Market Discussions

I think that you want to have an opportunity to participate in an even completely baseless bubble. That is the only time when you can make a killing. In a perfectly rational and competitive market an opportunity to make a killing does not exist. Even if you know that the price is in the bubble territory it is still worth if it for you to pay it to buy into a bubble if you are expecting to sell it for a higher price to somebody else. So the calculation of the price in a bubble is rational even if everybody knows that the price will eventually fall. It is still a calculation of risk vs reward. If you sell for a higher price than you bought then you were right to pay the price that you paid even if subsequently price falls as a bubble pops.

So I think in this way, and I don't like it when people say that markets are irrational. If markets are irrational then it is easy for you to become a trillionaire. All you have to do is is get the direction right and then it is leverage and you are golden. So why are not there trillionaires around?

But maybe in Eve there are trillionaires but if so how did they do it? Charts? Fundamentals? Monopolies? PLEX? Insider info? What worked is what interests me.

It possible to make a fortune from path info but you just don't need it.

The major source of EVE profits is regional price discrepancies, the arbitrage between different locations allows for a daily profit of 3%-5% from a sum of up to at least a hundred billions. It's huge number it means that you can make a hundred billions a month if you trade daily.

In RL such arbitrage opportunities just don't exists they very quickly discovered and filled by traders until markets turn to equilibrium , in EVE because amount of people willing to invest their time into filling this 3%-5% holes in the markets is actually tiny, it just don't meter that much for a majority of players to be an EVE trillioner

www.hellokittyonline.com

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And that's my (and Warren Buffet, probably) point. That confusing randomness with chaotic is not useful. Randomness means somebody can't approach the markets. Markets are MADE for people to meet in them. Implying price can't be used to make a profit would make people wonder why they'd trade in a market at all.
Being chaotic, on the other side, means that price acts as random but only "locally", one can filter out that "noise" and reveal the underlying trends and use them to make a profit.

Whenever I draw a trend line, all I do is to apply a low pass filter against "noise" (which is not really noise, but let's skip this step).

Markets are never irrational if talking about their microstructure, if we talk about the human sovra-structure then yes, there's irrationality and that's what I call "inefficiency" but it's purely a man made factor added to many others.

Markets are locally rational and efficient, globally are usually rational and less efficient (trends may be found), some times are very predictable even being efficient and rational (i.e. in confirmed breakout with a pin bar retracing over a previous resistance). Some times like at the top and bottoms they are less efficient (the double top / bottom and head and shoulders are THE overshooting symbol of a market being inefficient in that time) but still very rational.

Exactly, thank you. Plus chaotic here means there is an invariance of scale. Random walk, and chaos are very well defined in math, you may not like how that sounds but these terms apply to describe the behavior of the market.



For instance take a man walking on a line. Let's say he has 2/3 chance of going on the right, 1/6 chance of staying in his position and 1/6 chance of going left. That's a random walk (quite simple i give you that). I can predict with precision where he will probably end up in 10-100-1000 iteration, i can even evaluate the interval of confidence of my prediction... There is a lot that can be said about this exemple while still being something "random" mathematically speaking.

I haven't said that prices are chaotic, however volatility follows a chaotic pattern, locally and globally. Hum, sorry it's in french but you can clearly see that on the graph at 7:55 here : http://www.dailymotion.com/video/xd1yo1_jean-philippe-bouchaud-des-marches_tech



But that doesn't contradicts anything that i have been saying. More than 2/3 of professionals don't beat their reference (2/3 hedge fund managers don't beat S&P500 over a 20 years period). That doesn't mean you cannot be among the happy few, or among the lucky.
One can even not be better then the average while still making good money, if for instance you are clever and decide to invest in Asia, Brazil or whatever is booming you might make a killing while still not making returns above the average in these markets.

You seem to know Warren Buffet well enough to cite him as an example. I suppose then that you know the guy is no ordinary speculator. Buffet likes to invest a large enough amount of money to be on the board of the company and take part in decisions thus influencing the direction of the company. That's not what we are talking about here

Ok, then please use the math and tell me a lot about how Crude Oil or Gold will go in the next month from now.

Because that's what I do every time I analyze them and find them in "pattern status", and I don't need any math.




That's a quite (ab)used rebuttal. Fund managers are not there to beat the markets and that's it. They are there to *beat the markets with the least risk for investors*. Hedge fund managers are more biased towards gains than capital preservation but are still on the same boat.

Basically, it's intellectually dishonest to look at a fund long term profitability while willfully ignore its investors.
It's not easy to tell investors that they risk losing 40%. Fund managers will publish a prospectus with the maximum expected kind of loss (with a > 90% degree of confidence) and investors take THAT.

The difference between a professional and an hobbyst, in fact, is not about (want to) knowing how much to potentially make, but how much to potentially lose. Something EvE players call "undock with what you can afford to lose".

Therefore, if S&P loses 40% but then recovers 60%, fund managers will do their best to make their investors lose less than 40% (because investors might have to liquidate any time, even during bad times) even if that means their "investors capital protective strategies" imply they won't take the 60%.

So, the real sentence would be:

More than 2/3 of professionals don't beat their reference but protect their investors against the reference drawdowns.

Of course I am sure there are also bad or even dishonest fund managers, but hey, we have bad cooks, bad hairdressers and so on and they keep doing their job even being bad at it.




He's a market maker, but market makers are market participants.

Actually, he puts a lot of his own at stake so if anything his opinions have even more weight.

Money talks.
The rest is chatter.

I only appreciate science that tries to be practical and not dogmatic and self-referential.

We are in a trading forum of a quasi-realistic economy game and talking about trading and indeed money talks.

Not only that, but actual practice would easily tell people why prices behave like it does. I.e. a pin bar or a BUOB is just one or more large traders who brute force opposing ones, that happens all the time and is all but irrational, requires donkey math capability to pull off yet it's years I have to keep reading high solons claiming as irrational or impossible what's easily seen and experienced every day.

lol, only in eve are players smart enough to have a conversation like this, and only in eve is it rewarded "in game"

it's the only reason i play this boring game haha

Consider the possibility that I am trading IRL too and I am successful in my mind over a period of last 6 yrs exactly.

Was I lucky?

Lets say I got 15 percent per year over the last 6 years per year. Was I lucky? Did you beat me?

If you did I would like to know that you are better. No problem. Grats if you did. I am just curious.

I need to calibrate myself since I am young.