Posts Tagged ‘Round Numbers’

# Irrational Numbers: Price Clustering & Stop Losses

### Irrational Numbers: Price Clustering & Stop Losses

Courtesy of Tim at The Psy-Fi Blog

Universal Number Theory

One of the odder things about the universe is that the small set of numbers that define its structure, the so-called universal constants, don’t seem to have any structure of their own. You’d have thought that whatever immortal deity breathed life into the whole shebang would have at least have bothered to make sure that reality was defined in simple integer values your average gameshow contestant could remember. Yet someone’s just calculated Pi to more decimal places than you can read in a lifetime. The universe is strangely irrational, it would seem.

More likely, however, is that the irrationality lies in our heads. If you look at the way we treat numbers for investment purposes it’s probably a good job the infinite cosmos is specified in irrational numbers, because if it were otherwise we’d probably have sold it to the lowest bidder eons ago. Humans, it seems, treat numbers as an approximation to reality, unlike reality, which treats humans as an approximation to nothing.

That Friday 13th Feeling

Under standard economic theories one price should be much the same as another but all experienced practitioners know that this isn’t so – some numbers are much more likely to occur than others. Anyone with even a basic appreciation of behavioural psychology would expect no more or no less – people are as arbitrarily inconsistent about numbers as they are about everything else. In western culture, for instance, thirteen has acquired negative connotations to the point where many tower blocks omit the number from their floor numbering plans, presumably on the grounds that the universe can’t count. Beware, for fourteen is the new thirteen. Ha!

Despite the obvious irrationality of ascribing luck to a number many people are petrified of Fridays falling on the thirteenth of the month. Such is the human propensity to translate mental muddle into actual behavioural nonsense that it turns out that more accidents do occur on these days. So either there’s a malevolent demon tripping us up or our incipient fears are causing us to fall over our own feet. Mental confusion in our heads often turns into real problems in the real-world.

Round Number Attractions

It’s no surprise to find this numerological naughtiness feeding across into investment,…

Every profession has its own idiosyncratic superstitions.  In honor of tomorrow being Friday the 13th, I thought this would be a good time to discuss this topic.

Actors performing MacBeth will refer to it only as “The Scottish Play” for fear of being crushed by a stagelight.  Sailors never set foot on a boat with their left foot first.  The baseball player is perhaps the most tormented by ritual, from tapping the bat on home plate to never stepping on a foul line to the prolonged use of a lucky bat or glove way past what its condition warrants.

Traders and investors have their own set of superstitions, and these can seem every bit as silly as those we see in other walks of life.  That said, trading superstitions are very tough to let go of, even for the most logical and circumspect of market players.

Let’s look at a few of them:

Never Sell a Stock Crossing 90 – There is a widely held belief that you never sell a stock you own as it crosses \$90 per share because they almost always go straight to \$100.  This concept is demonstrably specious, but I know 20-year veterans who will never be convinced otherwise.

The Maiden Sacrifice to the Volcano - In times of market turmoil or in the midst of a heavy sell-off, many portfolio managers and investors believe that they have to blow out one position to appease the market gods, tossing a maiden into the volcano so that the island will be spared the wrath.  This thinking is as primitive as you get, but sometimes it feels good to toss out some AK Steel on a down 200 point day only to see the market rally.  If this happens once or twice, logic aside, you will swear by it.

Options Expirations/ Triple Witchings - “Never buy or sell on the third Friday of the month which is when monthly stock options expire.  And no matter what you do, stay away from everything on the four Triple Witching days of the year, when stock option, stock index options and stock indexes futures all expire together.”  Obviously absurd, but deeply ingrained in many investors.

Don’t Go Back Into a Stock the Third Time – This is a variation on the old “sticking your hand

### Phil's Favorites

#### The data war behind net neutrality

The data war behind net neutrality

Ajit Pai, former Verizon lawyer turned head of the U.S. Federal Communications Commission (FCC), rolled back President Barack Obama’s net neutrality policy in December....

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### ValueWalk

#### Exploring Gravitational Waves

By joniferdingcong. Originally published at ValueWalk.

In 2016, US scientists for the first time announced their detection of gravitational waves, ripples in space and time hypothesized by Albert Einstein a century ago. Such a discovery represents a scientific breakthrough, opening the door to an entirely new way of observing the cosmos. In 2017, the Nobel Prize in Physics was awarded to three US scientists for the detection of gravitational waves. To better grasp the process of their discovery, CGTN’s Tian Wei spoke to two of them: Rainer Weiss, Emeritus Professor of Physics at MIT and Kip Thorne, Emeritus Professor of Physics at Caltech. Chen Yanbei, Professor of Physics at Caltech, also joined the talk.

mikkehouse / Pixabay...

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### Zero Hedge

#### Stocks Suffer As 10Y Yields Reach 2014 Highs, Curve At Inflection Point

Stocks Suffer As 10Y Yields Reach 2014 Highs, Curve At Inflection Point

Courtesy of Zero Hedge

Overnight saw 10Y Treasury yields touch 2.64%, topping the post-election peak to its highest since September 2014 (and crossing Jeff Gundlach's "red line" for stock damage). However, the yield curve's bear-steepening may suggest a turning point.

10Y is up almost 30bps since The Fed hiked rates in December...

...

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### Insider Scoop

#### 14 Stocks Moving In Friday's Pre-Market Session

Courtesy of Benzinga.

Gainers
• Forward Industries, Inc. (NASDAQ: FORD) rose 64.5 percent to \$2.04 in pre-market trading after the company reported the acquisition of Intelligent Product Solutions.
• PLx Pharma Inc (NASDAQ: PLXP) rose 31.2 percent to \$8.00 in pre-market trading. Janney Capital initiated coverage on PLx Pharma with a Buy rating and a \$14.00 price target.
• Acorda Therapeutics Inc (NASDAQ: ACOR) rose 15.4 percent to \$28.85 in pre-market trading amid M&A chatter. The...

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### Digital Currencies

#### Bitcoin and cryptocurrencies are just the Beanie Babies of the moment

Bitcoin and cryptocurrencies are just the Beanie Babies of the moment

Courtesy of Vitaliy Katsenelson, Contrarian Edge

If you invested in the markets circa 1999, it is hard to observe the Bitcoin mania and not experience the feeling that you’ve seen this movie before and know how it will end – in losses and tears. The internet was a great idea that convinced a lot of great minds to invest capital and energy into businesses that have transformed the world – Amazon, eBay, Cisco, PayPal … the list is very long (though in fairness the list of non-survivors is even longer – but they are not here to remind us of their nonexistence).

R...

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### Chart School

#### Short Covering Driving Gains in Semiconductors and Nasdaq 100

Courtesy of Declan.

The Nasdaq 100 breakout cleared channel resistance, the fifth significant breakout in four months. All technicals are posting new near-term highs which also meant the short generated on the tag of the rising channel is negated.

The Semiconductor Index also enjoyed a substantial breakout as short covering drove traders out of their positions. Technicals see an improvement with a relative gain against the Nasdaq 100.

...

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### Biotech

#### How Alzheimer's disease spreads throughout the brain - new study

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

How Alzheimer's disease spreads throughout the brain – new study

Courtesy of Thomas E CopeUniversity of Cambridge

Harmful tau protein spreads through networks. Author provided

Alzheimer’s disease is a devastating brain illness that affects an estimated 47m people worldwide. It is the most common cause of dementia in the Western world. Despite this, there are currently no treatments that are effective in curing Alzheimer’s disease or preventing its relentless progressio...

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### Mapping The Market

#### Trump Admin Bans CDC From Using Words Like 'Science-Based,' 'Diversity'

By Jean-Luc

These are the policies of a theocracy, not a modern democracy:

The Trump administration has prohibited the Centers for Disease Control and Prevention (CDC) from using words like “science-based,” “diversity,” and “transgender” in their official documents for next year’s budget, according to the Washington Post.

Senior CDC budget leader Alison Kelly met with the agency’s policy analysts on Thursday to announce ...

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### Members' Corner

#### An Interview with David Brin

Our guest David Brin is an astrophysicist, technology consultant, and best-selling author who speaks, writes, and advises on a range of topics including national defense, creativity, and space exploration. He is also a well-known and influential futurist (one of four “World's Best Futurists,” according to The Urban Developer), and it is his ideas on the future, specifically the future of civilization, that I hope to learn about here.

Ilene: David, you base many of your predictions of the future on a theory of historica...

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#### Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.

### Promotions

#### NewsWare: Watch Today's Webinar!

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

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### Kimble Charting Solutions

#### Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...

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#### Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...