Posts Tagged ‘Round Numbers’

Irrational Numbers: Price Clustering & Stop Losses

Irrational Numbers: Price Clustering & Stop Losses

Courtesy of Tim at The Psy-Fi Blog

Professor holding astronomical globe

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.

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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.

metallic zero

Round Number Attractions

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

black cat

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


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Phil's Favorites

Why marijuana fans should not see approval for epilepsy drug as a win for weed

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

 

Why marijuana fans should not see approval for epilepsy drug as a win for weed

Small vials of CBD, which some believe could be a cure for many ailments. Roxana Gonzalez/Shutterstock.com

Courtesy of Timothy Welty, Drake University

A Food and Drug Administration panel recommended approval of a drug made of cannabidiol on Ap...



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Biotech

Why marijuana fans should not see approval for epilepsy drug as a win for weed

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

 

Why marijuana fans should not see approval for epilepsy drug as a win for weed

Small vials of CBD, which some believe could be a cure for many ailments. Roxana Gonzalez/Shutterstock.com

Courtesy of Timothy Welty, Drake University

A Food and Drug Administration panel recommended approval of a drug made of cannabidiol on Ap...



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Zero Hedge

IRD: "The System Will Have To Collapse"

Courtesy of ZeroHedge. View original post here.

Via InvestmentResearchDynamics.com

The public pension fund system is approaching apocalypse.  Earlier this week teachers who are part of the Colorado public pension system (PERA) staged a walk-out protest over proposed changes to the plan, including raising the percentage contribution to the fund by current payees and raising the retirement age. PERA backed off but ignoring the obvious problem will not make it go away.

Every public...



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Digital Currencies

"The House Always Wins": These Funds Made A Killing As Bitcoin Plunged

Courtesy of ZeroHedge. View original post here.

Volatility, neutral exposure and market making can still pay - at least for crypto hedge funds.

Despite the fact that cryptos have collapsed across the board so far in 2018, one investing axiom still holds true to this day: the house always wins. Those who have been making a market, keeping neutral net exposure and benefiting from exotic methods of trading cryptocurrencies have continued to have a positive year this year despite the fact that a lot of the underlying cryptocurrency assets have had a terrible year.

...



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Insider Scoop

Cowen Says The Big Sell-Off In Skechers Is A Buying Opportunity

Courtesy of Benzinga.

Related SKX 25 Stocks Moving In Friday's Mid-Day Session Mid-Day Market Update: Skechers USA Falls After Weak Q2 Guidance; Ericsson Shares Climb...

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Chart School

Short Opportunity II

Courtesy of Declan.

The first chance for a short play got burned but there is a second one on offer for the S&P.

The S&P tagged channel resistance and while today's reversal off resistance didn't amount to a big percentage loss it did register as a distribution day. There wasn't any significant technical change so if this short does evolve it will do so with risk measured on a move above 2,717.


The Nasdaq may match a 'bearish evening star' but if this is the case there has to be a significant move lower tomor...

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ValueWalk

Buffett At His Best

By csinvesting. Originally published at ValueWalk.

Bear with me as I share a bit of my history that helped me create SkyVu and the Battle Bears games. The University of Nebraska gave me my first job after college. I mostly pushed TV carts around, edited videos for professors or the occasional speaker event. One day, Warren Buffet came to campus to speak to the College of Business. I didn’t think much of this speech at the time but I saved it for some reason. 15 years later, as a founder of my own company, I watch and listen to this particular speech every year to remind myself of the fundamentals and values Mr. Buffett looks for. He’s addressing business students at his alma mater, so I think his style here is a bit more ‘close to home’ than in his other speeches. Hopefully many of you find great value in this video like I have. Sorry for the VHS...



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Kimble Charting Solutions

The Stock Bull Market Stops Here!

 

The Stock Bull Market Stops Here!

Courtesy of Kimble Charting

 

The definition of a bull market or bull trends widely vary. One of the more common criteria for bull markets is determined by the asset being above or below its 200 day moving average.

In my humble opinion, each index above remains in a bull trend, as triple support (200-day moving averages, 2-year rising support lines, and February lows) are still in play ...



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Members' Corner

Cambridge Analytica and the 2016 Election: What you need to know (updated)

 

"If you want to fundamentally reshape society, you first have to break it." ~ Christopher Wylie

[Interview: Cambridge Analytica whistleblower: 'We spent $1m harvesting millions of Facebook profiles' – video]

"You’ve probably heard by now that Cambridge Analytica, which is backed by the borderline-psychotic Mercer family and was formerly chaired by Steve Bannon, had a decisive role in manipulating voters on a one-by-one basis – using their own personal data to push them toward voting ...



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Mapping The Market

The tricks propagandists use to beat science

Via Jean-Luc

How propagandist beat science – they did it for the tobacco industry and now it's in favor of the energy companies:

The tricks propagandists use to beat science

The original tobacco strategy involved several lines of attack. One of these was to fund research that supported the industry and then publish only the results that fit the required narrative. “For instance, in 1954 the TIRC distributed a pamphlet entitled ‘A Scientific Perspective on the Cigarette Controversy’ to nearly 200,000 doctors, journalists, and policy-makers, in which they emphasized favorable research and questioned results supporting the contrary view,” say Weatherall and co, who call this approach biased production.

A second approach promoted independent research that happened to support ...



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OpTrader

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. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

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All About Trends

Mid-Day Update

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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...

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