Market Discussions

Your English is better than you claim.

You draw lines in the chart with ascending slope. That says "buy."

My curiosity is whether you trade in the direction of the lines you draw or against them.

We will meet in nitropes, it looks like. I also do not buy PLEX. :-)

The thing about MD is that there were always people here who appear as very good businessmen who somehow disappointed. You seem pretty good and good intentioned. I am not well intentioned. I am kind of curious how this will end up.

By the way, I do believe that markets are perfectly efficient at any given moment. So we have fundamental philosophical difference, which is why we probably will never agree.

But if markets are not efficient how can you tell? Do you mean that you know when markets are inefficient? BS. If anybody could tell when the price is wrong she would have unlimited money.

So is not it just hubris or academic to say that markets are inefficient because whoever says this at that particular point does not know that? Would not it be violation of trader rule #89, which is "dont argue with the price," to say that markets are inefficient?

Would not a better approach be to say that all given prices are correct and rather try to predict future? Alternatively, more agreeable or humble version of predicting future would be to try to predict what traders will do in the future and front run them.

What is the point of looking at charts if they only allow you to interpret the past and say nothing about the future? I think that charts do give you past info. Past info then gives you an idea of a range and a base and how traders could behave at various price levels.

There are multiple ways that make markets inefficient.
The most practical one: have you tried trading a future? They usually have 1 tick of spread. But that's not their real spread, not even on the Chicago Merchantile Exchange.
There are firms making a living buying and selling *inside* that 1 tick of spread yet most cannot do that, and by being unable to do that the spread cannot shrink and let the market become efficient. Because if all could trade inside the spread, that spread would further tighten up.

Furthermore, price is itself a lagging indicator. Price only changes after certain decisions have been made or after supply and demand conditions changed. The delta t between decision and act is an inefficiency in itself.

Furthermore, it's not important that markets are efficient, when the underlying supply and demand can't reflect their changes quick enough.

I.e. imagine that for some reason, the demand in a market suddenly forever rises by 20%. Will you see price suddenly going up by 20%? Not at all.

At first it will go down. Because the informed traders (*) (large institutions etc) will make sure to gather the maximum liquidity and this is done by pushing the market down, trigger tons of orders and then make them all go in stop loss and thanks to that, to get an added boost to the desired upwards momentum.

Then price will rise - slow at first. First inefficiency and this is where traders like me will enter.
Then price will rise usually quicker, at 30* - 45* pace.
Finally price will reach the new equilibrium... and won't stop. In fact it will overshoot the target because uninformed traders (*) will buy high.
At this point there will be a first, massive drop down to the new equilibrium, caused by informed traders dumping their stock. The first top has just been formed.
Highly aggressive smaller informed traders will buy that dip. They are much smaller than the institutionals but with enough liquidity to make price rise again. Not because of their strength (they lack of it) but because nobody will be in the market at that time to oppose them.
Price will rise almost at the same height it reached before and will overshoot the new equilibrium again. Aggressive small traders start dumping their stock, uninformed traders buy it.

At this point, with both large and smaller informed traders out of the market, volume drops to about zero and price hangs.
The second top has now been formed.
Now, not many large institutions short the markets so they keep staying out for now.

The first uninformed traders panic and dump at a small loss. Nobody is there to buy their little stock so price moves down fast and this scares the other uninformed traders who rush and panic sell.

If price rebounds a bit, small informed traders will start shorting. Those using price action will see a reverse being confirmed and will short as well.
At this point price is in free fall mode till it finally reaches the new equilibrium.

All of those exaggerated motions provide diverse opportunity to exploit them and make a profit.

I don't know how you'd call this, but it's certainly not the "square wave" it should be if the market + underlying supply and demand were truly efficient. Instead it will consist of many ripples, oscillations, swings, overshoots.

Call all of this "Philippe" if it makes you feel better. I call it "inefficiency" and I make a living out of it, both in EvE and outside.



(*) Definitions taken from former Chief Economist of the U.S. Securities and Exchange Commission Larry Harris cornerstone markets microstructure book: "Trading Exchanges: Market Microstructure for Practitioners".




Those who can front run are the inside traders. I am not one of them, I am not a Mynna who knows how the whole scenario evolves, with huge intelligence feedback, ability to influence the markets and so on.

Also, you suggest calling a "better approach be to say that all given prices are correct and rather try to predict future".

There's a tiny issue with that. The issue is that money does not come in by "predicting the future", because predicting the future is impossible. Therefore I check the past prices doing a "Philippe" (the term I used above) and act on that.




Because what's fool would believe that something can tell us the future? All we can do is to do what many math algorythms do: slice time and interpolate what statistically is probably going to happen in the immediately next slice. It works for small enough slices. Since we can pick the slices from the monthly prices, those slices are actually quite large, large enough to make a profit.

I have barely mentioned "money management" because we are still stuck at talking about the the trade entry.

The trade entry is not meant to be the profitability driver (as you found out) but to be the launching platform that allows later to make the profits.

That is, the entry has to be "good enough", that is, the trader has to enter and not be kicked out (i.e. stop loss) before price returns to his chosen direction. Don't forget I said above that price very often reverses at first.

Once the position is secured, that is once price is back up to the entry point, we are just at the beginning!

Money management now kicks in. It's a complex art that based on a dozen of hints, tells the trader what to do in the next bars.

In the method I follow, I am meant to not move the stop loss until price has formed a "barrier" bar (i.e. a BUOB after my entry point at a pin bar below it) and then move the stop loss right after the barrier bar. The subsequent bars, price should reach the so called "first money management target", usually it is the next swing. Then, depending on the price levels, big patterns shapes (triangles and so on) there are further money management targets, till a last take profit target.
Each money management target is the place for a decision: close a portion of the position, close it completely or... even buy more stock! It's a very diverse activity as you see.
Reached the last target, if price closes above said target it's preferable to not close the position yet but let profits run till they can and just trail the stop behind the last bars.

End result: without money management in the modern markets it's hard to even achieve 2:1 reward:risk, with multi-time frame money management it's possible to reach up to 5 and even 6:1.

outgunned, internet speed?

I'm sorry, I don't know if you know what you're doing. I am by no means a guru of any sort here, but unless its too slow to even create an order, it's fine. If you're on more than twice a day for 20 minutes at a time regularily, then you're on too long.

If you're properly reading trends this stuff should mostly handle itself while you are away, you just don't plan well is my guess.

Take a very simple trade, nothing at the level of candlestick mastery VV has.

during the day, a good will ebb and flow over many different ranges, settling on a price that day. if you're constantly there, you're riding the wave constantly, and spending way more money than you need to. Just place that order as low on that scale as you're comfortable with, with only enough numbers to keep from moving the price. It's a hard mix, because markets push and pull between your capital moving the price, and the daily price fluctuations becoming smaller, the more velocity there is in the market.

then instead of riding micro waves all day, you come back that evening, find 60-70% of the same amount of product in your hangar, all bought at a daily low. But each one was bought at lowest daily price, and you can then do the same thing on the sale. Put at the top end of what the days performance offers, and just wait it out. So long as you aren't in a downward trend, you're golden.

TBH, when you read VVs posts, they look like someone who knows what he's talking about. Yours seem more like you are a little girl wearing moms wedding dress. All the right stuff is there, but it ust seems off

Necro BOO = Best Boo (other then boo hoo)

But the question remains whether all these chart rules are made true by people believing that there are chart rules and trading accordingly.

And in Eve even more so it is possible to make chart rules come true with PLEX possibly funding trades. Not as much IRL.

So does Eve confirm that there really are chart rules or does Eve suffer from manipulation based on chart rules?

I am not yet sure either way.

But my feeling based on what I see, and I am more into watching both price and volume not just price, is that there are bunch of chartists and manipulators around here. With manipulators citing charts to make their speculation seem educated. Maybe it is maybe not. But it is OK. Let's see how this plays out in the long run.

I think the main point you aren't talking about is the very definition of an efficient market. Are markets efficient if they can put a price to any goods at any given time ? Are you talking about http://en.wikipedia.org/wiki/Efficient-market_hypothesis ? Or do we want markets to be efficient in the distribution of wealth, to be fair, to be Pareto optimal and so on ?
Depending on your definition of efficiency the answer may vary greatly.

Price shows a random walk affinity indeed but it's only apparent. Whereas with a truly random motion you cannot "backtrace" to a known initial configuration, with price you theoretically could.
I.e. for a small enough number of actors, you can "go back" in time, transaction by transaction and see how price formed.

Basically, price becomes unpredictable because actors are so many and because their choices are varied. But unpredictable does not mean "random".




Chaotic, true, but for me chaotic <> random. That is, something becoming unpredictable <> something inherently unpredictable since the origin and impossible to backtrace.




History is full of mathematically right theorems that later revealed to be wrong or to have missed some "details" (see Newtonian physics vs Relativity).

So, I admire people who are willing to spend their life creating scintillating theories but I'll take a true practitioneer with ideas that *work* over any amount of more or less proven theory.

I'd truly love to see a Herr Professor approaching Warren Buffet and telling he's an ignorant and doing it just wrong. Warren could just hint at the little detail about the professor's lifetime income being a pico-fraction of his yearly revenue.

We are not talking about distribution of wealth at all. I mean its eve so we can at least be heartless without being accused of being politically incorrect and not being able to discuss the topic.

My position is that market is efficient because the current prices reflect all info out there at this time. But my view is that it is still possible to make money for someone who is smarter than average.

Some people like to say that markets are inefficient because prices fall or rise in an unpredictable way. I dont hold these views.

Or some people say that prices are wrong because they say so. I want to know how they know what prices should be.

VV believes that market is inefficient and he has trading skills to take advantage of the alleged market inefficiency and his proof of his skills is that he made money.

You seem to agree with me that just because VV made money does not make what he is saying true. VV might have gotten lucky, eve market may be structured in such a way that a trader is well protected from implosion, or VV might actually be making money for different reasons than he thinks. That is why a theory would be nice, not just evidence of success in a form of pile of isk.

I think that this is what we are talking about.