Spike, I think your golf analogy mis-represents the actual situation. Let me apply the EMH to golf and maybe you will understand. The Pro golfers are the ones who win the big money. Most of them have been playing since they were like 1 -3 years old. This means that, if you or I would suddenly aspire to be a pro golfer using *publically available techniques*, we could work very hard all day for 10 years, and we would only be as good as the Pro-golfer was when he was 11-14 years old. So the Pros would always beat us in the tournaments. However, if we developed a new technique to play golf, then we could surely win some of the lesser tournaments. I'm sure if someone had the interest they could become an expert at projectile motion and perhaps even apply general relativistic corrections in order to take non-standard routes from the tee to the hole. (For example, anyone who has been playing golf for some time knows that a golf ball bounces WAY farther off a cart path or a tree than the fairway.) With high processing speeds available in pocket computers/Palm computers these days (not to mention what might be available several years down the road), one could do the neccesary calculations in the short amount of time required. I hope this analogy helps.
Question if a fund like fidelity decides to accumulate a mid cap stock. Do you think a trend appears. If they have a buy point to do you think specilists front run it. Do you think some daytraders attempt to front run the specialists. anyone who has interacted as a daytrader. Nows there are times there is an accumlation = trend and times when there is maintenance trading. . (Selling is another situation all together and it can be trendy but it frequently happens on very low volume. ) To think that trends do not exist is to not understand how the market works. Now it was much easier to spot them before all funds had to make public disclosures. But have ever seen a mid cap stock in a stair step pattern up. To deny the existence of a trend during an accumulation phase of a mid cap stock would take the arrogance of a two time fund destroyer.
Lefty, congratulations on your winning trade today. However, please keep in mind that as you sleep, especially since you just posted a chart showing your trade, the Big Firms are bringing many giga-cycles of computing power to bear on the market. I am quite sure that you will find, as I have in the past, that your entries will slowly erode over the next few weeks to the point where by the time you identify your entry and go to click the mouse, your profit target has already been reached. Remember the Big Firms do not sleep, they have constantly reconstituting teams of quants with supercomputer power to bear in 24-hour operations, worldwide.
Hey Peter: Before I hit the rack, I want to mention a couple of things. Your analogy of the pro golfer is an interesting one. I have a few friends who play professionally. They say that the difference between them and the duffer is a. talent, b. coaching, c. repetition and d. equipment. e. attitude (in no special order). All of them say the same thing. If you ask them, they believe that in any tournament, there are at least 10 guys who at any given time could win. If you look a little closer you see that all but a couple are having to deal with some problems as regards one or more of the items mentioned. So it is just a matter of momentum. The guy who has it all together and has a "good day" or several "good days", wins. In my view, trading is the same. You have to get your ducks in a row. Then on any given day, you might be one of the players who has the momentum and takes home the trophy. It has been a while now, but I once read the list of PGA's top 100 money winners. I remember that what struck me, was that the 100th guy, the last guy on the list, made a hell of a lot of money. Again, I think that this game is like any other. You have to commit to finding the tools you need for success. You have to commit to finding the coaching, and to getting enough reps, and to having the right equipment to get the job done. I think few people have that kind of commitment in them, and that more than anything is why so many fail and have to move on to other things. Good luck everyone. Lefty Edit: Peter your comment is a good one. I have already seen that erosion that you talk about. As a result, I had to modify my approach. I think part of the problem that traders are experiencing is due to lack of flexibility. You either adapt or you pack it in and get a job selling office supplies at Staples. OK then, I am outa here. Nice talking to you all. PPS: You know, I like that phrase in JEM's post (Fund Destroyer). I think I will use that as my handle from now on...Lefty the "Fund Destroyer". Oh, and all you "anti-trendists" should take a last look at your charts. That thing (the ES) is still trending like a mother trucker.
Congratulations, Peter. Not for taking my side of this issue, but because you looked at the facts and changed your mind. The efficiency approach is a good one. Then consider that no technique based on the processing of past price data would remain undiscovered by the gigaflops for more than a few days.
Yes congratulations Peter, and please be careful not to step in any gigaflops during your travels. Also you may want to be on the lookout for wild terraflops, or the ever dangerous Asian Flipflops.
Peter I have not read this whole thread but if you are buying into the emh you are buying into the easter bunny. You should read what charlie munger and warren buffet have to say about it. (charlie mungers speech was mentioned on another thread a few days ago. While I was in school the emh said no one could outperform the markets. Warren buffet proved them wrong. For the nasdaq to be at 5000 and then 1500 in a very short period of time manifests the flaws of the emh. Especially because most of the nasdaq was not making money at 5000 anyway. Liquidity drives the market not efficient pricing.
Markets may not be efficient in the absolute sense, but they are effectively so with respect to publicly available techniques.
Warren Buffet was a VERY LUCKY PERSON. He worked hard to find an edge and develop it into a trading/investing/risk management plan, and followed it with discipline for many years. In short, PURE LUCK. Because how many Warren Buffet's are there compared to losing traders?? Do not try and discredit the EMH, you are just kidding yourself.