|
PureBytes Links
Trading Reference Links
|
It doesn't make sense that you can make money on a system everyone
uses. Profitability is dependent on when you get in/out. As more people
enter the market long/short at the same point in time, liquidity decreases,
so the price goes up/down, which forces fewer people to get in/out at the
profitable time. Therefore, as more people get in on the same secret, it's
less likely they will make money as slippage increases.
Meanwhile, it's well known that everyone uses this system. Insightful
people realize this and anticipate future points of liquidity, and can fade
them with enormous amounts of capital. Then there are too many insightful
people, and no one is really making that much money. Then, someone comes
up with a new idea, and so on.
You have to have an edge. Period.
At 12:16 PM 2/22/2002 -0800, David Folster wrote:
>I would be interested to hear comments re: what peole think about too many
>people trading the same system, i.e. does it negatively effect the system?
>I've always wondered about why people say this is so. It seems to me that
>the more buying/selling power there is, the stronger it would make the
>system. But that is just logic off the top of my head; I have no idea how
>this would really play out. It also seems to me that even if the concept
>were true, that the stock market is so huge, it would be difficult for any
>one system to be negatively affected by a large number of people trading it.
>
>People often say that if there were a large number of people trading a
>system, eventually the floor would start fading those signals... but does
>anyone actually do that? Does anyone actually know people who say, "hey OB
>(or whatever) is going long, lets fade it!" ? That seems kind of unlikely
>to me, but I'd be interested to hear comments from people who know better.
>
>Thanks,
>
>David
|