Imagine the marketplace affected past times 2 relatively independent vectors. One vector describes directionality: the "trendiness" of the market. The other vector describes volatility: the aeroplane to which markets vary roughly a fundamental price.
The firstly vector describes the aeroplane to which marketplace participants are reassessing value inward the auction marketplace.
The minute vector is closely connected to book in addition to reflects who is currently active inward the marketplace.
Both vectors are distributed inward a non-stationary way through the trading day. That is, measures of trendiness in addition to volatility present dissimilar way in addition to criterion deviations through the day.
Early identification of when the vectors shift their way in addition to criterion deviations is of import inward recognizing the kickoff in addition to ending of trading ranges in addition to marketplace trends.
Many trading problems happen because traders merchandise the vectors equally if they are stationary: they automatically assume that past times levels of management in addition to volatility volition hold out accurate estimates of hereafter management in addition to volatility.
In other words, markets alter their demeanour faster than people tin dismiss alter their minds.
And that is why intraday trading is in addition to hence difficult.
.
No comments:
Post a Comment