Market Inefficiencies Thread
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Thread: Market Inefficiencies Thread

  1. #1

    I feel compelled to start this thread.

    Basically, I started a thread earlier today about how all we do is come up with exactly the identical entrance criterias.... Fibs, MA crosses, hedges, BB squeezes, etc.. Should I continue?

    So I want to step back and ask, what trades do you choose rooted in INEFFICIENCIES.

    This thread is for talk about that.

  2. #2
    The initial inefficiency (and only one that I am aware of) is trading nondealing desk broker spikes. It works in this way. Take 10 brokers and examine their own feeds. When one travels far away from all the others, take a trade.

    It's very likely that the price will return back to others.

  3. #3
    Another type of inefficiency is ceased hunting. Basically, you find out where the stops on currencies are predicated on a news service. When there is a lot of news about a particular stop level, you can observe for all those stops to be broken by the banks as they search for liquidity. If stop levels are broken, frequently price will significantly grow or fall past those levels (hence, support and resistance as chartists say.)

    These are the basics.... I don't have details, but rumor has it there are a number of folks trading this manner.

  4. #4
    3rd inefficiency: information asymmetry

    4th inefficiency: space-time analysis applied to the market.

  5. #5
    Potential inefficiency: The rollover egy Brijon talks about. Too early to tell, however, there might be some meat on that bone.

  6. #6
    Good one! Here's an inefficency I am aware of. Trading the news spikes. There will often be a retracement on the market following a news spike in the event the spiek was pushed by traders\' opinion. I gave a post that I have attached .
    These are a few of my ideas on investing in the news.

    The movement in the currency market around news is because of the way people perceive exactly what the news is not what the news really is. From studying many seasoned traders and my own monitoring the fundamental movement from the news statement is impactful but only temporary. The news will make a shift based on a sentiment return back to the most trend of the market.

    To see as an example of this look at an area ion a chart where the market is trending in a 4 hour chart and mark the areas where a news statement happened. Now look to see if it came to the general tendency of this market.

    If the trend is up along with the news drives the price down detect it usually comes back up to the management of this trend. When the news is up in an market the price will go up times that are quicker at these points.

    So in the event that you exchange the news one thought is to wait until the market makes a move between 5 to 30 minutes and you get some good signs to enter into the direction of the general trend. Take it for what it is worth as a common inefficiency we cope with.

  7. #7
    There are a lot that I've mapped.

    The biggest I've seen revolves round trader plogy: fear and greed. Resistance and support are all great examples of this, at support folks are too greedy and at resistance folks are excessively fearful. Overpriced and underpriced numbers abound on the outside floor. When folks get tired of the equilibrium they start pushing it... the result is a huge emotional spike that drives price, then a sudden reversal of the (Oh , did we overprice?!?) Then causes the previous area to be analyzed.

    It follows that any manor of traded R/S, such as pivots and even some MAs, can provide a tradeworthy edge.

    Yea, stop searches are a fun advantage. You can trade along in case you want since many men and women place stops at round numbers. Round numbers are a fun inefficiency anyway.

    Another is how in which the dollar acts in the bear market. For some time there I was just after the DJI.

    Another is that the way opening markets manage new pricing. News even comes out overnight and the markets respond because they start, but without all of the spread worries.

    Another is that the natural swings in volatility which exist during lunch and just how a lot of traders would rather go apartment before they move when they are unsure of this trend. Not only can it be great info, but it is an edge all alone.

    There are countless. Most are at the M15 level, they occur quickly and then they are gone. There are a few that happen at higher intra-day degrees, a small few that happen at the daily.

    Oh, and some brokers will destroy your account for feed searching.

  8. #8
    Everything you call an edge, I call gaming.

  9. #9
    Quote Originally Posted by ;
    Everything you call an advantage, I call gambling.
    Fair enough, but anything over 50% is a statistical advantage. Sit down at a black jack table and you're gambling, but start counting cards in a single deck game and you have an benefit. IMO gambling is where you have less than 50% advantage.

    I know of no system, advantage, or inefficiency that provides you a 100% certainty. Cease hunting can reverse, and feed hunting could reverse (and receive your account kicked), even long term cycle trading could be more prone to misjudgment.

    From our position as workplace traders we don't have the luxury of small near-certain edges, if we had been flooring traders we could do market arbitrage, create spreads or profit from slippage, but we are not... our advantage has to come elsewhere. Of course even people are not 100%.

    IMO intervals of low liquidity provide inefficiencies, periods of trading provide inefficiencies, periods of herd action perform also. They discount one potential over the other providing support to one outcome over another.

  10. #10
    Quote Originally Posted by ;
    Fair enough, but anything over 50% is a statistical advantage. You're gambling, but get started counting cards in one deck game and sit down in a black jack table and you've got a huge benefit. Where you've got less than 50 percent advantage IMO gaming is.
    In blackjack, card counting gives you approximately 2% advantage over the house (max). So it's not a huge advantage, but enough that it'll get you booted out of a casino if they believe you're doing it.

    One job I have running in the background would be measuring the statistics of how well indiors forecast the future. Most indiors are a coin flip, but I have a few on the time frames (4 hour daily ) that reveal a 5 percent to 8 percent advantage. Time frames under 4 hours are nearly always a coin flip, at least with everything I've tried up to now.

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