It is for me. I'm positive this year. (not much but that's better than the indexes) Win rate 36% but my win loss is 5.5 to 1 (YTD). Mainly in cash right now and losses are very small as I start with a small position and pyramid. A trend change will vary depending on how long I have held a stock. Draw a line below the lows to start. Then the swing lows and don't hold a loser in the portfolio.
Tao is one of the most giving traders on here. You on the other hand have been banned several times for being a troll.
It's a great trade if vols or index skews are high and you structure it as a split-strike asym-fly (say a 132 but split strike). Or if you have deep knowledge of a product and there is an implicit floor or ceiling in the product and it doesn't pay to trade ATM. It's not a always in the mkt strategy as one month you're going to lose a year's worth of gains.
I think in general this is good advice for stock investors starting out. The more powerful chart pattern would be a break out and flag on good vol. You must watch the overall market carefully is that too pulling back to important levels? Or just the stock you are interested in. Different sectors of the market affect the investment. High tech? Is tech in favor or out of favor. Sector selection can be vital. Rotations and how to play them. To always stay a step ahead you need a spidy sense everywhere not just on the one stock you are buying. Also keep the PE under the EPS growth rate. I always say this--> But an actual list of paper with names of stocks on it. Not on the Screen on paper. Up until five years ago I still charted on graph paper. But a watch list you can handle that then take a 2 week period and update. Put a + for up vol and a - for down. Plot the points. See how the name trades. Does it suddenly dump it's 5 day gains in 1 day = weak hands. The one's that have a future will tell you. Let the stocks tell you don't tell the stocks. Be like water (Bruce Lee) Don't force your vision understand that the market works almost like a living entity..is it happy or sad> Is it over bought, fat and happy and ready for a trip up? Or under bought, lean and mean and ready to roar? Are expectations really bad. Is Apple in trouble etc. Be a contrarian- that mindset will serve you well and keep you out of crowded trades.. Good Luck ~stoney
I would define it as any trade that, under the assumption of a complete market, could be recast as an arb via trades in Arrow-Debreau securities. A complete market is one for which Arrow-Debreau securities can be traded transaction-cost free (at mid) on all possible future states. Actual complete markets may not exist, but the SPX complex comes reasonably close. Jarrow and Protter proved the equivalence of edge and arb in 2010 (but had been circulating in preprint for years prior, proof might also require a representative agent). To quote from the paper: "a non-zero ... alpha represents an arbitrage." Arrow-Debreau rearrangement can be approximated (with trans cost frictions) with listed options. You've seen screen-grabs of this kind of structure here on ET multiple times. E.g. a ****-edge large enough (exceeds a certain metric level) can be recast as a ****-arb. You also see this type of rearrangment in the inverse strike squared weighting that's used in hedging/replicating var swaps. Note that the gamma curve is the RND shifted slightly right (not exactly, but more or less). The weighting turns it close to a uniform density (divide by the integral so that it integrates to unity) -- it looks like a kernel density estimate of a uniform, using a gamma or some other right-skewed positive support kernel. Under this arrangement, there will be edges available as long as the Q-measure implied density differs from the rationally-expected P-measure density. This will happen as long as traders/investors remain risk-averse. These edges will not be traded away as they are compensation for perceived risk.