically assumed a pure TA approach has no chance of succeeding.

All the best in your trading and I'm sure you have a lot of followers which is great. Don't take this the wrong way: I'm not here to tell people they shouldn't use FA. I'm merely saying they are plenty of ways to make a more than decent profit, using TA (i.e. price, not any fancy indicator) alone. At least Yuppie has taken a neutral stand and has opened his eyes to both possibilities.

As for my pension fund... FA obviously, why else did they lose 30billion last year? (tip: try googling 'pension funds lose money'

My last piece of advice:



Never trust anyone elses judgement, except for your own. Following someone else's calls without understanding their reasoning is a very stupid thing to do. Find your own truth, not what someone elses tells you is true. I've given people an opportunity to think, what they do with it is not my concern.

From what I understand by Jayjays post, the picture you painted in the last two posts isn't the most neutral one neither... But like I said I'm not here to condemn anybody.

PS: check out the IB Trading Olympiad 2008 results. The two winners managed to triple their account in less than three months. And they were college students. TA my friend, TA...

All the best.

Thanks for the post. I just simply think an average trader on this BB is well beyond your skill and your posts might just be a distraction to our path, If you could have Analysed the market in more professionally manner I would not see this as distraction but I was disappointed not with your short call but with your LEVEL OF ANALYSIS and expertise which you can offer to this BB .

Thanks for understanding and your last post was very understanding and i appreciate it buddy .

Thank you SIR

PS:-- Belflan made $6000 in a few weeks using the approach I recommend..

Grey1

 

[firewalker99]

Thanks for the post. I just simply think an average trader on this BB is well beyond your skill and your posts might just be a distraction to our path, If you could have Analysed the market in more professionally manner I would not see this as distraction but I was disappointed not with your short call but with your LEVEL OF ANALYSIS and expertise which you can offer to this BB .

Thanks for understanding and your last post was very understanding and i appreciate it buddy .

Thank you SIR

PS:-- Belflan made $6000 in a few weeks using the approach I recommend..

Grey1

My analysis might not have been what you expected it to be, but it's all I have to offer with regard to swing trading as I close out at the end of the day. My area of expertise if I can call it that, lies within intraday trading. As yours apparently isn't there, perhaps people would say the same about you. This is an example of the kind of analysis I make on a daily basis, given the number of recommendations the post received it obviously had a positive reception. There aren't many people in the public threads that make these kind of detailed analysis, including their own positions, targets and stops. I understand you did or do the same, and I can only commend you on those efforts.

No hard feelings, I'm sure that some of those who follow in your footsteps will reach their goals, but like I said that doesn't leave out the possibility that other methods lead to profits as well. Profit in terms of absolute money don't have much meaning, unless they are put in relation to the capital at risk and available. That's why I prefer to talk about % returns instead.

Anyway, good trading to you and all the best. I don't think I have much to offer here in this thread, without disrupting the positive flow.

 

[Grey1]

but like I said that doesn't leave out the possibility that other methods lead to profits as well. .

100% agree.



Thank you for your post ,,

grey1

 

[belflan]

Magnus

Magnus,

thank you for putting the time and effort into this thread, (keep it going.)

your posts so far have opened my eyes to broader market fundamentals (and i thank you for this..)

belflan

 

[Grey1]

Magnus,

thank you for putting the time and effort into this thread, (keep it going.)

your posts so far have opened my eyes to broader market fundamentals (and i thank you for this..)

belflan

magnus contribution is what we want

Grey1

 

[Yuppie]

Capital Asset Price Model (Pt 1)...

Iraj has mentioned in other threads that part of his selection process for "fundamentally weak" stock is the CAPM price model. The following information is taken in bits and pieces from articles on the following websites:

Capital Asset Pricing Model or CAPM
Stock Beta and Volatility
CAPM - Capital Asset Pricing Model
Calculating CAPM

Before the CAPM formula is presented, here is a representation of it in words...

"The expected return on an investment is equal to the return on a risk-free investment plus the risk premium that's associated with the stock market itself adjusted for the relative risk of the common stock we've chosen."​

In general, the capital asset pricing model describes the relationship between the risk of a particular asset or stock, its market price, and the expected return to the investor.

The capital asset pricing model states that the price of a stock is tied to two variables - the time value of money and the risk of the stock itself... ... ...the time value of money is represented by the risk-free rate of interest or rf.

From some more research, I found that the time value of money (TVM) is the effect that opportunity costs have on the cash flow one gets form an investment.

When measuring the risk of the stock itself, the capital asset pricing model explains that risk in terms relative to the overall stock market risk. Thankfully, we've already got a measure of individual stock risk relative to market risk - that's called a stock's beta.

We'll now go off on a tangent here and discuss a stock's beta...


Magnus