95% of traders fail???

[marketsurfer]

Quote from iceman1:

bbmat...

for a guy who purports to know a lot, and have insight into the markets and traders.... your posts on small traders and failure leaves much to be desired!!! In fact, your "argument(s)" in support of your proposition couldn't win a re-trial of the O.J. case.

I will add, having traded for many years off-floor before it became the "thing to do" and before there were more than maybe 50 hedge funds... that a primary reason for losses and "failure" ala this thread is because hedge fund traders and their ilk are NOT trading their OWN money! :eek: And in keeping with your anecdotal comments/proposition that small traders (too often) fall prey to (their) emotions and react/over-react.... thus incurring mounting losses while random walking through the equities/futures markets... there is NO doubt that trading one's own capital more often than not greatly exacerbates anxiety, fear and greed... and can spawn losing habits.

Please don't tell us that because mangers get paid on performance etc. etc that this equates with actually placing your own capital at risk each day. Nope it sure doesn't!

Trading OPM is not the same.... period!!!!

Do you REALLY tihnk commissions are the primary reason for alleged failure?

LOL

Have a good 2004...

Ice

nicely said, iceman. bbmat is simply parroting his interpretation on wm. gallacher's book "winner take all". it's almost down to the exact syntax of several sentences in the book. it is one of my favorite books on the market, also--- therefore i know it well.

LOL !

surfer

 

[optgamvol]

very right,

I like Winner Take All for its critical remarks and dealings with the futures industry. At least one honest guy. If the fact that I agree with Galacher disturbs you then I cannot change it. But why don't you tell all of us that you then seem to be the single guy on our planet earth who did not build up his opinion through readings and studies of the markets and its literature?

I like the book and can recommend it to all. It is a more useful read than 100 technical trading books together. BTW, I was the guy who first mentioned my agreement with Galachers thoughts and I pointed it out clearly and did not beat behind the bush. But all text I produced here is original and cannot even pass as paraphrases. If you disagree, let me know the page number and paragraph, I am happy to congratulate you for your eagles eyes, should you be right, and I am willing to give credit to the author should I have unconsciously used similar language or terms to describe the same point.

(Gosh this must be an example of people losing the big picture in favor of picking needles in a hey stack)

 

[marketsurfer]

Quote from bbmat:

very right,

I like Winner Take All for its critical remarks and dealings with the futures industry. At least one honest guy. If the fact that I agree with Galacher disturbs you then I cannot change it. But why don't you tell all of us that you then seem to be the single guy on our planet earth who did not build up his opinion through readings and studies of the markets and its literature?

I like the book and can recommend it to all. It is a more useful read than 100 technical trading books together. BTW, I was the guy who first mentioned my agreement with Galachers thoughts and I pointed it out clearly and did not beat behind the bush. But all text I produced here is original and cannot even pass as paraphrases. If you disagree, let me know the page number and paragraph, I am happy to congratulate you for your eagles eyes, should you be right, and I am willing to give credit to the author should I have unconsciously used similar language or terms to describe the same point.

(Gosh this must be an example of people losing the big picture in favor of picking needles in a hey stack)

it doesn't disturb me at all. i agree with gallacher on 90% of what he says in the book. please learn what the word --syntax--means http://dictionary.reference.com/search?q=syntax

in addition, i have been recommending gallacher's book for quite some time here-- you are not the first to mention it.

best,

surfer

 

[OddTrader]

Quote from bbmat:



if I understood your question correctly then I would say that I strongly disagree with such traders that you mentioned. How do you want to make money without an edge. As a small trader on is already at a disadvantage compared to large traders and hedgers (for the reasons given in one of my previous posts) so what else will contribute to profiting than having an edge?
Whatever risk management you use, whatever timing you use, whatever leverage you use (all of those of course important variables), but if you have good reason to believe that probabilities favor the market to go up and you go long, and if one can be right in such way more often than wrong then this is the edge I mean. Without such edge loss is a certainty.
In essence, being long when markets are long AND being short right before markets go down. If one can be in tandem with the markets more often than against the market that is an edge because it would mean that such trader puts forth good analytical skills (over the long term this can be considered a valuable skill as the probability of luck would become insignificant). The fine tuning comes in later and decides over a little less or more profits taken from those trades. But without an edge such as that money is for sure to be lost in my opinion.

Thanks Bbmat for the feedback!

 

[OddTrader]

Quote from bbmat:

I like Winner Take All for its critical remarks and dealings with the futures industry. At least one honest guy.

Any other good books (non-TA stuff) related to trading (and hedge funds alike as well, if you don't mind) you would suggest?

 

[iceman1]

Quote from marketsurfer:

nicely said, iceman. bbmat is simply parroting his interpretation on wm. gallacher's book "winner take all". it's almost down to the exact syntax of several sentences in the book. it is one of my favorite books on the market, also--- therefore i know it well.

LOL !

surfer

thanks MS...

I am not familar with that book.. will check it out.

... have a healthy & successful 2004

I

 

[OddTrader]

From one of the reviewers:

http://www.amazon.com/exec/obidos/t...e_h/104-6209799-4673557?v=glance&s=books&st=*

Q

Gallacher is neither totally wrong nor totally right in his methodical destruction of technical analysis.

What he overlooks is that fundamental analysts and many technical analysts actually have a similar problem: attempts to profit from predicting the future ultimately prove futile because the higher the probability that you are right, the lower the probability that you can make money off that knowledge before others do.

Pure fundamental analysts are worse off then pure technical analysts, because it is impossible to get all the hidden factors right and not get hit by surprise developments along the way, whereas a pure technical analyst will at least have a graphic representation in chart form that makes use of all traders' and analysts' opinions.

The true way to use technical analysis is not to try to predict the future, but only to measure probabilities of an event occurring, and then to place bets only when probability shows conditions to be favorable.

That is to say, if event A happens under certain conditions, then the probability of profitable scenario B occuring, while still uncertain, may have increased enough to make the trade a worthwhile risk.

Many chart patterns only follow through 50% of the time- but they can still be used profitably because rewards reaped can exceed risk taken through proper money management.

UQ

 

[optgamvol]

Oddtrader,

as everybody knows, there will always be proponents of TA and fundamental analysis. Some believe in this others in that.

But what I think the reviewer got wrong is that TA is related to the calculation of probabilities. This, in my opinion, is exactly what fundamental analysis tries to attempt: You look at the status quo and you accept that all available information is already priced into a given security and you form your own opinion on the possible future development of all variables that might influence the future price of such security. This in iteself requires the quantification of news, political events, correlated commodity price developments into probabilities. One then comes up with a binomial tree and separate probabilities for each possible outcome. Solving binomial trees can be looked up in each classic textbook. (This is a very simplistic view of fundamental analysis)

Of course, each individual will come up with different expectations of the future price, otherwise modern markets would not be able to function properly. Markets need people with different price expectations otherwise tradable prices (in agreement with the bid and ask) could never be determined. So, no form of analysis is a holy grail, and I am not trying to propagate that.

However, I still favor FA as TA is in iteself deceptive. TA does not deal with probabilities but with past prices. There is some merit as to the usefulness of TA when it comes to trend recognition. However, I am not getting into this as numerous other (much better) papers deal with such matters. What I find misleading about TA is that it utilizes indicators and values derived from past prices that have no influence on future prices (except in the very short term). TA is absolutely USELESS to come up with an idea how prices might be 3 months hence. What I find particularly questionable is how many look at charts to come up with an idea how prices might develop from now. Charts, in my opinion, have no more value than merely displaying past prices in graphical form. How can you derive trade ideas from looking at a 3min. bar chart when a 5min bar chart gives totally different entry and exit signals? This is what I do not understand. A MA or bands (Bollinger or what have you) look different depending on what time frame you look at.

AGAIN: There is no free lunch in financial markets (first sentence in each 101 class) and therefore it is essential for each trader to from his own opinions of the market. If one is wrong, money and risk management comes into play in order to cut losses short/to really exit a trade when the stop/loss is hit. Only being right more often than wrong in the markets can over the long term assure profitability.

THose are my opinions and to appease Marketsurfer, yes, hundreds of other traders, including Galacher and Tudor Jones have come to such conclusion long before I did.

Quote from OddTrader:

From one of the reviewers:


Gallacher is neither totally wrong nor totally right in his methodical destruction of technical analysis.

What he overlooks is that fundamental analysts and many technical analysts actually have a similar problem: attempts to profit from predicting the future ultimately prove futile because the higher the probability that you are right, the lower the probability that you can make money off that knowledge before others do.

Pure fundamental analysts are worse off then pure technical analysts, because it is impossible to get all the hidden factors right and not get hit by surprise developments along the way, whereas a pure technical analyst will at least have a graphic representation in chart form that makes use of all traders' and analysts' opinions.

The true way to use technical analysis is not to try to predict the future, but only to measure probabilities of an event occurring, and then to place bets only when probability shows conditions to be favorable.

That is to say, if event A happens under certain conditions, then the probability of profitable scenario B occurring, while still uncertain, may have increased enough to make the trade a worthwhile risk.

Many chart patterns only follow through 50% of the time- but they can still be used profitably because rewards reaped can exceed risk taken through proper money management.

UQ

 

[OddTrader]

Quote from bbmat:

Oddtrader,

as everybody knows, there will always be proponents of TA and fundamental analysis. Some believe in this others in that.

...

However, I still favor FA as TA is in iteself deceptive. TA does not deal with probabilities but with past prices.

Thanks Bbmat for the input. And here are my speculative views (worth total up to 20 cents):

1. TA (according to whatever definitions) would not be the only analysis which is based on past information. Basically all types of quantitative analysis (using maths, stats, combination, etc.) including such as fundamental, flow, economic, econometric, etc. would be also based on past information.

2. TA probably would be mainly based on prices. However, all the decisions made according to other analyses (FA, quan and else) would be still summed up and reflected on prices, ultimately.

3. Some would say FA (and other analyses) lead the upcoming prices and TA follows these prices. However, it would be possible that all analyses (including TA, FA and others) lead the upcoming prices, and all analyses follow these updated prices.

4. Perhaps TA is not able to predict prices effectively and precisely. Neither other analyses could. (Roughly according to a previous report I read.)

5. As TA needs to adjust decisions periodically (daily, hourly, etc.), other analyses would do their adjustments periodically as well.

6. Most likely all analyses could have individual merits in predicting upcoming prices (in various timeframes), all with limited certainties, because they are working on the same thing - the predictions of upcoming prices. (Neglecting TA completely wouldn't be a highly smart move, imo.)

7. Perhaps an integrated approach (as suggested by Callim Henderson in Currency Strategy - The Practitioner's Guide to Currency Investing, Hedging and Forecasting) combining all analyses would provide a better solution.

 

[dbphoenix]

Quote from bbmat:

TA is absolutely USELESS to come up with an idea how prices might be 3 months hence.

But then, so is fundamental analysis. So I see no particular edge stemming from its use.