I think the difficulty exists in defining when to enter a trend as they are being created in real time. How do you go about timing your entry in real time as these tops and bottoms are forming compared to just reading what price has done in the past and saying I should have bought there? Can you accurately define in real time where "there" is? I know of several different ways people go about defining a trend but the key is to how and WHEN to get aboard the trend move without losing your butt in the process of positioning yourself correctly. The idea of trading retracements, 123 reversals, ect is old hat but I think a lot of traders know these ideas but fail in defining when to enter the market thus the use of fibs, momentum indicators, ect for timing. Whether true of not I have read somewhere that the majority of traders can pick the right direction of a market move but can't pick a low risk entry spot to get into the market. So then timing becomes the issue that separates those that make money or lose money while trading a trend move.
Yes, there is abnormal distribution in the market, but we have no idea when that overreaction will occur, or how badly the overreaction will be. It is not predictable, so would that not be random?
I think it would be random in the sense that it is not known where in the specified probable range price will be.
Is everyone equally motivated to sell their shares? I think that would be a factor in how the game is to be played.
ProfLogic... It is not necessary to hide behind a moniker to contribute to the discussion. As a student of yours, I have found that there is no way to anticipate whether or not we have a trend until leg 3 is completed. Just as there is no way to draw one of Jack's channels until we have point 3. The assertion is that there is no way to determine where point three is going to be, and that makes the market random with regards to trends. Again, I believe that most traders here can trade within the budding trend if they collect and analyze the data. If you want this in Elliot terms, most traders must wait until wave 3 or 5 to enter a trade, because a trend cannot be seen before then. This is strictly my opinion, and should be treated with the according grain of salt.
I don't think so. I think that there is a range of probabilities which represents possible future worlds. Each future world can be described in (varying) probabilistic terms. In a truly random system, there is no variance between the probability that this or that event will occur - all the possible 'next events' in the series are equally probable.
So Niederhoffer and Taleb have the best way to trade then? And if so then we must simply learn to live with black swans?
Ummm... if I'm not mistaken, Vic and Nik took opposite sides of each other's trades, didn't they? Wasn't Vic famous for selling deep OTM options and Nik famous for buying them, anticipating the black swan? Sorry oddi, I'm not sure exactly what you mean by this, but it wouldn't be the first time I missed the obvious. What do you mean by 'the best way to trade'? Whoops - you must have added that bit about black swans as an edit. Yes!! I believe we have to learn to live with the black swans, and if we are exercising proper risk management, we have a good chance. Also, I think that guys who are managing big amounts of money are probably making sure that they aren't massively correlated, so that a black swan may not be as devastating. Hopefully they all learned their lesson from LTCM.
That's what I meant, they both have the same models, taking opposite sides of that model. LTCM, funny you should mention that. I think I saw on NOVA one year that LTCM knew that something was horribly amiss, in time enough for most funds to react, and had they not been the oil tanker trying to miss the iceberg, they may have survived. In fact most funds did react, leaving LTCM no place to run and nowhere to hide.