That makes good sense. However, I believe that that data, or those 'answers', are already present in the price and volume patterns which make up the market's action. My own approach has boiled down to a recognizing and trading a very small number of very high-probability patterns. But perhaps I don't approach trading in a sophisticated enough manner. The above approach certainly sounds interesting; from a research and understanding perspective.
Hello d9d, I agree with your statement that the price/volume patterns already contain or reveal the meaning of the market patterns. I would emphasize the volume aspect of the price-volume relationship, since volume reflects the cumulative transactions/interactions of market participants that are creating the pattern. Your focused approach to trading those patterns that you have found to recur is excellent in my opinion. There is no need to understand the underlying cause of the pattern, however, I do think that by understanding the dynamics that contribute, one can fine-tune trading strategies. Furthermore, some of us are driven to really try to put as many of the pieces of the market puzzle together as possible, realizing that this is a process that is never-ending, akin to understanding the patterns and meaning in life as a whole.
I just couldn't resist. Let's see how wrong i am. Markets are a means to wash illegal funds into mainstream society therefore promoting good ole new world order democracy. Watch the flow, make the dough. Let's say certain government officials of 15 countries decide to run a slave ring in a third world country supplying workers to Fortune 500 companies abroad. Well, where do you convert the wealth? What about every major narcotics dealer outside the U.S. that has a son or daughter at Wharton or the like? The market is a conglomerate of human relationships converted into dollar amounts of which most are illicit in nature. These events enable some 20 year old with some knowledge and some coin to swing for nickels and call it a job or a career. I don't know which is funnier. No system or trick or experience for that matter can outweigh being the player or operator that holds the hand. For some reason a Bruce Lee interview comes to mind when he said "When water fills a teapot, it becomes the teapot". Unless you can become the teapot, do not waste your time. I like this thread. Much can be said about the market. I hope some professionals chime in. The fact is, it is an animal all on it's own. It is everything and nothing at the same time. I imagine that if the U.S. came under martial law the market would change drastically. Instead of pitching dimes and nickels so that he can call himself a trader to his pimple faced girlfriend that 20 year old will now be working for Uncle Sam, most likely. Not Sam the Fox on ET. be good. alex
The "market" is a gigantic distributed computer whose sole purpose is for price discovery and the efficient investment of capital. Originally all its data-gathering and computational components were made from bits of organic cells, nowadays it's gaining silicon cells and that is making it more effective. The bulk of the communications in the computer are done through a number of centralized hubs called "exchanges", but that's also facilitated by telephones, online forums, etc. The speed of communication is also constantly being upgraded, making the computer more effective. The complexity of this computer is mind-boggling, as well as it's output, a lot of times. It's probably the most complex of all human inventions, considering the difficult of the task, it had to be.
The Rational Expectation Hypothesis is a good base to build a theory of market behavior and by extension a set of rules constituting a trading system. Market participants compete in predicting market reactions to future events and by trying to define something that doesnât exits -- the future -- traders adopt artificial rules. There is no âtruthâ, just adopted conventions and patterns. The most profitable systems are the ones that are the most often confirmed by future price movements so in their quest to have a system that maximizes such price confirmations, market participants continuously adjust the rules they use on the basis of what the market ended up doing as opposed to what the rules predicted. The process of continuously adjusting the rules based on the most current observations, i.e. the GRADUAL PROCESS OF AGREEING WITH EACH OTHER, is what creates price trends and, occasionally, price bubbles. People who typically loose are people who quickly loose faith in their system and constantly IMPROVISE new ones. Predicting is also very dangerous because NO ONE CAN PREDICT THE FUTURE. The alternative to predicting is - Understanding the present and wait for situations where simple common sense will provide you with a good idea of what is about to happen. - Measure the marketâs propensity to go in one direction or another. This is where quantitative methods can be useful.
One need not know or understand the complexities of "how" an automobile functions to successfully or proficiently operate one.
blah blah blah. everyone from his mechanic to the toll booth operator will fleece him every chance they get.
I almost posted a similar sentiment on another thread. I'm amazed at how some of the people who post here squawk social engineering practices as a means of trying to manipulate markets and "solve" perceived "problems."