On The News...

Discussion in 'Index Futures' started by Hawker, Aug 11, 2003.

  1. jem


    Since you told me not to be shy, I ask what do you are anybody, I am not trying to pick on you mean. when they say it is all in the chart. What is all in.

    I look at chart and wonder which way will this consolidation break out or how deep will this pull back be and how old is this trend. I do not really think all the info is in it. In fact it cant be because even if some people new they still have to worry about being too big a pig(s) and getting caught. I mean you look at a chart during lunch and you say hey where this sucker gonna be a at the close right now nothing is really in it it is just lunch time. Will fidelity buy this afternoon or was it all done this morning?
    #21     Aug 12, 2003
  2. dbphoenix


    You must have missed all the threads and posts on trading plans and finding an edge. Douglas' definition is that it is an indication of a higher probability of one thing happening over another. That pretty much sums it up. IOW, if whatever you've bought or borrowed or developed can't provide you with a result that's better than a coin toss, then you have no edge.
    #22     Aug 12, 2003
  3. dbphoenix


    Doesn't matter. Assuming that you have a plan, your task is to determine whether or not the market is providing you with any of the setups that are part of your plan. If it is, then you execute the trades. If it isn't, then you wait. Whichever way the market moves, you'll be on the right side of it because of your plan and your rules. If you consistently wind up on the wrong side of the market, then perhaps you need a general revision of your plan, or a new one entirely.

    You can never know what's going to happen next. Therefore, it behooves you to be prepared for anything, even news spikes.
    #23     Aug 12, 2003
  4. jem


    allright db I guess we agree it was just a matter of definitions. By the way it must have been late last night becasue my post was barely understandable.
    #24     Aug 12, 2003
  5. Hawker


    Thanks to every one for your replies. Actually when I did start this thread I was looking specifically for "News Services". I've to say that in both sides (opinions) of this post replies are good ideas and comments, however , we can not deny that news are part of the market physique. I agree that much of the time the news go out they're already absorbed by the price chart, but knowing the news you'll understand why those volume or price spikes have been printed.
    Nowadays with all the news services online in real time I guess it is possible for the independent trader to be much more closer to the market external factors movers than some years ago and so , closer to the smart money moves in this respect, mostly - I think - those events happening in the US and Europe while the market is in RTH.

    I'm just an apprentice in the markets but one thing I've learned is that although TA is a good tool for trading all the indicators , oscillators,etc are printings of price action in some way. So what really moves the price ?? Supply an Demand ?? Yeah Right !! For me is "What is behind Supply and Demand" that makes price moves. What make you buy or sell an issue ??

    From my point of understanding the price motion is a consequence of the Sentiment Indicators and News ( read: earnings, mergers , economical numbers, Fed word, global events,etc).

    That's why a reliable news service becomes important for me..

    Read a price chart without knowing the external factors that affect prices is like to try to play a sheet of music without knowing the tempo or feeling of the composition ; all you gonna see is a bunch of notes going up or down .
    Just my Tick.
    #25     Aug 12, 2003
  6. dbphoenix


    The purpose of musical notation, however, is to enable one to sing or play the music. Notes as to tempo and/or feeling are appropriate. But the purpose of price bars is not to enable the trader to determine other traders' assessment of the importance of news to the price. If so, that would imply that every single trader acts solely on the basis of news.

    One can try to look for reasons why price moves up or down, but the fact is that a thousand traders will have a thousand reasons for doing what they do, and not all of those reasons will have anything to do with news.
    #26     Aug 12, 2003
  7. Whamo


    #27     Aug 12, 2003
  8. Pabst


    While I think it's an over simplification to state that every trader has a different reason for being in a trade, I will concur that due to variance in risk tolerance, profit expectations, and the timeframes that participant's use, there is conflict inherent in the market. Those conflicts are what cause trades. Though trader's may enter the market for a myriad of reasons, they will only act in a force great enough to impact prices in a meaningful way if a majority of contracts are traded at previously disadvantaged prices creating new value. Initiative buying or selling so to speak. Naturally over a short duration an event as mundane as a trendline being broken, or a moving average being penetrated can induce traders to enter and exit positions and thus have an effect on the market's equilibrium which manifests itself in changing prices. I will agree with you DB that merely looking at the last quotation does give you the market's "temperature" at that brief snapshot in time.

    However, for the market to induce participants to continuously bid or offer prices away from a previously defined area of value, and for those buyers or sellers to overwhelm other participants who are "responding" by fading trades beyond value, a fundamental change in the expectation of future prices must take place. Whether that belief is real or illusionary is of course not important at the moment of rotation, but is paradoxically of paramount importance after positioning has occur. For in order to facilitate trade the buyers will bid to a level that sellers will find attractive, when those sellers factor the appropriate risk premium built in. That is how trade is induced.

    To closely examine news and it's effect on TA let's look at a commodities market. Grains are an easier example than stock index futures. Index pricing covers a wide basket of stocks and includes complex variables such as the anticipation of future earning prospects as well as the capitalization of those earnings, which are dependant on many factors including returns vs.competing investments ect. Grains are a little cleaner for this illustration.

    If I were to make an absolute statement "Nothing in the world of Corn as known to the majority of participants will change" then we could assume that other than the random jockeying of positions around value that nothing much would change the price of Corn. However if the perception "It looks like we may have a drought!"was allowed to override my prior absolute but now obsolete statement than one could logically expect that those who need Corn in the future would be buyers today. Now of course that buying would set off some technical buying and an adroit chartist would get long "not on the news" but because his system generated a buy. And as the threats of our drought become more real and the expectations of a bountiful normal supply of Corn decrease, the price will continue to shoot up as the shorts fear that they won't be able to deliver Corn at any price. So this huge rally in Corn was entirely News Driven. Does that mean that our chartist who buys breakouts didn't prosper. Handsomely I'm sure. Just as another guy who sells an overbought RSI or an extension through a Keltner band blew out. And maybe during the course of this rally there was false forecast of rain here and there that got our chartist out of his longs as pre-rain profit takers took the market below his trailing moving average.

    To me the guy who nails this hypothetical move is the trader who thought days before the move began in earnest "Gee it's been awfully dry." And then after getting long said "I'm not getting out until I see evidence that we're going to have a harvest that makes current prices look high." He may use a "technical' framework within his fundamental view, but the saying ignorance is bliss is never apropos to the world of trading. You're not just trading prices and formations, you're trading conditions.
    #28     Aug 12, 2003
  9. dbphoenix


    Some of what you say may be true. But this particular thread is under Index Futures, not Commodity Futures or Single Stock Futures, or Trading. I doubt that there are that many index traders who are concerned about corn.
    #29     Aug 12, 2003
  10. Pabst


    You're either in possession of the most subtle wit on this board, or you're a stark raving mad idiot. (I argue for the latter). The 'Corn" example was not germane (no pun intended) to the point of my post. I clearly stated that using a commodity would be of easier dramatic effect. I just as easily could have used 9/11 for stocks. I was a heavy buyer on Fri 9/7 and Mon 9/10 because an important (or so I thought) measuring objective signaled a short term bounce. I'll never know whether my work was valid on it's own merits because some "unimportant" news occurred before the open.

    Come to think of it, good thing I had News then. If not I'd have spent the next 5 days in front of my screen wondering why the market wasn't open!
    #30     Aug 12, 2003