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Exactly how do "Markets Change"

  • Post #1
  • Quote
  • First Post: Jan 31, 2009 8:45pm Jan 31, 2009 8:45pm
Scattered all around this forum you will find people talking about how markets change. I have never seen anyone come out and explain exactly what has changed.
We all know that systems and EA's work for a while and then stop. History is littered with such events.
What I would like a discussion on is how and what changed, can you put your finger on any time period and say, this happened and caused this, and the markets changed by doing this?
Do you get my drift?

Roy
Polishing my crystal ball
Quoting 30XTCi
Scattered all around this forum you will find people talking about how markets change. I have never seen anyone come out and explain exactly what has changed.
We all know that systems and EA's work for a while and then stop. History is littered with such events.
What I would like a discussion on is how and what changed, can you put your finger on any time period and say, this happened and caused this, and the markets changed by doing this?
Do you get my drift?

Roy
It's like a living breathing entity. It has it's own behavior. It goes through evolutionary changes, not revolutionary. The current market sentiment is very different than just two years ago based on everything that's happened in the world, and it will be different again two years from now. It's the summation of several small changes that aggregate into a larger flow. Think of it like how if you have enough water hoses you can make a river, but slowly start turning off some or turning more on and eventually the change will be big enough to be noticeable. It's hard to describe, but the essence is there. How do you think people get a feel for the market? They learn to understand it, as you would a person.
Pull up a EURUSD chart and zoom out so you have 5 years or so of data. See what happens around July of last year when the economy first started its major decline? Does the chart before July look at all like the chart after? Just compare the average daily range and you'll see what I mean. That is a perfect example of how market condition changes, in this case because of economic instability.
Quoting 30XTCi
Scattered all around this forum you will find people talking about how markets change. I have never seen anyone come out and explain exactly what has changed.
We all know that systems and EA's work for a while and then stop. History is littered with such events.
What I would like a discussion on is how and what changed, can you put your finger on any time period and say, this happened and caused this, and the markets changed by doing this?
Do you get my drift?

Roy
The market evolves in cycles that are themselves contained in bigger cycles. Maybe it is not that there is a change in the behaviour itself (as in the end it always will be constantly making forward/backwards waves) but that we are unable to confine in a series of fixed and limited calculations all the diverse elements that conform the whole.

For example, I could compare this to the biorhythm, where three or more cycles of a different span converge and diverge constantly, creating too many variables and different patterns to be reproduced in a limited set of formulae.

Added to this, unpredictable circumstances that have a huge effect on the market at a certain point, will cause a deviation, even if small, thus modifying the actual course of things, though maintaining its basic structure of waves inside cycles.

The scope of an EA or system is not enough, because it only takes a snapshot of a particular moment or behaviour, not taking into account the big picture cycle which duration would be expressed in years.

If you watch side by side all the possible timeframes from monthly to M1, using for example Bollinger Bands which are pretty much accurate in what they show, maybe you'll be able to understand and catch a glimpse of a much bigger picture which is going on beneath the monthly chart, which scope is out of bounds for a simple system or EA.
Quoting Lamdun
Pull up a EURUSD chart and zoom out so you have 5 years or so of data. See what happens around July of last year when the economy first started its major decline? Does the chart before July look at all like the chart after? Just compare the average daily range and you'll see what I mean. That is a perfect example of how market condition changes, in this case because of economic instability.
Interesting replies,

Lamdun, this is a normal price change, it is just that much more spectacular because it's over a longer time frame.

What I'm looking for is this:

Breaking News........ Breaking News........


Eliott waves have changed, they now work in waves of NINE..

Now if that were to happen somebody somewhere might notice, then that would be something that we could say this is why.

Roy
Polishing my crystal ball
Quoting 30XTCi
Scattered all around this forum you will find people talking about how markets change. I have never seen anyone come out and explain exactly what has changed.
We all know that systems and EA's work for a while and then stop. History is littered with such events.
What I would like a discussion on is how and what changed, can you put your finger on any time period and say, this happened and caused this, and the markets changed by doing this?
Do you get my drift?

Roy
the best way to look at market change is to look at daily ranges. take the dow for example. just a few months ago, a move of 200+ points just didnt happen. a five percent loss was considered a tragedy. nowadays, you'll get swings 400 to 500 points, that are considered common. a ten percent loss or gain is just looked at the same way as a regular win/loss on a trade. see, the market has changed from a 100 point commonplace range to a 500 point commonplace range.

in forex it's the same thing. if you go back a year or two on a eurusd chart, the range from open to close is between 75 to 100 pips. nowadays its closer to 250/300 pips. pretty big change.

i hope this helped a bit
Quoting blacksun1
the best way to look at market change is to look at daily ranges. take the dow for example. just a few months ago, a move of 200+ points just didnt happen. a five percent loss was considered a tragedy. nowadays, you'll get swings 400 to 500 points, that are considered common. a ten percent loss or gain is just looked at the same way as a regular win/loss on a trade. see, the market has changed from a 100 point commonplace range to a 500 point commonplace range.

in forex it's the same thing. if you go back a year or two on a eurusd chart, the range...
That's not a change in the market. That's just a change in volatility. Changing volatility is normal market behaviour.
I don't consider the term "how" of much interest when it comes to making profits. When you get tired of walking in circles asking yourself "how", you'll get different and more important questions popping into your head.

Also, I would rather ask myself if I can benefit from market changes or not. If you ever get a solution to the question "why", I would bet that it's already too late
Measure twice, cut once
Quoting euclid
That's not a change in the market. That's just a change in volatility. Changing volatility is normal market behaviour.
but when a market stays that way for a long period of time, it is different than it was a couple of months ago. when something is different for a prolonged amount of time, it has changed.

definition of change:become different in some particular way

so when the market behaves differently than it used to (more volatile, less volatile, etc.) it has changed.


addition:

another thing to note is that a changing market is normal market behavior euclid. so a change in volatility, though normal behavior, is stilla change.
Quoting blacksun1
but when a market stays that way for a long period of time, it is different than it was a couple of months ago. when something is different for a prolonged amount of time, it has changed.

definition of change:become different in some particular way

so when the market behaves differently than it used to (more volatile, less volatile, etc.) it has changed.


addition:

another thing to note is that a changing market is normal market behavior euclid. so a change in volatility, though normal behavior, is stilla change.
Yes, but by that argument a change in price would count as a change in the market, which of course it is, but I don't think that is what the OP is asking about when talking about a "market change". Volatility has never been constant.

Of course, "normal changes" to variables like volatility and correlations are enough to defeat many an EA without destroying the underlying inefficiencies.

The question is how (or why) could the market change such that inefficiencies that we all rely on could change or disappear. I have never seen such a change, but I would postulate that it would require a significant change in the motivations of the market participants. For instance, if market speculation was prohibitively taxed, it could reduce speculative volume to insignificant levels possibly leading to an efficient market.
Volatility regresses to the mean. Does that mean it changes? Or does it mean that normal is just a range of values? Up to you, define however you want.

Quote
The question is how (or why) could the market change such that inefficiencies that we all rely on could change or disappear.

Depends on the kind of inefficiency you're talking about. If you trade specific indicator combinations or technical behavior around certain spots like the high/low, well yes, probabilities can change there.

If you're talking about people's behavior tho, sentiment and psychology, no that's not going to change as long as there are people trading the markets.

The market always has periods where it needs to rest, always has periods where it needs to pull back in order to gather more orders, always has periods where it's planning a major move and needs to gather strength first... Some elements never change.
  • Post #12
  • Quote
  • Last Post: Feb 3, 2009 8:20pm Feb 3, 2009 8:20pm
Quoting 30XTCi
Scattered all around this forum you will find people talking about how markets change. I have never seen anyone come out and explain exactly what has changed.
We all know that systems and EA's work for a while and then stop. History is littered with such events.
What I would like a discussion on is how and what changed, can you put your finger on any time period and say, this happened and caused this, and the markets changed by doing this?
Do you get my drift?

Roy
I would define market change on two factors. One would be daily % move average. Is the market busy or not in terms of daily range? The second would up % v. down % over a defined period (greater then a day). Are we moving up 2% and down 1.5% or is the market moving up 2% and down 1.9%? Thus, is it ranging or trending. Now, knowing both of these is pointless is most respects. You could trade using averages and then they immediately go back to prior long term averages. Also, when the market goes up 2% and then down 1.9% and you conclude it is "ranging", then you trade near the 2% up move and then you get a breakout and it goes up 3% and only down .5%. Strictly in defining how markets "change", these are things I would look at.

Having wrote that nonsense above, these are things you "spot" more easily on spreadsheets than on the chart. At least, the first you would. In terms of your actual interest in pinpointing when, where and why it "changed", I wouldnt be able to give any input on that. The only people who could even begin to strive toward answering that would be the big boys.
The market is my nation. Traders, my family. Hello, brothers and sisters!
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