Does the market really change?

Discussion in 'Trading' started by Blitzjoker, Oct 11, 2020.

  1. Tradex

    Tradex

    What change?

    Markets go up, down, sideways, that's it.

    Have you seen them do anything different in the last 200 years?

    Come on.
     
    Last edited: Oct 11, 2020
    #11     Oct 11, 2020
    dennis86 and drcruz like this.
  2. Tradex

    Tradex

    Losing systems, sure.
     
    #12     Oct 11, 2020
  3. MrRenev

    MrRenev

    1- Markets change: for example the original day traders that were exploiting the big flaws in the SOES system, have left, the flaws got fixed by improvements in technology and with regulations. Today no day traders whatsoever makes money and that includes institutional ones.

    2- There are periods where day traders make money: At the peak of the dot com bubble about half of us day traders made money for 3 months. But the rest of the time which is over 99% (4*3 months time 20+ years) day traders, or as I call them day gamblers, do not make money. So in a way markets do change, but it mainly affects idiots.

    3- Citi EMU Government Bond Index Euro returned 22% between 2009 & 2012. Today european countries all have stupid rates of 0.02 or even negative. Markets have changed, there is no more a way to get 22% risk-free.

    4- Another way in how markets change: In the 70s & 80s systematic no brain trend followers made big big money, a famous example is Richard Dennis that turned $1600 into 200 million in 10 years! That guy wasn't the messiah as once dumb money left he just kept losing money and tried again and again and in 2000 he ended up taking a big hit and quitting and never came back.

    5- And again a way in which markets change: floor traders & manual specialists/MM have disappeared and now it's HFT firms running the show. Technology is their edge, not screaming loudly.

    But do markets really change fundamentally? Absolutely not.

    And YES, braindead day traders with idiotic systems always end up losing and then they use "markets change" as an excuse, especially the people that sell those scams that obviously do not work, if by chance their victims win then hurray it's because great system, if it loses it's because "markets change".
    Literally what will happen? An idiotic indicator based strategy let's say macd lines crossing when above/below EMA will:
    - "work" by systematically buying in an average trend
    - not provide any signal in a very strong trend (because the macd never crosses the wrong way to be able to then cross the right way)
    - lose money when there is no trend / fake breaks / sideways and so on

    Oh and obviously using a systematic approach like this strongly underperforms just buying and holding the trend.
    The systems of course does not predict what direction the price will go. The edge is 0.

    So yeah, then you hear day gamblers say that "conditions change", anyone with half a brain can understand how retarded this really is.

    In conclusion:
    - For stupid people that have no idea what they are doing: markets change
    - For people that find a flaw and exploit it: markets change
    - For people that have a clue what they are doing: no markets do not really magically change, you'd have to be a blind sheep to not be aware that bonds do not pay anymore or that something is not trending or is, it's really hard to mess it up only retail day gamblers with technical analysis that ignore the real world (in other words blind traders) mess it up. There are still bull markets, bear markets, bubbles, cheap companies, central banks trying to kill their currency or not (china bank recently said they were not planning on stopping their currency from getting stronger), for quants there have been statistical edges for 30 years and their job has not changed.
     
    #13     Oct 11, 2020
    drcruz, .sigma, Nobert and 1 other person like this.
  4. easymon1

    easymon1

    70/30
    I like it. What other spreadsheets you got layin around that you'd be willing to post similar screenshots of?
     
    #14     Oct 11, 2020
  5. Tradex

    Tradex

    If I understand your study correctly, 67% of the time stocks stay above the 50 SMA for 10 consecutive days, at most, right?
     
    #15     Oct 11, 2020
  6. Tradex

    Tradex

    There you go.

    The markets have never cease to provide plenty of volatility and enough daily (or weekly) range to scalpers, daytraders, swing traders and long term investors.

    And there is ALWAYS a huge uptrend or downtrend somewhere.
     
    Last edited: Oct 11, 2020
    #16     Oct 11, 2020
    dennis86 likes this.
  7. d08

    d08

    Markets obviously change. That's why most funds have deteriorating performance over time when using the same methods, same goes for traders. Some suggesting otherwise do not understand supply and demand.
     
    #17     Oct 11, 2020
    _terminus_, tommcginnis and comagnum like this.
  8. Tradex

    Tradex

    Most funds consistently underperform the S&P 500.

    Trend following systems have been working for the last 800 years.
    Markets trend, it is a mathematical fact.

    That said look at a 1920 chart and a 2020 chart for instance (pick ANY financial instrument), do you see any difference?
    Can you tell the difference if you cannot see the year and the price (on the X and Y axis)?
     
    Last edited: Oct 11, 2020
    #18     Oct 11, 2020
  9. realtrades

    realtrades

    What about manipulation? Is that a valid excuse? :sneaky:

     
    #19     Oct 11, 2020
    Tradex likes this.
  10. lol at some of the responses in this thread

    op it is called regime dependency. think of it like market cyclicality.. while there are certain edges that may be robust across all market conditions, certain market conditions foster certain strategies while others preclude them. eg you would not be short vol in rising vol conditions just as you not be long/short some pairs trade when correlations decouple.

    there also exists something called alpha decay which simply means that strategies tend to decrease in performance over time. once some edge is discovered, others will discover it as well, and money will flow to that opportunity until it is essentially arbitraged out of existence. this doesn't always happen as there are limits to arbitrage in real world markets, but often it does.
     
    #20     Oct 12, 2020
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