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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Naz4500 who wrote (8576)	5/27/2000 2:34:00 PM
From: Sir Francis Drake	Read Replies (1) \| Respond to of 18137

<<All that is needed is volatility, which we have plenty of>> This is the key. A good trader can make money in markets up and down. But he needs one key ingredient - volatility. Without it, there is no trading. The problem with TRUE bear markets (as opposed to cyclical corrections), it that volume and VOLATILITY die. When both volume and volatility die, it becomes hard to even scalp. I am sure many have had the experience of trying to trade a stock that just sits there without any real movement - it becomes a game of nerves w/ the MMs, and lacking volume, you can put out your offer over an ECN, and it will just sit there for hours. You are lucky to scalp an 1/8 twice in the day - and I mean LUCKY. And you can't even compensate with a large trade, because there isn't enough volume to absorb it. Just the pits. Now, we haven't had a true bear market since the 70's - and should one hit, it will not be a happy time, for traders or investors... the difference perhaps being that traders won't (hopefully) lose their money on the way down into a real bear (the downside of B&H investors), but traders will make little if any money trading a true bear market. The thing that has charaterized this correction so far (not a bear as yet), has been record volatility. I say: traders don't know how good they have it right now. If you think this is bad, wait until volatility dies - then you'll cry the blues. A side question for a different discussion, would be this: how will a MODERN bear market differ from a traditional one? This is not an idle question. We are always cautioned to never think "it will be different this time". But I sincerely believe that in some respects, it WILL be different this time. The reason is that in all previous bear markets (I don't mean going back 2000 years, just the last 200 or so), the market environment was markedly different. First, the markets were more isolated. It was possible to have a bear in one country without significant impact on another. Then, as trade spread, you could have a crash in the U.S. eventually get exported all over the world - but it would take time (1929). Now the movements are very rapid (to wit: 97, 98 Asia, Russia crises). However, I honestly think that the behavior of the market now is more unpredictable, simply because there are many more factors impacting it than in the past - so you can't just take the past patterns and apply them here. Further, there is a lot more money in the equity markets than ever before. The effects of that are not "proportional". It used to be, that a few big key players could really impact the market - that is no longer true, because there are many more players, and by % even the big players are smaller proportionately to the overall market. Another key difference is that the trading environment is radically different. Just one factor alone is hugely important: ECNs - now the individual trader has the ability to represent himself in the market in a way never possible before - so he is no longer at the mercy of house inventory and representation with all the conflicts of interest attendant. The regulatory environment is different too - stuff like Manning rules etc. In short, I doubt that the rules that applied to the last 5 bear markets so reliably, would still apply now - somehow I think that this time will really be different - I just wish I knew "in what way different", LOL! I'm not saying that bear markets have been somehow abolished, but rather that the meaning of the term "bear market" perhaps needs to be re-evaluated. We may have a "modern" bear market and simply not recognize it until some time later. This is not just a question of definition, semantics and word-play. What we need perhaps is a new analysis, new vocabulary for the new behavior in the market - so, f.ex. we may ask "how does a MODERN bear market look?" Morgan