National Grid Share Discussion Threads

[mani2013] 14/9/2017 19:16

Hey DavR0s,

Thanks for the pointers. I will check them out.

I might take you up on the offer to see your routine. Sounds like you have a lot of effort into it. I will send you a private message.

[davr0s] 14/9/2017 17:38

You should also read some of Mark Minervinis work (he has two books)

[davr0s] 14/9/2017 17:37

You should look at Trading Bases website which I subscribe to (but some of its free). It's run by a very experienced trader and there is a private chat room where we share ideas very much along the lines you describe. In parallel I am writing a market analysis routine that systematically scans for high probability setups and presents them in real time. Been working on it for a year now! Too much to put in a message but if you are interested come and have a look. I am a firm believer that 95% of what you need to know is in the price and volume.Interestingly I have a degree in physics and a PhD in astrophysics !

[mani2013] 14/9/2017 17:22

Bounty hunter,

You are right. Psychology plays a BIG part in trading, as do probabilities.

It is in our innate nature to always want to be right. As humans, we cannot stand the thought of being wrong. The ability to get out quickly and take a (small) loss on a trade after being proved wrong is vital if one is to be successful if trading.

[mani2013] 14/9/2017 17:08

Hi Pierre,

I respect your views and appreciate that not everyone believes in Technical Analysis.

James Harris Simon manages his renowned hedge fund with mathematical models that look for non-random movements in the markets to make predictions. That is how he made his billions. The fact that he and so many other traders have done this successfully proves that the markets are not random (which, I believe, is the point you are refuting).

I think the pivot-point of this debate rests on what is meant by 'charting'. It is a huge field and different people have different perceptions and ways of using the charts, but ultimately, 'charting' or more correctly, Technical Analysis, has it's roots in Mathematics (more specifically, probability & game theory) and Human Psychology (which some would argue is a science).

Perhaps I should clarify how I use charts for Technical Analysis. My approach is to simply look for trends on the charts (non-random movements) to identify the most probable (and least risky) moves - high probability trading. I identify these non-random movements in several timeframes which gives me a multi-dimensional view of any given market and the precision required to time my trades for maximum profit potential and improve the profit/loss ratio on my trades.

The key here is the trend (non-random movement) in any given timeframe and how it is affected by the other timeframes. e.g A trading range in one timeframe is simple a series of smaller trends in a lower timeframe. Charts are fractal in nature, so the same rules apply to all timeframes, the only difference being the number of opportunities available to make money in each timeframe.

I do not look for chart formations (flags, triangles, wedges etc) although I do understand how they get formed at price level (by trends and trades placed with specific risk/reward ratios) and why they are so widely used. I do not follow any indicators. They are in essence, derivatives of the price and therefore somewhat removed from the actual price action. The closer your view is to the current price, the better.

It is an approach I built from the ground up having finally understood the markets after years of research and experience.

You mentioned that you specialise in Science & Maths, as do I. When I was younger, I wanted to be a scientist (specifically a physicist). I certainly had the aptitude and credentials for it. I loved the idea of researching and analysing something to its core, discovering new ideas and sharing my findings with the world, hopefully to make a difference.

I guess I did get to be a 'scientist' of sort after all, but just not in the traditional sense :)

[bountyhunter] 14/9/2017 10:34

...a very interesting debate, central to which is the psychological aspect in my view which may be the key to gaining an edge, but that needs to be sufficient to beat the costs of spreads, commissions and capital.
(...and an interesting divergence imho while all is relatively quiet for NG)

[pierre oreilly] 14/9/2017 10:28

I knew there was another point!

I much preferred this thread when it discussed national grid issues. There are insiders here with expertise and access to information which is really useful, both as investment considerations and pure interest.

Charting is simply generic, supposedly applying to all companies, so not ng. specific.

While anyone is free to post anything, my personal view is I'd like board (either this or another) with the very intelligent and knowledgeable content this board has had over the last several years until very recently. My personal views, no idea what others want.

[pierre oreilly] 14/9/2017 10:20

I find the chartism belivers v science based beivers tiring too, so I'll back out now. I just wanted to point out your rather certain posts on chartism certainly have no agreement in scientific or mathematical circles and it's fine with me if you want to proceed on a magic type belief system rather than a scientific one.

Your reference to Simons is nothing to do with charting at all. Yes he's got rich, yes he's a mathematician (hence the signal he'd know charting is nonsense), yes he runs a hedge fund - not sure how that supports your views. His maths expertise is in part pattern recognition which is a valid field of maths, but he hasn't applied it to charting as far as i can see (and neither would he, unless for business interests.

I've attempted to read books on charting. I never get far - they all very quickly state as fact unproven and mathematically insane concepts. If they made sense, then i would be able to follow - it isn't a lack of ability on my part.

Maybe i could guide you to a good book - ' Fooled by Randomness' where Talib tries to bridge the massive gap between academic thinking and populist thinking. He's an ex-trader mathematician too, and his PhD was options pricing.

You have to simply throw away all academic thought to believe past prices indicate future prices. A nobel prize is waiting for the first decent paper which stands up to scrutiny.

Anyhow, that's my lot on this. Charting, imv, is simply a technique backed by interests in the City to encourage people to trade (or overtrade). The average trader, using whatever means, loses, because in the zero sum trading system, the city takes its cut from every trade.

[mani2013] 13/9/2017 21:56

Pierre,

Thanks for the detailed post. I now have a better understanding of where you are coming from.

It is the age old debate between those who believe that the markets are completely random (and therefore completely unpredictable....'the random walk theory') and those who believe that it is not.

In reality, the markets not entirely random and are beatable. But to recognise that you first need to understand what the market actually is.

A stock market (as an example) only functions because of its participants. If there was no one playing the markets, they would be no market. It is people and their emotions (greed and fear) that drive the markets. As humans, it is in our inherent nature to seek out patterns where there are none and then perpetuate those patterns to the point where other participants see it and join in the foray. You may argue that it is a self fulfilling process, but it is this behaviour that makes the markets predictable and consequently beatable.

You have likened the markets to playing roulette at a casino, which is not quite the correct analogy. They are more of a strategy play like the game of Blackjack.

Blackjack is seemingly random, but in actual fact if you learn how to play it correctly and use the various tools available to stack the odds in your favour, you can win consistently over the long run.

Even in the game of Blackjack, most of the time you will get losing hands against the dealer, but every now and then, you will have a string of winning hands. The trick is to keep your loses small until you hit that winning streak which you then take advantage of with money management techniques to quickly make more money than the loses incurred.

In the markets, you follow a similar process by using trends to make your money.

We could go on debating about this forever, but it might be simpler for me to prove my point by directing you to the works and research (with respect to the markets) of James Harris Simon, a mathematician who is now a multi-billionaire:



Might I also suggest that you read a few chapters of the very famous book, 'New Market Wizards by Jack Schwager' to get a better understanding of what trading is all about. It is often used as a study reference by both new and old traders.

[action] 13/9/2017 19:28

This is hood trading stock if you pick up the right entry level. Mine is below 935.

[pierre oreilly] 13/9/2017 19:26

Hi Mani, no I'm not a sceptic at all. I pretty well know charting simply doesn't work. I'm trained in maths and science, and I bet most who believe in charting aren't. In maths terms, share price changes are non-deterministic and always, in academic research, the movement is simulated by a random walk (with other criteria necessary when that can be applied). There aren't a great deal of scientific papers on charting, simply because it's non-deterministic. However, when nobel prize winning economists who have studied traders who use charting, there is no difference to random bets. Traders who make a lot are simply lucky, those who lose a lot simply unlucky - a natural occurrence from randomness. On average chartists will lose, due to trading systems being zero sum with costs taken out. (That's the key to making money from charting ... set up an enablimg system to deliver trading services, and encourage trading. One way of encouraging trading is of course to convince people they can know a future share price, and charting seems a successful method of encouragement).

You said before that a casino was different from the stock market. But really it isn't, except in the magnitude of risk and costs. Chartists looking at past prices attempting to foresee a future price are absolutely no different from the person who notes down the red and black sequence on the roulette board in an attempt to work out what colour will come next. Just as any red/black sequence is irrelevant to the next spin, so past share prices are irrelevant to the direction of the next tick and future prices (which are actually driven by sentiment which itself is driven by pretty random asynchronous events)

Of course you may believe patterns indicate a future price, but you'd get a nobel prize yourself if you could publish a paper on how that is done.

I find it difficult understanding your stance. You say examine past share prices and you can predict future prices, or the probability of future prices, and yet you say that most of your predictions are wrong, and you make money via stop loss strategies etc. The probability of a random guess is 50%, yet by your own admission, your charting delivers less success than random bets.

The ultimate test is of course as i have highlighted. If anyone can predict future prices (or the probability of future prices at greater than say 51%) then they would be exceptionally rich. My guess is chartists like to believe chartism works, and so lay much more emphasis on the approx 50% of successful trades and tend to forget the approx 50% of trades which lose.

[mani2013] 13/9/2017 17:39

Pierre,

Wow, you are a strong skeptic indeed :)

I am not sure if you have ever traded, but let me put some perspective on trading....

You cannot always be right in the markets. You cannot always predict prices with 100% certainty. You can only analyse and predict the MOST LIKELY direction and outcome. But there is always a chance that the less likely outcome will play out and you will be proved wrong, which is why you should use stops or at least exit quickly safely when you are wrong.

It's a game of probabilities, rather like playing blackjack. You will be wrong more times than being right. You will have more losing trades than winning hands (and have to deal with the psychology of that). The trick is to stack the odds in your favour, control your loses on the losing hands and try to capitulate on the winning trades. And you have to do all that with discipline.

My apologies, but I am not going go into further financial detail at this stage. Suffice to say I have done very well out of it, enough to give me financial freedom and the ability to also live a better life.

I am sure there are probably a few people out that have made the kind of money you are quoting (which would be very nice indeed), but as an individual, it is extremely difficult, because of the sheer amount of work and focus required to extract a 1% gain daily growth from the market consistently (believe me, I have tried !!). And there are so many other aspects to consider. Liquidity, volatility, risk management, money management.

As an (human) individual, you do hit a limit, as there are only a few stocks you can trade simultaneously (you would fare better with currencies, though, which is where I am ultimately heading) This is were automated program trading comes in, which would allow you to trade multiple stocks with a tried and tested system which has an edge over the long run. Hopefully, someday, I will be able to extract 1% daily (or even more) from the markets.

It's not just simply a case of plugging in some figures on an excel spreadsheet with a multiplier and predicting how much money you are going to make over 3 years (I have done that too !!). You have to consider costs and drawdowns on the capital. You need to live after all. You are also limited by number of days you are going to trade.

I post on this forum with a view to try and enlighten people to the benefits of technical analysis and to encourage them to be smart with their trading so they can hopefully avoid the pitfalls I went through. I rarely post now as I simply do not have the time, but I saw the potential drop from 871.7 on NG and thought I should warn my fellow traders. And of course, this leads to justifying why the drop could occur, which is very time consuming.

Feel free to filter my posts if you feel TA is too much like magic :)

[pierre oreilly] 13/9/2017 13:26

Ok Mani, let me rephrase the question ... Why after 23 years of research and 3 years of being able to predict future share prices, why aren't you extremely wealthy, in the billions? If I could predict future share prices I'd be a billionaire in 3 weeks, let alone 3 years.

Reading your posts, it seems to me that making 1% per day by your methods would be trivial to achieve. (If not, what sort of performance per day would you claim, given your charts tell you the future price?)

Well if you make 1% per day, then after 3 years, from a £10k starting point, you'd have £17.5m. I just wondered whether you've made that sort of money?

[mj19] 13/9/2017 09:11

Mani - you were spot this morning might buy now?Anything else worth buying?

[mani2013] 13/9/2017 00:29

Pierre,

Perfectly valid question !!

26 years of research and experience of understanding how the markets work !! 3 years of actual FULL-TIME trading experience !!

I bought my first share 26 years ago and thus began a lifelong love and passion for the markets. Determined to understand 'the market machine' from the ground up. Self taught. Lots of dead ends and lessons along the way. But I never gave up :)


And of course, you need capital to play in the markets. It takes time to build it up, without blowing yourself out of the water.

I didn't want to say much about my personal life, but since you asked, I am actually semi-retired and pursuing some rather expensive recreational activites. Beginning to get bored, so having to set myself harder challenges.

I am also now working towards setting up a small private hedge fund over the next 5 years and automating the system. Who know where that will take things.

Wish I had started it much earlier, though, but life has a way of throwing distractions at you.

Trading is actually quite boring. But then it's meant to be. If I wanted excitement, I would go to the casino (which incidentally, is how most people treat the markets).

For me, trading is not just about making money. It's become a way of life. The desire to continuously understand the 'beast' and try to harness it. You learn a lot about yourself in the process.

[pierre oreilly] 12/9/2017 23:50

It begs the question why, after 26 years of being able to predict future share prices, you haven't made sufficient to give up and enter the world of retirement. After all, staring at a screen trying to identify the patterns you rely on is pretty boring isn't it?

[mani2013] 12/9/2017 23:14

prewar,

No worries. As you say, each to their own.....as long at it is working.

Please note, TA does not just apply to day-trading, it applies to all timeframes. The concept of Support and Resistance (created by trends and trading ranges) is applicable to all types of market participants i.e scalpers, day-traders, position traders,investors and also institutional traders. The only difference between these groups of participants is the timeframe they use to buy or sell:

Generally....

Scalpers use 1 minute, (or tick charts) to quickly move in and out of an instrument.
day traders use 5 min charts
position traders use 60min chart
investors use daily chart
institutions use weekly charts

The difference is all to do with position sizes (and of course, the ability to devote adequate time to a particular timeframe). The larger the size, the longer it takes to complete the trade in the markets.

A hedge fund institutional trader wanting to sell 100 million shares of National Grid will not be able to do it in one go using a 1 minute chart without drastically affecting the day to day liquidity of the stock and in the process getting a terrible price. He (or she) would have to do it over a period of days or even weeks to get a more favourable average price. He/she will therefore use the daily/weekly chart to time the trade.

The sale will cause an over-supply of the stock in the marketplace and will therefore decrease the price over the sell period which, of course, will get imprinted on the charts.

[prewar] 12/9/2017 22:43

Thanks, very interesting although don't have time to day trade so don't buy into it personally but each to their own.

Data seems to be leaked early (or at least traded upon) regularly, bank shares moved even earlier today. FCA should investigate and string them up.

[mani2013] 12/9/2017 22:36

MJ,

I am also holding GSK stock, but am short the CFDs to hedge my holdings against the current downtrend on the Daily chart. I am waiting to exit the short.

I will refrain from discussing GSK charts here as this is an NG forum :)

[mani2013] 12/9/2017 22:17

prewar...

Yes and No. Let me see if I can try and explain it.

You may be right. It is perhaps due to the correlation that the price has moved. Many traders trade on fundamentals and trade 'with the news'.

I trade with Technical Analysis (TA), the premise of which, is that, at any given time, the prevailing price of any instrument is the price agreed between the buyers and sellers of that instrument at that point in time. These buyers and sellers have analysed all known (and even unknown, as I will show later) data that affects that instrument before deciding on a price. The price point is effectively the balance of views between the buyers and sellers, which get imprinted on a chart. The chart therefore discounts all known (if not all) information about that instrument and shows the overall sentiment (i.e negative if prices going down, positive if going up). In TA, we use this overall sentiment to predict which way the price is MOST LIKELY to move.

In my setup, I view News (world, national, corporate) as exogenous events i.e events which are deemed unexpected and capable of changing the widespread market view e.g a bomb going off somewhere, or better than expected corporate results, election outcomes etc. The wider markets then have to 'adjust' to these 'unexpected' news.

But in my 26 years of research and experience, I have found that most 'exogenous' events are not entirely unpredictable. To some extent their effects can be forecast in advance from the charts. Someone (or a group of people) somewhere knows something (either as a result of insider knowledge, or some very detailed and exhaustive analysis) that the wider market does not know yet and has decided to act on it i.e either to buy or sell. Their actions will create a supply or demand imbalance and an adjustment on the price point which will show up on the chart.

Let me show you an example that happened today. I was day trading National Grid on the 1 min chart this morning and was long, capitalising on the small uptrend on the 1M chart from 08:19 to 09:20. All of a sudden a relatively large down move (usually caused by a large sell order which 'swells' up liquidity on the SELL side, thereby creating supply and therefore lower prices) occurred at 09:21, triggering my stop loss and in effect shorting the stock. The down move continued till 09:46, breaking the uptrend on the 1m as well as the 5m and setting the stage for a larger downtrend throughout the day.

My point is that the selling started at 09:21 (you can check the 1M chart). The inflation figures didn't come out till 09:30. Someone somewhere already knew something that the rest of the market did not, and decided to sell. Those participants watching the charts (like myself) saw the reaction imprinted on the chart and went short, well before the inflation figures were announced. The rest of the market reacted at 09:30.

I have observed such behaviour on the charts time and time again, in all timeframes. There are clues well in advance of the actual moves, even before major selloffs in the market. It got to a stage where I completely 'switched off' all news and started trading exclusive from the charts, completely objectively and without any particular bias, just following what the charts tell me and using stop losses to protect myself from truly unexpected exogenous events.

I hope the above gives you a better understanding of how the charts do in fact predict macro-economic drivers, or at least their anticipated outcome.

[prewar] 12/9/2017 20:40

mani, imv only, the drop off today as a result of higher inflation data than expected released today thus creating increased expectation of interest rate rises. Gilts prices go down and NG share price highly correlated (can see this in the chart above).

Does your historic chart predict this sort of macro-economic driven change?

[mj19] 12/9/2017 19:56

Thanks for the post let's where we go from the 950s close today. Very informative, not sure what to buy in the current market I hold gsk only at the moment