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Technical Analysis Fallacy

  • #29,301
  • Edited 6:16am Nov 25, 2011 6:05am | Edited 6:16am
Quoting Dmessenger
fti sir,

what do you mean by 'Delta'? sorry for asking, just that i always encounter this word but don't really have a clue... and also you mention about 'sigma', eon's ago if you won't mind me askin' funny questions.

thank you dear sir.

carlo
Post # 4686 page 313 by fti,


Hi ksl.
This is the metdoloy of treasury managers in risk management , in that he could offset risk in any # of dealers books against his book by the use of the delta.
You see in a bank, there are all sorts of dealers managing all sorts of instruments , like the deposits dealers , forex dealers , capital market dealers,
options OTC dealers, etc............................So hecannot be looking at all the dealers exposures to know , lets say what the banks exposure was in USD against his natural currency, All the TM need is to generate net USD deltas for all USD activities and he woulds know his net exposure, in this case the USD. if the delta read he was exposed, he could initiate trade positions to neutralise the exposure.
However as the component of delta is dynamic . So as the price of , in this case USD/??? changes then his delta shifts as well. In effects , it has to be dynamically managed as well, requiring the TM to have an opinion to the exposure.

This has no important significance for speculative traders. It is a management tool to curb risk, whereas traders creates risk exposures. Unless you traded multiple instruments of same risk denomination.

deltas , sigma, vega teta... etc these are the "greek" components in management & pricing models that calculates the respective risk elements. These can be plotted and identified graphically.

regards
  • #29,302
  • Nov 25, 2011 6:16am Nov 25, 2011 6:16am
Another post by fti on the same page


Hi ksl,

delta is a "greek" component in any pricing model that calculates fair value.
Option pricing models are of the same class.

delta hedges can be used as a position hedge models for all kinds of derivative trade and synthetic instruments, options is one of them.

In the options markets.The delta hedged technique known as delta neutral hedging is used by professional option writers to defray price risk, and capitalising on volitility money and time decay of premiums which is their component of income.

delta hedging is predominantly used by treasury managers to measure net exposure of all the banks treasury activities, inclusive of capital markets,money market , forex , derivatives and synthetics.
  • #29,303
  • Nov 25, 2011 7:02am Nov 25, 2011 7:02am
Happy trading day everyone! Had planned to take the day off from trading, but find myself building a position in the E/$ this morning. Got up to watch and do some paper work but the PA pulled me in. Might add the GBP/$ to the list as the NY session gets underway, but they are having a shortened session today so will be cautous about that move. Hope you are all having a good Friday and good trading to you all.
  • #29,304
  • Nov 25, 2011 7:06am Nov 25, 2011 7:06am
Quoting GEfx
Happy trading day everyone! Had planned to take the day off from trading, but find myself building a position in the E/$ this morning. Got up to watch and do some paper work but the PA pulled me in. Might add the GBP/$ to the list as the NY session gets underway, but they are having a shortened session today so will be cautous about that move. Hope you are all having a good Friday and good trading to you all.
Good day to you as well GE, I had profitable morning today and came out with 1% win, no plan to trade NY as I have to sort out some stuff.
  • #29,305
  • Edited 10:56am Nov 25, 2011 9:38am | Edited 10:56am
Quoting Dmessenger
fti sir,

what do you mean by 'Delta'? sorry for asking, just that i always encounter this word but don't really have a clue... and also you mention about 'sigma', eon's ago if you won't mind me askin' funny questions.

thank you dear sir.

carlo
delta is risked exposure.
exposures "at the money" have delta 0.5.
it means have 50 % go up 50 % go down
spot positions have delta 1.
so as price gyrates delta shifts according to your sigma.
Sigma measures speed of change of yuor delta.
and teata measures your tenure of exposure.
All components react to your implied and historical volatility.

Your questions is not funny.Is Ok. Just that you not exposed to managing risk at wholesale levels.
If you managing money in 100s of millions and have 100s dealers doing all sorts of stuff. You need learn how manange net exposure.

These financial institution's methodolody stay alive. they like charge you 15% interest cost of funds for volatility and move markets 3%. in 1 years time you lose 12% or 18% according to how clever you are. Is called gaming tax. This reason why if you trade long term positions, there is no way for you make money, only windfall events. In the long run you will lose unless you have no cost of funds.

Everybody goes into shock when equities drops 5%. your cost of funds is probably in excess of 6% and your brokerages 10% and the smartest are the ones pay professional managers anotehr 5% manage their moneys and 25% profitsharing and )% for loss sharing. Oh and goodwill and expectations of earnings and dividents builtin on equities can be in excess of 30% of NTA in good years.
Why do you think there are such rules as no short positions in certain markets? Markets are professional wrenches for money.

Oh and if you think , well my money is cash , there is no cos of fund. Then you need go economic school and learn about opportunity cost. There is no money that has no cost of funds.

These are exceptional years, markets are moving about 10 % average. Why do you think the system want to stabalise things down. These years many financial institutions have their back against the wall.

With board interest rates close to zero. and with bank haircuts on your returns and tax, your yield could already be about -5% per annum. If this happen long term, your real wealth (purchasin power parity) will devalue compounded about 100%(halfed) every 6.66 years give a take. depending on if you compounding daily of by the minutes.
Enjoy the turkey.
If your cost of funding is via credit and in excess of 12%. well, Good luck and enjoy the turkey. With about 3% haircuts on customers , some organisations cannot even survive if cost of funds is any where near 7%. At double digit, its cheaper go chapter 11.
regards
  • #29,306
  • Nov 25, 2011 10:52am Nov 25, 2011 10:52am
Hi friends!

Reading a nice book atm.
The following quote made me smile. A new guy having his first day at Goldman Sachs, afer he had left Citibank ...


I remember my first week on the job, I put on a 50 million deutsche
mark/Swiss franc position, which was a fairly sedate cross. I’d been a trader for four years at that point and it was the biggest position I’d ever had on in my career. I thought,“I’m going to do it.”
I remember the head of trading walking over and asking,“How’s it going, Christian—you got anything on?”
I said proudly,“Yes, I’m short 50 Mark Swiss.”
He paused, looked at me, and said, “I like a guy who averages into his positions,” and walked off.
  • #29,307
  • Nov 25, 2011 11:20am Nov 25, 2011 11:20am
Have a great weekend all

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regards
  • #29,308
  • Nov 25, 2011 5:45pm Nov 25, 2011 5:45pm
Quoting fti
delta is risked exposure.
exposures "at the money" have delta 0.5.
it means have 50 % go up 50 % go down
spot positions have delta 1.
so as price gyrates delta shifts according to your sigma.
Sigma measures speed of change of yuor delta.
and teata measures your tenure of exposure.
All components react to your implied and historical volatility.

Your questions is not funny.Is Ok. Just that you not exposed to managing risk at wholesale levels.
If you managing money in 100s of millions and have 100s dealers doing all sorts of stuff. You need learn...
Thank you sir! i am still trying to digest what you have just said. I'm still learning.

kind regards,
carlo

p.s. @ ksl , thanks a lot for helping, you just pointed me back to a good read - appreciate much!
  • #29,309
  • Nov 25, 2011 8:04pm Nov 25, 2011 8:04pm
Quoting MaMood
Hi friends!

Reading a nice book atm.
The following quote made me smile. A new guy having his first day at Goldman Sachs, afer he had left Citibank ...

[font=Bembo][size=3][font=Bembo][size=3]
[indent][left]I remember my first week on the job, I put on a 50 million deutsche
mark/Swiss franc position, which was a fairly sedate cross. I’d been a trader for four years at that point and it was the biggest position I’d ever had on in my career. I thought,“I’m going to do it.”
[size=2]I...
what book is it ?
  • #29,310
  • Nov 25, 2011 10:08pm Nov 25, 2011 10:08pm
Quoting indianguyinny24
what book is it ?

Hi V,

I read that book before and i believe it's 'inside the house of money - top hedge fund traders .... by steven drobny' personally, not really a good read for me

regards,
carlo
  • #29,311
  • Nov 25, 2011 10:32pm Nov 25, 2011 10:32pm
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  • #29,312
  • Nov 25, 2011 11:30pm Nov 25, 2011 11:30pm
Hi All

Fti

I would like to ask you, did you ever trade with a range bar instead of a time bar? Or if not, did you hear about it?
A range bar is formed when a certain number of pips from high to low.
I am using a 6 pips bar and I found very helpful in the "dance".
Would be good to know what you know about.

Cheers
mla
"The Heart is the hub of all dances; go there and chill out"
  • #29,313
  • Edited 1:02am Nov 26, 2011 12:18am | Edited 1:02am
Quoting mla
Hi All

Fti

I would like to ask you, did you ever trade with a range bar instead of a time bar? Or if not, did you hear about it?
A range bar is formed when a certain number of pips from high to low.
I am using a 6 pips bar and I found very helpful in the "dance".
Would be good to know what you know about.

Cheers
mla
Hi mla,

Pardon me for intruding. Is this the same as a box plot? I believe it also removes the element of time. I do remember fti saying that it is good to identify support and resistance levels, except that the size of the box (in your case 6 pips) is very critical for such analysis to work properly. If chosen wrongly, it could be very detrimental to your trading.

Just sharing my thoughts here and I am open to all criticism

regards

edited: I meant to say point and figure charts
  • #29,314
  • Nov 26, 2011 12:47am Nov 26, 2011 12:47am
Quoting N_Trader
Hi mla,

Pardon me for intruding. Is this the same as a box plot? I believe it also removes the element of time. I do remember fti saying that it is good to identify support and resistance levels, except that the size of the box (in your case 6 pips) is very critical for such analysis to work properly. If chosen wrongly, it could be very detrimental to your trading.

Just sharing my thoughts here and I am open to all criticism

regards
Hi N

Thank you for your post.
Sorry, I am not sure what a box plot is.
A 6 pips bar range is just a bar made of 6 pips(or which one you choose).
When his range forms a 6 pips from high to low is completed, then forms another bar that will be completed with another 6 pips.

Our standard bar is formed not by pips but by time.

Hope it helps

mla
"The Heart is the hub of all dances; go there and chill out"
  • #29,315
  • Nov 26, 2011 1:01am Nov 26, 2011 1:01am
Quoting mla
Hi N

Thank you for your post.
Sorry, I am not sure what a box plot is.
A 6 pips bar range is just a bar made of 6 pips(or which one you choose).
When his range forms a 6 pips from high to low is completed, then forms another bar that will be completed with another 6 pips.

Our standard bar is formed not by pips but by time.

Hope it helps

mla
Hi mla,

Pardon me, I meant point and figure charts. Got confused with something else

regards
  • #29,316
  • Nov 26, 2011 1:06am Nov 26, 2011 1:06am
Quoting mla
Hi All

Fti

I would like to ask you, did you ever trade with a range bar instead of a time bar? Or if not, did you hear about it?
A range bar is formed when a certain number of pips from high to low.
I am using a 6 pips bar and I found very helpful in the "dance".
Would be good to know what you know about.

Cheers
mla
There are many ways plot statistics and data. They methods to highlight certain aspects of price gyrations. If you know hoe to dance the markets rhythm, then these all only distractions.

Peeps thinks they understand many things, In fact the more they invent distractions, their skills deteriorates.

One example.
You think you understand the chinese. then try understand this.
Anything resembling what you thought?

Inserted Video



mainstream print knowledge is nothing.
No one gives you the real stuff.
Why would they?
Why would i want give you ways make a million ? for your $10000 you want pay me?
There is a real world and a book world.
Those who cannot get to real world, best they can do is read published.
There's good in published world, but its nothing compared to real world.


regards
  • #29,317
  • Nov 26, 2011 1:17am Nov 26, 2011 1:17am
Quoting N_Trader
Hi mla,

Pardon me, I meant point and figure charts. Got confused with something else

regards
Not prob, mate, any time.

mla
"The Heart is the hub of all dances; go there and chill out"
  • #29,318
  • Nov 26, 2011 1:22am Nov 26, 2011 1:22am
Morning Chief,

I have a question today regarding the use of long and short swords. For long swords, do we carry the position over days/weeks? Or are we referring to only intraday (i.e. exhaustion of trend)?

Hope you can enlighten me.

regards
  • #29,319
  • Nov 26, 2011 1:22am Nov 26, 2011 1:22am
see what is on mainstream presentation and you think is the part is the whole.
How myopic you want get is up to you.
Tell me which is chinese.

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  • #29,320
  • Nov 26, 2011 1:25am Nov 26, 2011 1:25am
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