TA Debunked

[SIUYA 11]

move along ...nothing to see here.....

 

1....retail traders v large managers.....pointless comparing returns as there are liquidity issues, clients to consider, varying leverage allowances, regulatory hurdles, capital constraints, 1 person v many under a portfolio etc etc etc.

 

2....large managers returns will likely deteriorate for a number of reasons, a....they were never aiming for massive returns as no one would beleive them, b....liquidity issues, c....broking costs (they are sometimes smart enough to realise its best not to over trade), d....reversion to the mean, e....clients get too nervous and hence they have clients and a business to contend with.

 

3.....when someone, anyone discusses returns weather or not monthly or daily or yearly please add all the other vital information that needs to go with it....ie; drawdowns, leverage used, trades and volumes.....then you can judge if its scalable and or sustainable.

 

4....larger funds as mentioned approach things as a portfolio, spread risks, often have a large number of bums on seats depending on how many funds or markets they are covering, and are often benchmarked.

 

5....individual traders and larger insto are subject to the same market conditions, and unless you are big enough to influence things (can happen eg; a large fund manager saying to a stock - you should issue X debentures at this rate and we will take them all) the real advantage you might have over smaller guys is access to more research or ideas. (spoofing will not stop the market - it may influence it yes, but c'mon - plus its largely considered illegal (??) )

As a small guy you have nimbleness and the ability to do nothing on your side....that's about it.....these in themselves are of a great advantage..... for some strategies

 

IMHO the bottom line is - if I get 10% on a large pot of money, i would take that any day over 200% on a small pot that i cannot scale.

 

Karoshiman - "Fair enough. But you can still make money as an individual if you understand such behavior of funds" - better understanding the behaviour of the market as its made up of many participants, ideas, opinions, strategies and such.

 

Now back to the point of is TA debunked.....???

[MightyMouse 12]

move along ...nothing to see here.....

 

 

3.....when someone, anyone discusses returns weather or not monthly or daily or yearly please add all the other vital information that needs to go with it....ie; drawdowns, leverage used, trades and volumes.....then you can judge if its scalable and or sustainable.

 

 

 

Draw-down? There is no draw-down when you can consistently do better than 3% a month or otherwise use the market as an ATM. Leverage? Since it is consistent, there is virtually no amount of leverage that is too much. Volume? Soon enough, you are the market.

[joshdance 10]

the real advantage you might have over smaller guys is access to more research or ideas. (spoofing will not stop the market - it may influence it yes, but c'mon - plus its largely considered illegal (??) )

 

Purely conjecture, but I doubt that research and ideas are what make big money for big banks.

 

Spoofing is not illegal in the least. Washing is, but search for the recent claim against RBC and you'll see that washing is still a practice that goes on (allegedly anyway).

[Logic 10]

Fair enough. But you can still make money as an individual if you understand such behavior of funds.

 

All I'm saying is that an individual trader can make money by gathering a few ticks here and there, whereas most funds need big(ger) moves to make money. This is an advantage we have over them. It's only one aspect, of course, but this is IMO always missing in performance comparisons of individual traders vs. funds.

 

The examples of some of the Market Wizards showed that their performance got worse the more money they managed. Now, you can attribute that to other aspects as well (or just good and bad luck). However, they themselves attributed it to the increased size they had to manage.

 

You are correct.

 

If trading decisions are made based on visually or algorithmically tracking completed transactions and not the bid/ask, this levels the playing field and it becomes irrelevant the size of the participants or the size of the trades in the specific market you are trading.

 

You are also correct in stating that there is a point or apex in regards to the amount of money one trades or a fund trades. There is a saturation point that each individual or entity needs to know like the back of their hand.

[bobcollett 10]

The back of my hands were horribly burned in a bizarre fire eating incident when a clown was forced to stand in for the famous fire eater Nicolas Flamel .As a result,i became pretty adept at palm reading,and as you can imagine,it has become an invaluable tool in the TA arsenal

And now back to our live debate " TA de Benchmarked .

 

Dear mitsubishi

Whats the problem?

You are posting rubbish!!

Dont prove Lorenz correct by looking for glory.

regards

bobc

[karoshiman 10]

 

...

 

The idea that anything we do is a disadvantage to "them" is....questionable.

 

 

 

Absolutely! However, I don't know who claimed that...

[gosu 10]

As much as your criticism of Blue horseshoe may have validity....Unfortunately gosu - you should realise not everyone in the world is a US citizen...I hope that does not reflect on your trading abilities

 

Not everyone in the world is a U.S. citizen?? That's quite an insight. Uh, what's your point though?

[BlueHorseshoe 10]

You should stick to trading and hope your knowledge of the market you trade is not as poor as your knowledge of tax law.

 

If you're interested in researching, I can suggest looking up

 

(1) Subpart F income, CFCs, PFICs, FPHCs, etc.;

 

(2) Taxation of worldwide income on U.S. citizens and residents; and

 

(3) The Immigration and Nationality Act provisions on renouncing U.S. citizenship for the purpose of avoiding U.S. taxation.

 

However, I suggest you save yourself a lot of time, headache, and possible criminal prosecution and just leave it to experts.

 

And I can suggest you glance at my profile - I'm not a US citizen

 

Avoiding tax (in any jurisdiction) is very simple: if you don't earn it you can't be taxed on it. If the earnings belong to a company in a zero-tax jurisdiction then they don't belong to you - that means that you can no more be taxed on them than you can be taxed on the earnings of Apple. The reason that most people don't do this is because they're not willing to operate a business but forego the earnings . . .

 

BlueHorseshoe

Edited May 29, 2012 by BlueHorseshoe

[BlueHorseshoe 10]

People who make up spreadsheets compounding some modest return like 3% per month into the future over 10, 15, 20 years, etc. are merely revealing their lack of personal experience.

 

Gosu apparently thinks that spending any time on considerations of money management is time wasted . . . Thanks for helping me to avoid wasting my time Gosu - from now on compounding is out the window - it's all about obsessing over entries and 'skills' for me!

 

BlueHorseshoe

[gosu 10]

* * *

 

Just one question re. MF Global and leverage. You mean you want to increase your leverage to generate more return in order to pull out money out of your trading account faster, so that a similar occurrence as with MF Global will not wipe out everything you have?

 

In this era of hyperhypothecation, the days of parking money in a trading account are over. More leverage means less money needs to be in the account. It is a safety issue. The broker is far more likely to blow up, especially if it's publicly traded. Why would anyone hold an account with Penson right now?

[BlueHorseshoe 10]

Blue,

 

The rodent probably thinks St. Croix is a foreign country too.

 

Thanks for your reply Logic - I don't know about MightyMouse but my geography is shocking!

 

Now when will you be able to provide the name of the hedge fund that you are partnered with so that I can reap the benefits of greater than 3% monthly returns?

 

Cheers,

 

BlueHorseshoe

[gosu 10]

An I can suggest you glance at my profile - I'm not a US citizen

 

Avoiding tax (in any jurisdiction) is very simple: if you don't earn it you can't be taxed on it. If the earnings belong to a company in a zero-tax jurisdiction then they don't belong to you - that means that you can no more be taxed on them than you can be taxed on the earnings of Apple. The reason that most people don't do this is because they're not willing to operate a business but forego the earnings . . .

 

BlueHorseshoe

 

I don't check profiles so I did make the assumption you and Mouse were both in the U.S. and referring to U.S. tax law. I see now that you are in the U.K. Fair enough.

 

I have a lot of experience in international tax law from the U.S. side but I am not an expert on U.K. tax law. However, I do know that tax regimes in developed countries use similar rules to address tax avoidance using controlled entities, and what you suggest is hardly novel. If it were so easy as you suggest to defer and/or escape taxation by simply running an account through a corporation in a low-tax jurisdiction whose ownership can be attributed to you, there would be little need for tax lawyers in the world.

 

I would be surprised to find that what you suggest actually works in the U.K. when it would clearly fail under U.S. tax laws. With a little research I can find the answer to that question but I never worked for free when I was in practice. I would advise seeking competent counsel before you follow your own suggestion.

 

Cheers.

[4EverMaAT 10]

You are correct.

 

If trading decisions are made based on visually or algorithmically tracking completed transactions and not the bid/ask, this levels the playing field and it becomes irrelevant the size of the participants or the size of the trades in the specific market you are trading.

 

You are also correct in stating that there is a point or apex in regards to the amount of money one trades or a fund trades. There is a saturation point that each individual or entity needs to know like the back of their hand.

 

The volume and the agreed price on each volume unit would be what you consider to be the "completed transactions"? Easy to do with exchange-traded products. OTC like forex is a little more tricky, but can be done.

[BlueHorseshoe 10]

I don't check profiles so I did make the assumption you and Mouse were both in the U.S. and referring to U.S. tax law. I see now that you are in the U.K. Fair enough.

 

I have a lot of experience in international tax law from the U.S. side but I am not an expert on U.K. tax law. However, I do know that tax regimes in developed countries use similar rules to address tax avoidance using controlled entities, and what you suggest is hardly novel. If it were so easy as you suggest to defer and/or escape taxation by simply running an account through a corporation in a low-tax jurisdiction whose ownership can be attributed to you, there would be little need for tax lawyers in the world.

 

I would be surprised to find that what you suggest actually works in the U.K. when it would clearly fail under U.S. tax laws. With a little research I can find the answer to that question but I never worked for free when I was in practice. I would advise seeking competent counsel before you follow your own suggestion.

 

Cheers.

 

It's hardly novel, you're right . . .

 

Are all those millions of businesses that incorporate in tax havens just labouring under a misapprehension then?

 

I would, of course, seek professional advice before setting up any kind of vehicle for tax avoidance. At the level that I currently operate financial spreadbetting allows perfectly legal tax avoidance here in the UK.

 

BlueHorseshoe

[gosu 10]

It's hardly novel, you're right . . .

 

Are all those millions of businesses that incorporate in tax havens just labouring under a misapprehension then?

 

* * *

 

What millions of businesses? Most businesses in the world do not have dedicated tax departments that serve as revenue centers, nor do they hire major accounting/law/consulting firms to game the system because there just isn't much juice there to extract. Or maybe I should say that there isn't enough juice there to attract the interest of these firms in the first place.

 

As a layperson, you really have no idea. There are legitimate reasons for moving boxes around, including tax avoidance. But what you are suggesting is the most obvious and quintessential scheme that any tax system would immediately rule out. You cannot compare your simple scheme to what multinationals do in organizing their actual business operations, financing, holding of intangible property, etc.

[MightyMouse 12]

Thanks for your reply Logic - I don't know about MightyMouse but my geography is shocking!

 

Now when will you be able to provide the name of the hedge fund that you are partnered with so that I can reap the benefits of greater than 3% monthly returns?

 

Cheers,

 

BlueHorseshoe

 

That is just awesome.

[Logic 10]

The volume and the agreed price on each volume unit would be what you consider to be the "completed transactions"? Easy to do with exchange-traded products. OTC like forex is a little more tricky, but can be done.

 

Correct, the price of each individual unit (share or contract) bought or sold.

 

I'd be really impressed if you told me you had been able to dig that information out of FOREX. I've heard it was embedded and hidden in the feeds but haven't ever been able to confirm that.

[4EverMaAT 10]

Correct, the price of each individual unit (share or contract) bought or sold.

 

I'd be really impressed if you told me you had been able to dig that information out of FOREX. I've heard it was embedded and hidden in the feeds but haven't ever been able to confirm that.

 

3 workarounds to doing it:

 

1) (less precise): use futures contract equivilant fx contracts and calculate proportional volume into its spot FX equivilant. Also CME and other institutions may actually be starting to do some OTC transactions on an institutional level.

 

2) (broker-specific): measure the price difference per incoming tick. If they offer some sort of level II volume statistics, use it. I think FXOpen ECN, InstaForex (surprisingly), maybe MBTrading, Interactive Brokers, and maybe the newer tradestation feed does offer some sort of level II insight.

 

3) (broker-specific): see if you can get a feed with as many liquidity providers/brokers as possible / api access and get the actual level 2 volume as they keep track of it. Then you would compare the net price movement and net volume for each tick. Obviously this is the most accurate of the 3 and the most expensive/difficult.

 

The inherent problem with forex is that each individual broker "makes" the market available to its clients. much of the retail volume is aggregated and re-aggregated, plus there is a lot more that will never be shown in the higher-tier interbank markets, unless some of those providers start revealing real-time volume information.

 

Exchange traded products every tick is accounted for; so no problems getting accurate tick data. Forex brokers tend too "filter/smooth" their datafeeds. You'd be surprised how many actual ticks would come through if they didn't smooth the feed. But then there may be additional platform stability issues, etc. And for historical analysis, tick data is lacking from many brokers; forextester is one of few companies offering tick data collection.

 

If metatrader 5 had been what metatrader 4 was now, this data might have been more accessible already with more traders.

 

My APAMI indicator, which measures net distance between the current price and a previous price point, (qualified by retracements) did reveal some interesting aspects about how price really works. More on that hopefully by the end of this week :haha:

[SIUYA 11]

Not everyone in the world is a U.S. citizen?? That's quite an insight. Uh, what's your point though?

 

My point was that you took the normal US world view that the rest of the world does not exist.

(believe it or not its one of those funny but too often true stereotypes that occur for many US citizens, and I was more or less teasing you ...I am sure me as an Australian hit other peoples buttons as well)

 

Check out this - BBC News - Major UK companies cut secret tax deals in Luxembourg

 

The UK is one of the worlds great tax havens and the place where all the rehypothecation occurs. It is the main reason why its one of the worlds financial capitals.

As a non Domiciled resident in the UK I can tell you I can effectively pay no tax if I choose to , it is largely only US citizens that are stuck with your issues.

Blue is treading the line of doing things too simply, and ultimately the tax man looks at issues such as control, ownership and where decisions are made. Plus Blue just trade CFDs

(I have been involved in some companies where a day trip to Dublin, or Luxembourg easily get around that - as ridiculous as it is this is what happens here and it is all legal)

The UK government is slowing clamping down on this with recent law changes such as a 15% stamp duty on houses bought in trusts, changing the non dom rules etc. Such a shame , the only reason to stay in London soon will be its not part of Europe, but still close enough to pretend.

[gosu 10]

Hi karoshiman, I parsed your post from earlier.

 

Great post gosu! It was worth at least 3 cents

 

Glad you enjoyed it. You can keep the change.

 

I am of the same opinion that the performance statistics of any fund are irrelevant for us individual traders. People often forget the huge advantage we have over them. That is, we don't have to move gazillions of money around. Hence, we can participate in many more market movements than they can. It's like comparing a speed boat with a large cruiser. We are much more flexible than they are.

 

I like your image of the speed boat and the large cruiser. I would just add that I don't consider what I do to be in direct competition with the larger participants. It is true that at the point of execution all participants access the same bid and ask, and since I am mostly a liquidity taker there is less liquidity available for others. However, the size that I run is relatively so small that it is like a flea bite on an elephant. Someone stated that individual traders are pikers in the market. Another term I've seen used is "parasitic." I think both are apt.

 

If you read the congressional testimony and reports on the May 2010 flash crash, you may get a glimpse of where you fit into the picture. The largest of participants do not have as their goal anything resembling what I do.

 

Just one question re. MF Global and leverage. You mean you want to increase your leverage to generate more return in order to pull out money out of your trading account faster, so that a similar occurrence as with MF Global will not wipe out everything you have?

 

I responded to this previously.

[karoshiman 10]

 

My point was that you took the normal US world view that the rest of the world does not exist.

(believe it or not its one of those funny but too often true stereotypes that occur for many US citizens, and I was more or less teasing you ...I am sure me as an Australian hit other peoples buttons as well)

 

 

...

 

 

I was thinking the same, when I saw gosu's comment

 

And you are an Aussie? Maybe that's why you seem to be a relaxed fella...?

 

What other buttons do you hit?

[gosu 10]

My point was that you took the normal US world view that the rest of the world does not exist.

 

* * *

 

You assume too much.

[MightyMouse 12]

My point was that you took the normal US world view that the rest of the world does not exist.

(believe it or not its one of those funny but too often true stereotypes that occur for many US citizens, and I was more or less teasing you ...I am sure me as an Australian hit other peoples buttons as well)

 

Check out this - BBC News - Major UK companies cut secret tax deals in Luxembourg

 

The UK is one of the worlds great tax havens and the place where all the rehypothecation occurs. It is the main reason why its one of the worlds financial capitals.

As a non Domiciled resident in the UK I can tell you I can effectively pay no tax if I choose to , it is largely only US citizens that are stuck with your issues.

Blue is treading the line of doing things too simply, and ultimately the tax man looks at issues such as control, ownership and where decisions are made. Plus Blue just trade CFDs

(I have been involved in some companies where a day trip to Dublin, or Luxembourg easily get around that - as ridiculous as it is this is what happens here and it is all legal)

The UK government is slowing clamping down on this with recent law changes such as a 15% stamp duty on houses bought in trusts, changing the non dom rules etc. Such a shame , the only reason to stay in London soon will be its not part of Europe, but still close enough to pretend.

 

In the USA we have IRAs and Roth IRAs that you can trade futures, forex, stock, etc and you do not pay tax on the gains. In the case of an IRA, the money you put in is pretax and you do not pay tax on anything until you take it out at which time all of it is taxable whether it is a gain or not. In fact, you pay a penalty tax under most circumstances if you try to take it out too early. A Roth IRA is funded with aftertax money and grows tax free and when you are over 591/2 Y.O. you can withdraw money from it tax-free no matter how large a gain. Yours truly doesn't use either of these to trade, but each is a legitimate account that any US citizen or resident alien can employ.

 

The US centric thought process is just a phase. Give it another 200 years, it will fade away.

[karoshiman 10]

 

...

 

 

I would just add that I don't consider what I do to be in direct competition with the larger participants. It is true that at the point of execution all participants access the same bid and ask, and since I am mostly a liquidity taker there is less liquidity available for others. However, the size that I run is relatively so small that it is like a flea bite on an elephant. Someone stated that individual traders are pikers in the market. Another term I've seen used is "parasitic." I think both are apt.

 

 

 

I don't try to compete with the larger participants either. In fact, I try to identify where they move the market and try to get on board... just like a flea on an elephant ... but I do try also to get on the temporary counter moves which happen intraday. These can also be good for a few to several points.

 

Thanks for the hint to the congressional testimony and reports on the May 2010 flash crash. Will check it out.

[gosu 10]

* * *

 

Thanks for the hint to the congressional testimony and reports on the May 2010 flash crash. Will check it out.

 

You can start with these. There is a larger pdf that won't upload. But you can find it on the SEC site:

 

http://www.sec.gov/news/studies/2010/marketevents-report.pdf

gensler_statement_5.11.10.pdf

Duffy052010Testimony.pdf