|
PureBytes Links
Trading Reference Links
|
Excellent post...you have just described why making $ is 90% money
management..Tom Stein comfut@xxxxxxx
----------
From: owner-realtraders@xxxxxxxxxxxxxxxxxxx on behalf of Wayne Moody
Sent: Friday, June 27, 1997 2:20 AM
To: RealTraders Discussion Group
Subject: Re: stocks: Friday
At 01:48 AM 6/27/97 -0400, intel55 wrote:
>In a message dated 97-06-27 00:24:49 EDT, nwinski@xxxxxxxxxxxxxxx (nwinski)
>writes:
>
><< In a theoretically perfect free market, all players must eventually be
> returned to an economic zero profit. The market will do what it has
> to do to see that as many as possible make as little as possible.
> >>
>do not really understand this. It just begs the question why? The market does
>not "see" us. It goes where it wants. THe individual will do what he/she has
>to do to make or lose money. It is a zero sum game down there but I do see
>why the players must all be set back to zero eventually.
The market doesn't see us, but it is us, and most of us carry the seeds
of our own self-destruction, by looking for permenant rules in a
changing system. After we've all learned what's "sure" to happen, one
of two things must happen: no one is left to take the other side and
the game ends, or, the game changes as what's been learned fails.
The market just loves to do what it can't possibly do, what it's never
done before. It's function is to test the limits of price and value.
In 1985, calculate the chances of a 30% decline in one week. In 1993,
state how long the S&P can go without a 3% decline. We're surprised
when different things keep happening for the first time in history,
but they do, consistently. Change is the constant.
Are the markets perhaps games of probability that most traders insist on
treating instead as puzzles to be solved? If so, the majority of traders
seek and act upon "proof" that will fail as soon as too many people are
aware of it. The big winners notice the first wispy hints that things
are starting to behave differently, and speculate on change that few
others expect. The small winners never make a trade, they make a
series of 20 consecutive trades.
Do we have a need to believe that if we only work a little harder,
we can figure it out, and does that need work to destroy us? Suppose
the only truth is that next week's probability is 60/40 to be up. That
is, if you replayed the week 10 times it would be up 6, down 4, but no
single result is knowable. There is something terribly frightening
about that. If that's true, you must function with constant
uncertainty, you have control over nothing except what you
personally do, and you are therefore personally 100% responsible
if you lose. The market's action doesn't matter. You already know
it will play every possible scenario.
The current stock market is typically seen with the old tools as
either (1) in a strong uptrend that will continue indefinitely, or
(2) vastly overbought and on the verge of collapse (usually envisioned
as 1987 again, usually with a hint of moral righteousness).
Wednesday's action was striking. The sudden 20 point dip from the
new high, so quickly after the high, was extremely unlikely according
to many parameters I follow, both in timing and extent. I wonder
if it's the first hint of the new order: teach the players to buy
the dips, but make the dips too scary and sudden to buy. Teach
the players to buy and hold, then terrify them with random
mini-collapses?
My preference by nature was to seek "proof", meaning that a certain
set of conditions will be followed by a predictable price move.
The instances of astonishing reversals of some of these proofs
made a deep impression on me, forced me to abandon any pretense
of knowing any specific outcome. It's a strange feeling to trade
without a clue to what will happen in the current trade, like
feeling small in the presence of great forces, but also free
and detached from it. I understand what Norman is saying very
well. The market taught me not to learn.
Wayne Moody
wlm95@xxxxxxxxxx
|