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You may have heard the old saying, "Buy the rumor, sell the news".
Fundamental factors tend to be "discounted" in the market. You may
have seen stocks move down even after a favorable earnings report is
announced. This happens because there were too many buyers ahead of
the news, and no one was left to buy after the news was released...
If a Company's earnings are moving up, the stock price will already
reflect the public's anticipation that this will continue. If the
market is ever dissapointed by an earnings report below market
expectations - it can react with a deadly vengeance. Even if you
were plugged into the news all day long, you still will never know
which way the stock is going to move on a given earnings report
unless you could also factor in this "discount"...
rgds, Pal
--- In amibroker@xxxxxxxxxxxxxxx, "DIMITRIS TSOKAKIS" <TSOKAKIS@xxxx>
wrote:
> "If everyone thinks an underlying
> instrument is going up, that is because they all own it."
> An interesting point to step in :
> There is another procedure in the [N100] market. The leaders are
> going up and the leaders owners expect better prices and wait.
> Another, important, second wave is searching among the followers,
to
> buy something not so expensive for this bullish day.[Many people
will
> not buy CSCO if the Opening gap up is +10%, they will prefer MSFT
at
> +1.5% or SYMC at +0.5%]
> There are two important consequences :
> a. Many people buy SYMC, although they would never buy SYMC if the
> day was bearish.
> b. The last h of the session is a real party, when we see 98%
> AdvIssues.
> The statistical result of this behavior is the directionality of
the
> N100 market.
> These simplified thoughts would be a scenario lost in the ocean of
> the daily scenarios, if we did not have a proof. And there is no
> better proof than the composite indicators.
> When we see a "~MeanStochD" at 90% and, since this composite is
> created from the 100 stocks StochDs and, since a StochD needs 14
bars
> of previous behavior we are more than happy : The massive buy was
not
> only for one day, it was repeated again abd again until they bought
> even the last preference.
> The speed of this procedure is also important and gives excellent
> characteristics to the composite tickers.
> It is not easy to explain this behavior, it is easier to code it
and
> use the results, if any.
> The "~MeanRSI">45 was a definite sell signal the last years and it
is
> not a coincidence.
> Dimitris Tsokakis
> --- In amibroker@xxxxxxxxxxxxxxx, "palsanand" <palsanand@xxxx>
wrote:
> > Hi,
> >
> > Practice without theory is impossible, theory without practice is
> > useless... I believe in the "Contrarian theory" and all the
> systems
> > I ever developed are built around it. The only reason prices
move
> is
> > because of an imbalance between buyers and sellers, between
supply
> > and demand. Price tends to equalize supply and demand. That's
> > why "contrary opinion" works. If everyone thinks an underlying
> > instrument is going up, that is because they all own it. Since
> there
> > are a very few buyers at the current price, it takes very few
> sellers
> > to drive it down....
> >
> > rgds, Pal
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "bvandyke" <bvandyke@xxxx>
wrote:
> > > Hi Pal,
> > >
> > > Can you help me understand please what you mean by selecting
> > systems
> > > on "sound theory", as opposed to selecting systems based on
past
> > > objective data regarding their profitability? Thanks.
> > >
> > > Bill
> > >
> > > --- In amibroker@xxxxxxxxxxxxxxx, "palsanand" <palsanand@xxxx>
> > wrote:
> > > > Hi,
> > > >
> > > > In my view, it is misleading to exclude individual systems
> using
> > > past
> > > > measures of profitability like APR, Annual trades, Percent
> Wins,
> > > > etc., because these statistics may disprove that a system
has
> > > been
> > > > unprofitable in the past, but cannot prove that it may be
> > > profitable
> > > > in the future. I would select systems based on a sound
theory,
> > > not
> > > > arbitrary systems which has no solid theoretical
foundations...
> > > >
> > > > rgds, Pal
> > > >
> > > > --- In amibroker@xxxxxxxxxxxxxxx, "MarkF2" <feierstein@xxxx>
> > wrote:
> > > > > This is in response to DT's and others' requests to provide
> more
> > > > > details on my 9 robustness criteria.
> > > > >
> > > > > First some administrative anouncements, lol. I've decided
to
> > > > provide
> > > > > them one-by-one, first due to my time constraints, second
> > > because I
> > > > > feel that's the best way to discuss them and third because
I
> > > want
> > > > to
> > > > > see how this goes. I welcome all constructive debate,
> > > especially
> > > > > opposing views supported by quantitative analysis. But if
> this
> > > > > degenerates into a flame war, I've got better things to do
> with
> > > my
> > > > > time. Treat me with respect and I'll treat you with
> respect.
> > > > There
> > > > > seems to be a lot of interest in this topic, so let's
please
> > > have a
> > > > > collegial and productive discussion. This is post 1 of 9
(not
> > > > > counting the dialog inbetween, let's see how far we can
get :-
> ).
> > > > >
> > > > > Why care about robustness? For whatever reasons, markets
> > > change.
> > > > We
> > > > > could spin our wheels forever discussing time series
theory,
> > > serial
> > > > > dependencies, random walk, nonstationarity, etc., like
> > > academicians
> > > > > do and get nowhere (as they do), or we can try to cut
through
> > > the
> > > > crap
> > > > > and deal with it (the simple fact that markets constantly
> > > change).
> > > > > My weapon of choice is robustness. You could say I have a
> > > > robustness
> > > > > obsession and my criteria are overkill. But that's my
choice
> > > and
> > > > > you're free to make your own on how far you want to take
> this,
> > > if
> > > > at
> > > > > all.
> > > > >
> > > > > OK, I lied. There will be some, very light discussion of
> > > > statistics
> > > > > because some criteria are steeped in statistical theory.
But
> > > most
> > > > > can be reduced to simple, mechanical procedures that can be
> > > graphed
> > > > in
> > > > > a spreadsheet and visually and intuitively interpreted.
> Others
> > > > > require simulation software and one requires proprietary
> > > software
> > > > but
> > > > > we'll cross that bridge when we come to it.
> > > > >
> > > > > Speaking of proprietary, there are some things I simply
won't
> > > > > disclose, such as specific parameters for certain
criteria.
> So
> > > > please
> > > > > respect my wishes and don't ask. I have my reasons. So
> > > evaluate
> > > > this
> > > > > on your own and decide for yourself what place, if any, the
> > > criteria
> > > > > have in your trading. They work great for me but I make no
> > > claim
> > > > that
> > > > > they're the Holy Grail of robustness and am sure that some
of
> > > you
> > > > will
> > > > > come up with better ideas if there's enough interest and
> > > > discussion.
> > > > >
> > > > > With that long winded intro, here's Criterion #1:
> > > > >
> > > > > Test *unoptimized* system on small, mid & large cap stocks
in
> > > bull,
> > > > > bear & sideways market conditions, same parameters for
all.
> I
> > > use
> > > > > the stocks of the S&P 600, 400, and 500 indices and 2 year
> > bull,
> > > > bear
> > > > > and sideways periods (for a total of 6 years per stock).
> > > Rationale
> > > > > behind this: to find systems that profitably *tested out in
> the
> > > > past*
> > > > > on a large number of (somewhat tradeable) stocks of varying
> > > market
> > > > > caps in multiple sectors under different market conditions,
> > > under
> > > > the
> > > > > assumption that this indicates the system is robust enough
to
> > > > > profitably *trade select issues in the future*. More on
> robust
> > > > issue
> > > > > selection in later criteria. Looking for net profitability
on
> > > all
> > > > mkt
> > > > > cap and mkt condition subtests, and profitable on the
> majority
> > (>
> > > > > 50%) of issues in each subtest, the more the better.
> Sometimes
> > > I
> > > > cut
> > > > > a system some slack if it's close on one or two subtests,
> it's
> > a
> > > > > judgement call. My commission setting(s) in AB:
proprietary,
> > > based
> > > > > on my *slippage* research using data from actual trades.
But
> > you
> > > > > could choose an arbitrary say, 1% to get started. Date
> > settings
> > > for
> > > > > my 2 year intervals: proprietary but you can easily find
your
> > > own
> > > > by
> > > > > eyeballing a chart of a major index. Just use the same
ones
> > each
> > > > > time so you compare apples to apples. My lite version of
> this
> > > is 2
> > > > > year bull and bear periods on the ND100 and SP100 stocks,
> which
> > I
> > > > > sometimes run as a quick pre-screen. Next time someone
posts
> a
> > > > system,
> > > > > run it through the lite or full version. Or test the
systems
> > in
> > > the
> > > > > AFL library. The more systems you run through, the more
> > > intuitive
> > > > of
> > > > > a feel for robustness you'll get. Note that I'm *not*
saying
> > > you
> > > > > shouldn't or can't successfully trade something that
doesn't
> > meet
> > > > > this standard, lol. That's obviously not true! I was
asked
> to
> > > > > explain my robustness criteria and that's what I'm doing.
> > > Period.
> > > > > This criterion is a post-Amibroker creation, BTW. Pre-
> > Amibroker
> > > I
> > > > had
> > > > > a small test portfolio of diverse issues I used instead and
> it
> > > did a
> > > > > decent job. I run this now because I now (easily) can,
*many*
> > > thanks
> > > > > to Tomasz. If you're thinking, geez, why bother with this,
> ask
> > > > > yourself a simple question. *All else being equal*, would
you
> > > feel
> > > > > more confident trading (with your money) a system that
passes
> > > this
> > > > > test or one that fails it?
> > > > >
> > > > > Regards,
> > > > >
> > > > > Mark
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