LLLL.com market "timing"

filter · 11-12-2007, 02:45 PM

I posted this in the LLLL.com sales report thread - now thinking it may be an interesting topic for some more random discussion here so as not too clutter up that busy thread too much more!

http://www.namepros.com/2319742-post251.html

Originally Posted by filter

I expect (just guessing of course) that prices will tend to move in something akin to a "three steps forward, two steps back" pattern ... If that's the case (in a very approximate sense) then selling a few on the "third step forward" while buying more on the "second step back" would be a nice trick to learn.

But it's probably delusional to expect a reliably predictable trading pattern to persist for long (in theory, the peaks and valleys will be smoothed over as people start selling rather than buying that much sooner before the peak in anticipation of the "two steps down" phase and likewise buying on the dips to the point where there aren't dips to buy on anymore). So buy and hold strategy makes good sense vs. trying to successfully "time" any apparent rhythm in this fast-moving market ...

Now to respond a bit to my own post ...

????: NamePros.com http://www.namepros.com/short-domain-discussion/395119-llll-com-market-timing.html

The "unlikely for stable pattern to persist since it will be predictably traded into non-existance" is just one (old but solid) school of thought. It is based in part on the assumption that financial markets are shaped primarily by the aggregation of many individual decisions based on rational calculations. In reality there are many other factors in play in most markets at any given time - and the basic assumption that groups of individuals will tend to make purely rational calculated economic decisions is questionable to say the least. (Google "behavioral economics" for more on that angle ...)

Given that in some markets (such as commodities trading and foreign exchange) so-called "technical analysis" often trumps "fundamental" (bottom-line "earnings-ratio" and dividends type analysis - ie more along the lines of traffic and PPC revenue in domainers' universe) ... seems like the LLLL.com might be one of those types of markets where "technical" analysis of price movements might be usefully applied - or at least would be an interesting exercise.

Anyone care to share more ideas along these lines ?

npcomplete · 11-12-2007, 03:30 PM

Market timing is difficult in most markets. For example, in stocks and other financial instruments, the typical price pattern is saw-tooth: Long ramps up in price followed by quick declines.

Other things to consider are the usual difficulties in detecting a known pattern. For example, the famous "head and shoulders" pattern in markets are best identified after a change in the second derivative on the third "hump" in the proposed head and shoulders pattern, and even then it is hard to tell whether this is a real inflection prior to a market correction, or just a temporary slow down that will be followed by other price increases (digesting the market moves before moving on).
????: NamePros.com http://www.namepros.com/showthread.php?t=395119

I don't know if I agree on the statement that technical trading trumps fundamentals. In the markets I look at the charts for timing and hints of future market moves, and then if I see something interesting I look at fundamentals to confirm a buy/sell. In the recent markets we saw this when the DOW was around 14000 a few months ago. The charts didn't look that strong, and the market fundamentals looked worse, so I moved to cash. Also, all the market analysts were screaming DOW 15000 as we were hitting 14000, and getting all glassy eyed. We see some of this glassy eyed speculation in some domain extensions and categories... which is a warning sign. As they say in the markets "trees don't grow to the sky".

Marc

accent · 11-12-2007, 05:07 PM

There is a fundamental (!) difference from the stock / bond market - Domains are individual, both in that each is different (although there are rough categories), and more importantly for this discussion, each sale/buy is different. You may, in todays LLLL.com market sell a lower grade name for two or three times as much if you are willing to put a little time and effort into it. And as someone mentioned in another thread, you incur a substantial penalty for selling a large number of domains at the same time.

Small investors can use these conditions to their advantage by buying low and selling high, but I don't think larger investors could move in and out easily enough to be worth while.

filter · 11-12-2007, 05:24 PM

Excellent points - thanks for sharing your insight! I think this is fascinating stuff, and the LLLL.com market may be a great laboratory in which to study some of these ideas.