Normal Market Behaviour

[Novice1]

Hi All,

I have read a few posts from some of the traders and I am a little confused as to why people ask the same question over and over again about why is ABC or DEF is doing what it is doing.

I would like to add my 2 cents and point out some things about the markets that I have noticed over the years.

The Stock, forex, commodity etc markets do the same thing every day "They go up and down"

Sorry to burst theories but this is "NORMAL MARKET BEHAVIOUR".

The market behaves the same way as humans do, "irrationally".

Nowadays the HFT (High Frequency Trading) programs are actually picking up wording in news articles, wording from live shows like Bloomberg, CNBC etc. and acting on this.
What I would say is stop and just trade.

The market is always right so if you think BHP.AX is worth $50 then I will Sell it to you at $50 today in any size you want and you can HOLD it for as long as you like.
10 Nov 2011 Price of BHP = $37.48
(this is not an actual offer to buy or sell a financial product just making a point)


relevant discussions welcome.

 

[tech/a]

And just trade

Define just trade

 

[Starcraftmazter]

Mmmmm on a related note,

http://screen.yahoo.com/europe-in-crisis-mode-are-there-any-viable-solutions-27216608.html
4:08

 

[Tysonboss1]

The market is always right so if you think BHP.AX is worth $50 then I will Sell it to you at $50 today in any size you want and you can HOLD it for as long as you like.
10 Nov 2011 Price of BHP = $37.48
(this is not an actual offer to buy or sell a financial product just making a point)


relevant discussions welcome.

What about CSL, I think it is worth $23.00 can I buy 100,000 units off you?

I find your statement a bit funny, First you say the market acts like humans "Irrational" and then you say it is always right.

Can someone who always acts irrationally always be right at the same time?

 

[tech/a]

Can someone who always acts irrationally always be right at the same time?

So your single then?

 

[Tysonboss1]

So your single then?

Ha Ha HA,

 

[Novice1]

Thank you for your replies,

If you think of the market as one big machine that is in complete control of "YOUR" emotions.
How many times have you gone LONG and the market goes down?
What about when you go SHORT, it goes up?

Can someone who always acts irrationally always be right at the same time?
The Answer is Yes when they make the rules.
My point about irrational behaviour is valid as the market plays with human irrational behaviour.
But it is always correct as the market makes the current price not you.

My point re BHP was a relevant one for the BHP (BUY, HOLD, PREY) traders, who buy a stock at a high price and the stock goes down and they HOLD (TELSTRA)??
The one thing about humans is that they hate to be wrong so they do not know when enough is enough.
If CSL is currently trading at $30.84 and you think it is worth $23.00 then all you need to do is go short. Correct?

On the other side of the coin is the irrational behaviour of the traders who are in profit and allow the trade to go into negative.
I heard a saying a while ago “DON’T BE GREEDY” as the market will be there tomorrow and sometimes you need to feed its ego by giving some of your profits back but not all, just like you feed your own. Remembering that the market is always right.
I think the quicker you realise that the market is only doing what is does normally then maybe you can move forward.
I personally dont understand why someone who had $20 in their hand would just give it away and maybe hand over an extra $10.
How about this for a thought? If your $20 goes down to $15 take you bat and ball and go home. try again tommorrow?

I understand that my thoughts may be received with some “rolling of the eyes” and “laughter” but they did the same to Peter Schiff.

http://www.youtube.com/watch?v=Z0YTY5TWtmU

Relevant discussions welcome.

BTW: Married with children and I know who is boss”my wife” I would be delusional if I thought any other way.

 

[vkdirector]

So your single then?

POST OF THE YEAR RIGHT THERE ^^^^^^^^^^^^^^

 

[Timmy]

POST OF THE YEAR RIGHT THERE ^^^^^^^^^^^^^^

Got my vote

 

[So_Cynical]

I personally dont understand why someone who had $20 in their hand would just give it away and maybe hand over an extra $10.

Because perhaps next week that $20 or $10 could be $30.

The market does what it does..how you use that to your advantage is up to you and your personality.

 

[Novice1]

Because perhaps next week that $20 or $10 could be $30.

The market does what it does..how you use that to your advantage is up to you and your personality.

Thank You for your reply.

You have actually proven my point.
So you started with a profit of $20 the market goes against you and now you have a loss of $10.
"perhaps next week that $20 or $10 could be $30."
You are still in the trade and now the market moves further against you and your loss is now $40 (2 x your initial profit).
Next week the market moves against you again.
I can go on and on, BTW I am the market remember and I am irrational but right.

had enough yet? or are you still BHPing on me.

Oh BTW ever heard the term " markets can stay irrational longer than you can stay liquid"?

apologies if I am a little upfront.

The markets don’t pat me on the back when I make money and they definitely don’t hug me when I lose money.

 

[tech/a]

Essentially you are correct.
Particularly from an observers point of view who is " In the shoe box" if you see the market this way then you've not found the way to understand and trade it.

Before I go further is this the case or do you have your own method of " Just trade it"
Which you are going to pass on to us here?

If so i'm interested.
If not---- your point is?

 

[Tysonboss1]

Shorting csl would not be an option for me, companies with a market darling status can stay over valued for many years, ( look at the Tol chart ).

You are obviously trying to go down the path of a trader, so naturally you are going to think differently to an investor.

I buy businesses, both on the market and off the market.

If I can find a business I understand, that has good economics, is trading profitably and based on my assessment is likely to do so for the foreseeable future, and it has a price that makes sense compared to the return it will produce, I will buy it. And once I hold it I will care much more about it's operations than the daily market moves.

If you bought a farm for $200 acre that Would return $80 an acre in profit, and a week later some whether forecaster said the rainfall next year would be below average, would you rush out and sell the farm for $150 an acre.

 

[So_Cynical]

Because perhaps next week that $20 or $10 could be $30.

The market does what it does..how you use that to your advantage is up to you and your personality.

Thank You for your reply.

You have actually proven my point.
So you started with a profit of $20 the market goes against you and now you have a loss of $10.
"perhaps next week that $20 or $10 could be $30."
You are still in the trade and now the market moves further against you and your loss is now $40 (2 x your initial profit).
Next week the market moves against you again.
I can go on and on, BTW I am the market remember and I am irrational but right.

had enough yet? or are you still BHPing on me.

Oh BTW ever heard the term " markets can stay irrational longer than you can stay liquid"?

apologies if I am a little upfront.

The markets don’t pat me on the back when I make money and they definitely don’t hug me when I lose money.

Market goes up market goes down market goes up etc...you have demonstrated that you are unconformable holding (giving back profit) when the market goes against you...im not.

On a portfolio basis ive had consistent profitability across the last 2 and a bit years, some stocks have been unprofitable but on the flip side many more have not....normal market behaviour gives me many opportunity's across my portfolio to make money.

The "markets can stay irrational longer than you can stay liquid" and on the occasion when that has happened to me i simply hold till "the market" inevitably adjusts back....i don't think the market is always right, i think the market is always wrong, its bollocks to think XYZ is worth 1 billion at 11am, 980 million at 11.30am and then 1.05 billion in the afternoon...total bollocks.

The market reprices my stocks by the second...i chose to buy hold or sell by the day, week, month, year.