You are either very simplistic or very arrogant. Maybe both? Funny what a winning streak can do. You realize not one finance academic would agree with you? There are major inherent flaws in your logic. Not to mention its very arrogant since you are claiming "special knowledge" that's beyond the smartest folks in the biz--- so what does that make you? Peace, surf
No special knowledge. Absolutely. No arrogance as well. Arrogance in my view is claiming something beyond what you really do. Claiming what you really do is not arrogance, it's objectivity. Academics are very often wrong. I am 5th generation in the family of academics myself, hence no blind adoration of the words "scientific" or "academic", only objective critical view of everything. Let's try for example to analyze the concept of "noise": Every trade in the market is real transaction, someone actually buying and selling, do you agree with this thesis?
I'll be devils advocate here for a moment, not every transaction is a genuine effort to buy or sell. Lots of trades are dummy trades, manipulated trades and short term short covering etc. Big money has big firepower hence they can play with the market a bit like a cat with a mouse. I think on shorter time frames there is noise, also possibly many trades are from inexperienced traders who are entering and exiting at inapproriate moments, eg they are trading on hunch and a bit randomly, therefore not trading a system, this could also be construed as noise possibly. If 95% of traders lose, then only 5% of traders really seem to know what they are doing. If only 50% of traders lost, then I would hazzard a guess there was no noise. Just an idea.
This is getting interesting. If 99% of active traders lose, then how can the chart patterns they create offer any opportunity to profit? I never questioned the usefulness of TA patterns before. I figured they were self-fulfilling prophecies that might work enough of the time to make money. But when I consider that the group of people who create these patterns are losing money on balance (only to give up and then be replaced by more noobs) then I have to ask myself how these patterns be of any use? This is something I've been thinking about lately. Is this all a trick being played on our brains? Or am I over thinking this?
Of course not all trades constitute clear intention to buy/sell for a directional trade. As a perfect example, NQ is heavily affected by AAPL option MMs and that's the case with most derivatives, you never know if even heavy buying/selling is outright trade or leg of a spread or a hedge. But nevertheless just writing off some trades as "noise" has absolutely no solid base, I am dead sure that all so called researchers who made those conclusions have no valid criteria to distinguish "noise" trade from "real" trade, because market simply doesn't provide such information. So I prefer to use Occam's razor and analyze the market as simply and objectively as possible: a trade is a trade, every trade matters and sum of trades (small, large, directional and non-directional) forms what we call market action. Those who say there is "noise" and "real" action just rationalize their inability to trade what they call "noise". They forget what is noise for one can be huge trend for another, what is insane noise and chop for the human can be great tradable range for HFT algo et cetera.
I don't believe market is fed by the noobs who lose. Not too many people in % of all world's population actively participate in the markets, especially derivatives etc. Game would be not worth playing if it was only about picking the pockets of those $10K account retail people. Market is a proxy to economy as a whole, that makes a lot more sense and explains where billions and billions of dollars in profits (and losses) come from/to.
It's not only about noob 'traders' who lose. Think about those investing in mutual funds, etfs etc, but entering and leaving the market regularly at the worst possible time. Also think about those who do not simply lose, but just underperform. There are a lot more ways to 'lose' in the markets (and thus providing profits for those which are smarter/faster/better informed) than trading. And finally, there a market participants who do not even seek to profit in dollar terms. Hedgers, for instance, which are willing to sell risk - at a negative price.
Yes, that is what I called proxy to the economy as a whole: pension funds, mutual funds which buy and hold savings of hundreds of millions of people across the world, commercial hedgers etc. Those are where profits come from to speculators. All listed above care less of TA patterns, but their action is what causes TA patterns, such as great intra-day trends, when many funds have to rebalance their portfolios due to one or another reason.
I always like to see how people reach their conclusions---the source of the information so to speak. what is your background in finance and trading that enables you to say these things and the others with such authority? surf
My background is years of experience and continuous interaction with people with even more experience, so over 100 years of combined experience.