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Shall We Play a Market Timing Game? (2018)

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Re: Shall We Play a Market Timing Game? (2018)

#21

Post by saalweachter »

brownbat wrote: post #14

Sure. It's a really bad idea to try to time the market on a day to day basis. There's two sides to every trade, so you're generally playing poker against professionals with armies of quants. But this game really just proves that you can't time the market while knowing nothing about the outside world. Headlines sometimes matter. Not all the time. Talking heads generally overstate how much one random speech matters, "p…

> Here's the real test: what will be the best signal of the rally after the pandemic?

When people start worrying that there is a new bubble. :-)

Re: Shall We Play a Market Timing Game? (2018)

#22

Post by grey-area »

Majromax wrote: post #20

> Update: Added a Monte Carlo mode which lets you play with data that is randomly generated from the daily returns of the S&P500. The probability of a daily return being picked is the same probability/frequency that it occurred in the last 68 years. This mode is rigged. Any proposal for market timing requires correlated returns. "Technical" traders infer short-term trends form patterns like the shave-and-a-haircut an…

Yes exactly. The market may resemble a random walk in the short term, over days, but it is driven by economic forecasts and company results in the long term (the long term is also more than the 3 year timing given).

Absent any of that information, obviously you can’t guess how the stocks will move (i.e. time the market), except that they will in aggregate move gradually upwards in price as all currencies aim for inflation.

With that information, sometimes the way the market will move over a time period of years is clear. Clearly the consensus moves in a panicky way with the latest news, and constantly undershoots or overshoots real returns, but it is based on real returns in the long run.

Re: Shall We Play a Market Timing Game? (2018)

#23

Post by jcfrei »

Majromax wrote: post #20

> Update: Added a Monte Carlo mode which lets you play with data that is randomly generated from the daily returns of the S&P500. The probability of a daily return being picked is the same probability/frequency that it occurred in the last 68 years. This mode is rigged. Any proposal for market timing requires correlated returns. "Technical" traders infer short-term trends form patterns like the shave-and-a-haircut an…

They could easily create a better simulation with a moving block bootstrap method. That is by sampling consecutive returns (for example for a whole week) and create a new time series with them.

Re: Shall We Play a Market Timing Game? (2018)

#24

Post by pembrook »

czbond wrote: post #12
empath75 wrote: post #9

This just shows that so-called ‘technical’ analysis with no context is about as useful as trading based on horoscopes. Add in some information like ‘a new pandemic threatens to shut the world economy for months and kill tens of millions of people’ and suddenly this changes.

Technical analysis has validity - it is just patterns and data. It isn't perfect, because outcomes are still variable, and also consist of independent human decisions. A pandemic is an edge case... However, markets react much more quickly than in the past (algorithms, global data, instant analysis of that data) - that technical analysis short term timelines have compressed. If you want statistical breakdowns of each…

That book is essentially a collection of newspaper horoscopes.

Trading off data and patterns is a valid strategy, but the book you referenced doesn’t show you how to do that. (drawing pictures over charts and making subjective conclusions based on what you drew is not a data driven strategy).

Read the recent book on Rentech (the man who solved the market is the title I believe) to better understand how difficult it is to actually beat the market using data.

Once you read about a firm who has consistently beat the market—-and how tiny their edge actually is—-you’ll put the notion that you have the resources to do so on your own to bed.

Re: Shall We Play a Market Timing Game? (2018)

#25

Post by socketnaut »

corey_moncure wrote: post #18
brownbat wrote: post #14

Sure. It's a really bad idea to try to time the market on a day to day basis. There's two sides to every trade, so you're generally playing poker against professionals with armies of quants. But this game really just proves that you can't time the market while knowing nothing about the outside world. Headlines sometimes matter. Not all the time. Talking heads generally overstate how much one random speech matters, "p…

The Efficient Market Hypothesis is obviously, patently false. The markets cannot agree on the value of an asset from week to week, day, hour, minute or second. Equities in stable businesses with millions of shares traded daily see their prices fluctuate 5%, 10%, 20% intra-day. The tangible value of a company simply does not change that fast. It doesn't. It's impossible to time the market perfectly every time because…

You need to be smarter than volume-weighted average, not smarter than the average participant. The demographic you have in mind is trading relatively small amounts of capital.

Re: Shall We Play a Market Timing Game? (2018)

#26

Post by Klinky »

vidanay wrote: post #15

I predict that the market will see a handful of the largest single day point increases within the next six to ten months. Just a prognostication on my part, it's worth exactly what you paid for it.

I'd expect percentage losses as deep as those seen in 2007/2008. This isn't just paper money drying up, it's the inability to physically work. It's not just a matter of injecting a ton of capital into the economy, literally that capital cannot do anything if people can't work.

We'll also see hyperspecialization towards COVID-19 in the health sector, which could leave those industries vulnerable when COVID-19 finally runs its course(likely many months from now).

Some industries are already failing, and will need propped up. If not, then those industries will take awhile to recover after COVID-19 runs its course.

Also I'd be incredibly wary of huge single day gains. Consistent slower gains is a better sign of a healthier economy than the spiky behavior we've seen as of late indicating people are heavily speculating on the volatility.

Re: Shall We Play a Market Timing Game? (2018)

#27

Post by TomMckenny »

Majromax wrote: post #20

> Update: Added a Monte Carlo mode which lets you play with data that is randomly generated from the daily returns of the S&P500. The probability of a daily return being picked is the same probability/frequency that it occurred in the last 68 years. This mode is rigged. Any proposal for market timing requires correlated returns. "Technical" traders infer short-term trends form patterns like the shave-and-a-haircut an…

Yes, it simulates the hypothesis that future markets are unknowable. Which would indeed be begging the question. Unless of course you find that whenever you apply technical trading to a Monte Carlo market, you get the same results as applied to real market history. Then you show that the signals technical trading uses are not actually predictive.

At any rate, if the market trends upward and trading is close to random (regardless of what the trader believes) then being out of the market occasionally will always be bad statistically. If there are vast numbers of traders all actually acting randomly then some will out preform others and some tiny number might out preform the market. In fact, if you have the data, you can plot the performance of every trader against the market average and actually measure how far from random the average trader is.

Maybe price to earnings ratio "should" relate to stock price. But in actuality stock price is determined by what people are willing to pay for it obviously. To the degree that people are buying and selling _not_ based on P/E, say for example they are doing so somewhat randomly, then the P/E won't reflect accurately the stock price: it won't be predictive.

These hulking paragraphs is what the demo is basically saying.

Re: Shall We Play a Market Timing Game? (2018)

#28

Post by dpc_pw »

This is such a nonsense being pandered by people who make money on it.

You, you can absolutely "time the market". You just can't do it exclusively based on the chart. The real world is still there, and it's important, you know? And Stock Market and savings accounts are not the only investment instruments available to people. And you don't have to be all in or all out.

Maybe if you don't have time and skills to think about it, etc. then this makes you feel better about your "investments" because "there was nothing you could have done better". But it's still load of rubbish.

Re: Shall We Play a Market Timing Game? (2018)

#30

Post by heartbeats »

dpc_pw wrote: post #28

This is such a nonsense being pandered by people who make money on it. You, you can absolutely "time the market". You just can't do it exclusively based on the chart. The real world is still there, and it's important, you know? And Stock Market and savings accounts are not the only investment instruments available to people. And you don't have to be all in or all out. Maybe if you don't have time and skills to think…

Agreed. I read about the coronavirus and decided to pull some of my money out - that's probably earned me 10% so far.
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