You're both wrong (or right, depending on the way you see it). It's part luck, part insight. Now stop fighting.
You're both wrong (or right, depending on the way you see it). It's part luck, part insight. Now stop fighting.
I'd be willing to make a bet that it's 99% luck. A little serendipity can go a long way... until it reciprocates and blows up your account.
ElFenix has the right idea.
I would say 99% is a little extreme. But $2k => $6k, more luck than "skill." Nevertheless, a combination of both.
Miramonti
Lifer
- Aug 26, 2000
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Your hypothesis is that the markets are 100% efficient....LOL
Where there is fluctuating supply and demand, the markets will always have inefficiency and thus always have volatility (and right now there is a heckuva lot of volatility
). And whenever you have volatility, you have opportunity (and right now, a heckuva lot of opportunity ). Someone simply can't prove that successful trading systems that take advantage of inefficiencies or pricing imbalances don't exist...they can only prove that they haven't found one yet.
Originally posted by: jjsole
Your hypothesis is that the markets are 100% efficient....LOL
Where there is fluctuating supply and demand, the markets will always have inefficiency and thus always have volatility (and right now there is a heckuva lot of volatility
Someone simply can't prove that successful trading systems that take advantage of inefficiencies or pricing imbalances don't exist...they can only prove that they haven't found one yet.
I don't think he's claiming the markets are efficient, only citing that market efficiency (really the lack thereof) is a common topic in finance.
The stock market, for example, is highly inneficient. If anything, they are becomming more inneficient due to low barriers to entry for people who think they know something, but really know nothing. Those people create more opportunities for the professionals (those who truly know what they're doing, certainly many don't)
Miramonti
Lifer
- Aug 26, 2000
- 28,653
- 100
- 106
Originally posted by: everman
Originally posted by: jjsole
Your hypothesis is that the markets are 100% efficient....LOL
Where there is fluctuating supply and demand, the markets will always have inefficiency and thus always have volatility (and right now there is a heckuva lot of volatility
Someone simply can't prove that successful trading systems that take advantage of inefficiencies or pricing imbalances don't exist...they can only prove that they haven't found one yet.
I don't think he's claiming the markets are efficient, only citing that market efficiency (really the lack thereof) is a common topic in finance.
The stock market, for example, is highly inneficient. If anything, they are becomming more inneficient due to low barriers to entry for people who think they know something, but really know nothing. Those people create more opportunities for the professionals (those who truly know what they're doing, certainly many don't)
He's claiming that success is random, and basing it on capital market efficiency, if I'm not mistaken. That's the argument I was attempting to disagree with.
I agree with you very much on what you said after that.
See, here's the thing, I don't agree with the statement that you can't use trends to predict market behaviour and make profits. In fact, I'd say that's asinine. People make money all the time doing that. Terms like "bullish" are based on trends. For example, say a case of mad cow disease is found in or near the US, it's a very safe bet that stocks for center-of-the-plate protein providers are going to take a dive. Past history proves this. That's a trend.
As for what I did, I simply found a couple of fairly cheap stocks (<$15) that had a history of fluctuating a couple of dollars over and over. Then I would buy when it dipped and sold when it rose. Of course, this methods takes a while to gain large profits unless you have a large amount to put in, but it works and is easily repeatable. The only drawback was I missed out on some larger than normal rises and failed to buy on larger than normal drops because I based my selling point on the past trends. But using trends I made money. Simple as that.
As for what I did, I simply found a couple of fairly cheap stocks (<$15) that had a history of fluctuating a couple of dollars over and over. Then I would buy when it dipped and sold when it rose. Of course, this methods takes a while to gain large profits unless you have a large amount to put in, but it works and is easily repeatable. The only drawback was I missed out on some larger than normal rises and failed to buy on larger than normal drops because I based my selling point on the past trends. But using trends I made money. Simple as that.
Trading based on the example you gave is called "gambling." You're putting odds at the probability of mad cow disease spreading in the US, because by the time the real news comes out, you're too late in getting in on any action bc the market most likely already moved based on the possibility of it.
Past history also correlates women's skirt lengths the market trends, doesn't mean there is a real correlation, only a perceived one.
There's one "reliable" indicator right now which seems to predict something with amazing accuracy, but so far I'm seeing that it just isn't happening yet, although there appears to be a very strong correlation between these two things for a very long time. Yes there is a trend, but it is a historical trend, and so far it does not extend into the present.
Call it what you want, but the fact that stocks will drop is a near certainty and is a historical trend. But, yeah, I'm not a day trader and don't have time to sit around and watch for news items like that, so that's exactly why I didn't base what I was doing soley on news... I based it on the historical movement of individual stocks.
Of course you can find crazy facts like that, but that still doesn't change the fact that you can make money using trends. I wasn't basing anything on women's skirts :roll:
What you keep talking about isn't even a trend. A trend is the price action over a single stock over a defined period of time. That could be 5 minutes to 5 decades, and from that you're free to derive intermediate or even short-term trends. A trend has nothing to do with the market psychology which is what you are talking about.
[edit]I should extend "single stock" to include indices, etc. as well, but you get the idea.[/edit]
Did you even read what I posted? I clearly stated that my actual buy/sell decsions were based on the past trends of the stock price. I didn't try to make any decisions on market psychology. I just gave that as an example and I still think my example qualifies as a trend. You could even make a graph of prices vs news items if you wish and show the trends... but, again, that's not what I used.
[edit] Anyway, I'm about to leave work. I'll just say that I don't agree with not being able to use trends. People do it every single day. If trends are useless then why all the graphs?
Miramonti
Lifer
- Aug 26, 2000
- 28,653
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Trends in stocks (or whatever) are not all that elusive, if you know how to quantify and measure them. The confusion often comes in when someone tries to trade a single stock on its own trend, instead of trying to learn the similarities of how all stocks trade.
Originally posted by: jjsole
Your hypothesis is that the markets are 100% efficient....LOL
Where there is fluctuating supply and demand, the markets will always have inefficiency and thus always have volatility (and right now there is a heckuva lot of volatility
Someone simply can't prove that successful trading systems that take advantage of inefficiencies or pricing imbalances don't exist...they can only prove that they haven't found one yet.
There is no more opportunity than there is risk.. The only exception is to cheat, which isn't really an exception, it just transfers the loss.
Miramonti
Lifer
- Aug 26, 2000
- 28,653
- 100
- 106
Originally posted by: Tom
Originally posted by: jjsole
Your hypothesis is that the markets are 100% efficient....LOL
Where there is fluctuating supply and demand, the markets will always have inefficiency and thus always have volatility (and right now there is a heckuva lot of volatility
Someone simply can't prove that successful trading systems that take advantage of inefficiencies or pricing imbalances don't exist...they can only prove that they haven't found one yet.
There is no more opportunity than there is risk.. The only exception is to cheat, which isn't really an exception, it just transfers the loss.
What does 'there is no more opportunity than risk' mean? If there is proven success by trading or representing success through indepth statistical analysis, then how would that be called cheating?
- Mar 20, 2000
- 102,402
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the implications of the weak form of the efficient capital markets hypothesis have been shown to be correct over and over again. you can't make money by analyzing old pricing data.Originally posted by: jjsole
Your hypothesis is that the markets are 100% efficient....LOL
Where there is fluctuating supply and demand, the markets will always have inefficiency and thus always have volatility (and right now there is a heckuva lot of volatility
Someone simply can't prove that successful trading systems that take advantage of inefficiencies or pricing imbalances don't exist...they can only prove that they haven't found one yet.
when lots of smart people in peer reviewed studies can't show a way to make money by analyzing so-called trends, what makes you think random joe schmoe has figured out the magic bullet?
and volatility is far better explained by other factors, rather than claiming that the market is inefficient
- Mar 20, 2000
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- 8,574
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that's like going to the roulette table and saying, well, the last 10 spins landed on red, surely red must come up next. or, maybe you're contrarian and say it must hit black next. the fact that you made money with such a betting strategy (and that is all it was), was completely by chance. people play roulette all the time and a lot of them make money.
and for all i know, you didn't even make a profit. you might be way behind a properly diversified portfolio with the same risk level. in that case, you were gambling and not even getting paid for it.
Originally posted by: jjsole
Originally posted by: Tom
Originally posted by: jjsole
Your hypothesis is that the markets are 100% efficient....LOL
Where there is fluctuating supply and demand, the markets will always have inefficiency and thus always have volatility (and right now there is a heckuva lot of volatility
Someone simply can't prove that successful trading systems that take advantage of inefficiencies or pricing imbalances don't exist...they can only prove that they haven't found one yet.
There is no more opportunity than there is risk.. The only exception is to cheat, which isn't really an exception, it just transfers the loss.
What does 'there is no more opportunity than risk' mean? If there is proven success by trading or representing success through indepth statistical analysis, then how would that be called cheating?
What I mean is, the greater the opportunity, the greater the risk. By cheating, I don't mean analysis, that's just educated guessing. I mean things like market timing with other people's money.
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