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I Had to Develop an iPhone App to Understand Swing Trading

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Re: I Had to Develop an iPhone App to Understand Swing Trading

#11

Post by lnanek2 »

falsestprophet wrote: post #10
mistrQ wrote: post #9

Earlier quoted context omitted.

> People literally spend all their time doing this, if there was free money to be made someone would be making it:) I used to think this, then I worked on a trading system in an investment bank. Don't underestimate how quickly and easily you can learn and exceed people who should know what they're doing, given sufficient motivation.

There are thousands of buy side firms all over the world stocked with stone cold geniuses who do this all day every day after having trained in maths and science all their lives. The fact that you saw some people you perceived to be clowns once , does not demonstrate the market is anyone's for the taking.

Those people are usually managing a lot of money, though. Warren Buffet has said he has to trade completely differently nowadays due to size. So those people are not working the same opportunities most people here are going for.

Re: I Had to Develop an iPhone App to Understand Swing Trading

#13

Post by encoderer »

dirtyaura wrote: post #12

A tangential question: It seems that a lot of smart people believe in technical analysis, but to me it sounds like telling the future from tea leaves. Does it really work or are successes just part of the standard randomness of stock investing?

I believe there's efficacy to it as one input; it's not an exact science.

Technical analysis is just acknowledging that while price moves are random (and if you plot daily price moves, they represent a bell curve with fat ends), there are still patterns that reappear. And if you have tight stops in place to manage risk, you can (try to) take advantage when a pattern emerges.

Re: I Had to Develop an iPhone App to Understand Swing Trading

#14

Post by Hermel »

jeffreyrogers wrote: post #7
chollida1 wrote: post #2

Good for this guy for making this app. However, this makes me worried for him... > There’s a 50% chance that I can lose $50.00 in a few days, but there’s also a 50% chance that I can make $100.00 or more in a few days. Why 50% chance? This number will be different for every person depending on his profit & loss history. Ummm..... This doesn't seem true to me. What if the stock just stays flat? That's more often than…

> People literally spend all their time doing this, if there was free money to be made someone would be making it:) I agree with everything you said above, including this. I want to add though, that there is effectively free money in the stock market. For example, just by buying a low-fee index fund (e.g. something from Vanguard), you're almost guaranteed to do better than most investors and probably better than near…

Note that you are somehow arguing in favor and against the efficient market hypothesis at the same time.

By arguing for ETFs, you are implicitely assuming that there is not much to gain by doing your own research because markets are efficient and have already priced in everything.

By arguing that most people underperform the market, you are implicitely assuming that it is easy to underperform the market - something that should in fact be hard if markets were efficient and everything priced fairly.

Re: I Had to Develop an iPhone App to Understand Swing Trading

#15

Post by cliftonk »

chollida1 wrote: post #2

Good for this guy for making this app. However, this makes me worried for him... > There’s a 50% chance that I can lose $50.00 in a few days, but there’s also a 50% chance that I can make $100.00 or more in a few days. Why 50% chance? This number will be different for every person depending on his profit & loss history. Ummm..... This doesn't seem true to me. What if the stock just stays flat? That's more often than…

Very helpful post. I'd like to add that "Fooled by Randomness" [1] by Taleb should be required reading for investors and speculators alike.

A couple other good quotes to remember by one of my favorite investors, Ray Dalio. "Just because something hasn't happened recently doesn't mean it's implausible." "Always ensure that the improbable outcome is still acceptable."

[1] http://www.amazon.com/Fooled-Randomness-Hidden-Markets-Incer...

Re: I Had to Develop an iPhone App to Understand Swing Trading

#16

Post by chollida1 »

dirtyaura wrote: post #12

A tangential question: It seems that a lot of smart people believe in technical analysis, but to me it sounds like telling the future from tea leaves. Does it really work or are successes just part of the standard randomness of stock investing?

This is a good question, and I don't think you'll get a definitive answer.

If by technical analysis do you mean watch for patterns to appear, then yes it works. There are patterns all over the place.

Renaissance Technologies is famous for its pattern matching AI. They hired 2 key employees out of IBM many years ago that layed the base for their technology and the rest has been money making history. See: http://www.businessinsider.com/bob-mercer-peter-brown-2010-3 and http://en.wikipedia.org/wiki/Renaissance_Technologies

The world of trading has been a cat and mouse game of pattern matching for awhile. One of the earliest attempt at hiding large orders was an algorithm called POV( Percent of Volume). It's an order that would slice up a big order into smaller chunks and sell it throughout the day. The first variations would just sell every 10 minutes. Its easy to see how someone could find this pattern (Hmm, it seems like 1,000 MSFT are being sold at market every 10 minutes by Goldman Sachs) and exploit it which lead to more intelligent order spreading, and the cycle continues.

However, if by technical analysis you mean looking for patterns like "head and shoulders" (http://www.investopedia.com/terms/h/head-shoulders.asp) then it might be true only in that if so many people/computers believe in it that it becomes a self fulling prophecy. For example, if every one believes that when a stock crosses above its 20 and 50 day moving average then its going to fall, then it will fall just because everyone will start selling because they believe it will fall, which causes it to fall which reinforces everyone's belief that the pattern works and you have a positive feed back cycle.

Does that mean technical analysis works? IMHO this type of investing doesn't work, but who am I to say...

Re: I Had to Develop an iPhone App to Understand Swing Trading

#17

Post by TDL »

chollida1 wrote: post #16
dirtyaura wrote: post #12

A tangential question: It seems that a lot of smart people believe in technical analysis, but to me it sounds like telling the future from tea leaves. Does it really work or are successes just part of the standard randomness of stock investing?

This is a good question, and I don't think you'll get a definitive answer. If by technical analysis do you mean watch for patterns to appear, then yes it works. There are patterns all over the place. Renaissance Technologies is famous for its pattern matching AI. They hired 2 key employees out of IBM many years ago that layed the base for their technology and the rest has been money making history. See: http://www.bu…

I've come to the conclusion that those who successfully employ technical analysis (i.e. chart reading, etc.) are practicing a form of risk management (knowingly or unknowingly), but do so consistently. In short, they are quickly out when they are wrong (taking small losses) and allow their 'winners to run'.

Re: I Had to Develop an iPhone App to Understand Swing Trading

#18

Post by batguano »

Hermel wrote: post #14
jeffreyrogers wrote: post #7

Earlier quoted context omitted.

> People literally spend all their time doing this, if there was free money to be made someone would be making it:) I agree with everything you said above, including this. I want to add though, that there is effectively free money in the stock market. For example, just by buying a low-fee index fund (e.g. something from Vanguard), you're almost guaranteed to do better than most investors and probably better than near…

Note that you are somehow arguing in favor and against the efficient market hypothesis at the same time. By arguing for ETFs, you are implicitely assuming that there is not much to gain by doing your own research because markets are efficient and have already priced in everything. By arguing that most people underperform the market, you are implicitely assuming that it is easy to underperform the market - something t…

> By arguing that most people underperform the market, you are implicitely assuming > that it is easy to underperform the market - something that should in fact be hard > if markets were efficient and everything priced fairly.

I think the argument is that many people (including fund managers) trade too actively, which generates costs that cause them to underperform an efficient market.

Re: I Had to Develop an iPhone App to Understand Swing Trading

#19

Post by TDL »

Nice job. This looks like a much better and more complete position sizing tool then the one I built (more of a learning exercise for me.) I wonder if the William Eckhardt position sizing algorithm was used.

http://powerful-reaches-1118.herokuapp.com/ [very much a work in progress.]

Re: I Had to Develop an iPhone App to Understand Swing Trading

#20

Post by falsestprophet »

lnanek2 wrote: post #11
falsestprophet wrote: post #10

Earlier quoted context omitted.

There are thousands of buy side firms all over the world stocked with stone cold geniuses who do this all day every day after having trained in maths and science all their lives. The fact that you saw some people you perceived to be clowns once , does not demonstrate the market is anyone's for the taking.

Those people are usually managing a lot of money, though. Warren Buffet has said he has to trade completely differently nowadays due to size. So those people are not working the same opportunities most people here are going for.

Sure, even small hedge funds and propriety trading firms are generally working with millions of dollars.

I agree there must be some niches are that are amenable to exploitation by small independent traders (perhaps anything to do with nanocap stocks).

I have not had success finding niches where I thought I would be successful, but I could very well be insufficiently clever.

But trading highly liquid equities on a multi-day timescale (the strategy proposed here) is certainly not prohibitively hostile territory for large, sophisticated buy side operations.

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