|
PureBytes Links
Trading Reference Links
|
Hi Steve,
As I'm sure you know, it's more like Harley makes 95 cents, Steve loses
$1.05 ;-) Everyone's gotta tip the waiter. Be that as it may, I am curious
as
to why you think profiting in futures is more difficult than equities.
Trading equities is certainly more risky if you consider the statistical
distribution of prices changes between the 2 markets. Equity distributions
tend to have much wider tails and flatter tops than those of commodities.
This could imply commodity price changes are less random and more
"predictable" than equity price changes.
That said, I feel many of the indicators and systems developed for the
commodity markets don't crossover to equities well at all. Though I have no
way to prove my this, I suspect the reason why is that stocks represent
growing, changing, economic organizations of people, that can produce income
for its owners irrespective of its market value. And while supply and demand
certainly plays a part in equity prices, I feel it is secondary to the role
played by
the perceived fundamental prospects of the underlying business.
I know that the pure technician would say that stock fundamentals are just
as much voodoo as the pure fundamentalist would say about technicals. Like
most things in this world though, I feel the truth lies somewhere between
the two extremes. For example, the copper you buy today is the same copper
your granddad bought, with its price largely still determined by supply and
demand, and unable to produce income for its owners by any means other than
an increase in its market value. GM, Pepsi, or IBM on the other hand are
hardly the same companies that they were 40 years ago. And even in these
stock's
darkest hour, the underlying companies still can generate a profit/cash flow
ripple effect that gets passed on to owners, employees, and suppliers. And
if the stock price stays depressed long enough in contrast to the positive
business fundamentals, management or someone else steps in with a buyout.
Witness AMP for example. Also, cornering the market in silver is only good
if you later sell it to someone else at a higher price. Cornering the market
on MSFT means buying the company and getting all the future cash flows it
may generate. One may not need to ever sell to show a profit.
Perhaps this is what you mean by easier profits in equities?
cheers,
Rick
-----Original Message-----
From: Steve Karnish <kernish@xxxxxxxxxxxx>
To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
Date: Monday, August 24, 1998 10:58 AM
Subject: Re: futures zero sum or not? Re: System development
>This really hasn't a single thing to do with "zero sum". "Zero
>sum" is the term applied to the accounting of the futures
>market. Harley makes a dollar, Steve (or someone) loses a
>dollar. This is a huge difference when compared to stocks and is
>the reason that futures are a tougher game to extract profits
>from.
|