OK, who here doesn't understand the simple concept

Okay, who here doesn't understand the simple concept that, if it weren't for people betting stocks would continue in the direction they're going, stock prices would generally tend to continue in the direction they're going?


In other words, the best indication of "true" demand for a stock is an extrapolation of the immediate trend in demand. Also, the fact that prices are fairly random proves the existence of "investors" who make money without reading a single research report.


So here are two charts:


http://bigcharts.marketwatch.com/qui...&freq=1&time=9


http://bigcharts.marketwatch.com/qui...&freq=1&time=9


Lookign at these two-year daily charts of GE and LAB, which one looks over-fished - meaning it tends to reverse - and which one looks trendy - meaning it tends to continue in whatever direction it is going?


Why might a chart of a less liquid instrument look trendier? How badly would a trend trader have gotten chopped up in GE in March of 2000? I only bring this up because it seems people are SO inclined to look just about anywhere - and believe just about any theory - but at the actual demand for a stock!


leroy

you think way too much there leroy. the price of a stock over a period of time is solely determined by its earnings potential plus a little for breakup value of the company. forget about market demand and all the other theory from the books. that may tend to push a price for a while but not for too long. except for the last too long bull market where fools bought on every downclick.

if you are going to trade in and out you are correct that things are not always in wack but for just about all the world its buy and hold.

In the very short term, of course demand for a an individual stock drives up the price, like during the IPO madness of '98-'99 or during an hour's trading. But demand for stocks is fickle. It went away in '73 when companies were still making money and it came roaring back in '81 when risk-free t-bonds were yielding 13%. To profit abnormally, you'd have to figure out what the demand for a stock will be before anyone else is able to, suggesting clairvoyance. And you'd have to bet big to avoid getting chewed up by expenses, thus taking on a lot more risk.


By all means, if you know more about how a company's stock behaves than its millions of other investors and you can afford the risk and expense of trading, momentum investing could work for you. I'm not nearly that smart. Good luck, Russ.

From books, Ray?? For crying out loud! I am only talking about the strategy used by all the greatest speculators in history, as well as the predominant one used on every trading desk or floor in the country! However, I have NEVER seen it mentioned in ANY book.


Smart, Russ? That is just my point! The people, over and over, whom I see making money doing this, are dumb as boards! You want to show me smart, tell me your claptrap theory about why you are so sure the stocks S&P puts in their index will rise over the next 35 years?


And trend following works in ALL timeframes! From Keane to Livermore to Dennis to Borsellino to Saidenberg, From Houtkin to Tognetti, from Cambell to Dunn! NOW you know why I posed the question with such an attitude! Because you people are thick, and are immune to the truth!?


You go to the poker forums, and you have a whole bucnh of people posting who are actually making money playing poker day-in and day-out. They don't say "Well, the only way to make money gambling is to buy a casino." That's actually what I get when I talk about poker in the trading forums!


I've talked to traders everywhere. You see Art Cashin on the NYSE, or Lewis Borsellino on the CME, or Chris Bankovitch on the PSE options floor, on CNBC every week, I've met all those guys, I've worked around them, even for them, I've met and talked to traders from every end of every product, you go to Stark's CTA database, I exchange emails with half those guys on a regular basis, I've even worked for some of them, too!


I'm just telling you what works, and everything else is camouflage! Because if this is a forum about your company automatically depositng X% of your paycheck into your 401k, and it being forwarded to Fidelity to compound without you having to worry about, we won't have a whole lot to talk about.


leroy

Actually, when it comes to forms of gambling other than playing poker, the only sure way to win is to own the casino...


You are correct in your assessment of my personality and investing style. That psychic ability, plus a superior momentum trading strategy, are sure to earn you fame, fortune and happiness, and I am glad that you are sharing these pearls with the rest of us. Peace out.

If you check the archives you can find some posts I wrote about why trend following works. By the way, what do you know about Dunn? ... Just curious.

Whoops, I was thinking of Eckhardt!


So far as Dunn, he got killed in the bond last month, his system signals are too coarse, I think he has accepted too much money into his program recently, and I have reservations about his portfolio-diversification strategy. I think... aaaah, not today I'd really be pushing it to get any more technical than that anyway!


He is a brilliant mathematician, a great all-around guy and manager, and a tireless innovator, but I don't think he is on the cutting edge so far as trading philosophy. Put simply, I don't like his signals, they're too specific, too aggressive, and too risky, and I guess I'll leave it at that! But that's nothing new anyway, that's what everybody says.


My most important opinion is that I don't think the markets will treat his systems favorably in the near future, too much interleave! Bad days for surfing ahead, and he's not on the lookout!


In all honesty, I don't really know much about Dunn. But call Florida, they're pretty open and friendly! They'll probably tell you their plan, as I'm sure they're cooking up a good one, and will want folks to know that!


What do you know about Dunn? Aparently more than you do about those other names I dropped, and probably more than me! Funny, you picked up on the one unintentional name I named by accident.


**************************************


Is my brain broken? When I love people, their brains occupy a different spot in my brain! As I meant to say Eckhardt in the original post, I decided not to delete the following comments which I wrote first


I know that Eckhardt uses 17 variations of three systems, adapted to different instruments and to neutral variaton of entry points, to scale in and minimize impact.


I know that, for many years, he had been worried about the proliferation of trend traders creating false breakouts, or cross triggering of systems. I know that after some tough months in the mid 90's, he introduced a chop filter to try to avoid this and only capture robust trends.


I know that as a result of this filter, his systems have been sitting largley idle through the recent tough periods for Turtles, but that many of his investors are disappointed with his relative performance in some of the key moves of the last 18 months. I know some other stuff, but this is all just general stuff off the top of my head.


Besides, I don't think Eckhardt would appreciate my speaking on his behalf even to the extent I just have!


Eckhardt, in my opinion, is at the top of the heap so far as responsible management of client accounts, acceptance of new accounts, professional integrity, trading theory, you name it. He is...


What, specifically, do you want to know?


Leroy

but we are not on the floor. we are stuck watching the boob tube or our computer screens. we get the worst of the price on trades and are always seconds too late in the moves. so, perry what do we do then?

Actually, with today's bandwidth, I don't think you would have any trouble executing, out of your home, the same scalping strategies the sharks use at, like,


http://www.schonfeldsecurities.com/


or


http://www.icapdirect.com/index2.htm


for instance.


There is always a new fast/intraday game being found and played somewhere, and the best way to discover it is to just move around and tag along with whomever is hot in a given year. The better talent - which requires more smarts than just being a copycat - is to understand why the different games work when they do, so as not to get left high and dry when they stop working. A lot of used Ferrari's get passed around.


Anticipating your response, I intentionally weighted my list of heroes to off-floor characters. I wouldn't be surprised if, among the S&P-futures traders I am familiar with, the bigger score isn't being made off-floor. The CME pit is mostly empty half the time, and it's local-on-local - with no fish - the rest of the time.


In fact, other than maybe Mike Milken or Tom Baldwin, I have trouble thinking of any of these traders whom you "can't possibly beat" who actually made huge fortunes. And I promise you, you go to the NYSE floor, or UBS in Stamford, you wil find people who would have trouble beating 2-4, they have dropped to the level of their advantage. It's just mass production.


They just vegetate around their advantage like moss, and that moss is receding as the advantage dries up. It's just a million fractions of pennies anyway, being processed by half-conscious factory workers. The ones who get a clue strike out to manage money, or to build a new software tool for the factory workers, or something.


Really, your only option is to learn the off-floor game from someone who has already taken the losses. But, unfortunately, there aren't any solid books on the underlying theory, nothing like TTOP. And it's a little late in the game to become a Turtle, though that is the longest-term, easiest in-your-spare-time way to get started.


But the long-term futures game is still the big game. Understand that NOBODY has an advantage in long-term futures - because nobody has any local information from, like Japan, and nobody is using any economic model that is worth diddly. Soros' "reflexivity" model, for example, was actually pretty half-baked.


The reason Soros had an edge, in my opinion, was not only because he had put in endless late-night reps as a grunt currency arb, but because he truly LOVED the geopolitical drama of Europe. There aren't too many people who know the first thing about economics who give a hang about Europe. But that was also Soros' undoing, because he made like a $2 billion philanthropic contribution to Russia at his clients' expense!


I promise you, Ray, Russ, and everyone else:


NOBODY HAS AN EDGE ON YOU IN PREDICTING WHERE THE YEN WILL BE NEXT YEAR. It's wide open! And the best your competition can do is to buy when it starts going up, and sell when it starts going down. If you can take it an inch above that - nothing like 40-80 hi-lo mind you - you win.


Besides, you know why most people who lose at poker lose. It's not because they're not smart enough, or because there's not enough information at the table, or because the odds are stacked against them from square one. It's because they're too lazy to learn, and too emotional to execute it even after they have learned. They're safer punching a clock than counting on themsleves to not call 75o.


The off-floor game is wide open to people with discipline, people who can function when their whole day isn't mapped out safely in advance. Most people just don't like walking minefields, it makes them miserable, when the mines are their own errors.


perry