A journey towards successful trading...
- Thread starter Traveler
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First, let me start with the caveat that I am not really qualified to make any observations at this point because up until very recently I have been a consistent loser in the financial markets.
Having said that it seems to me that there are allot of systems that work, the question is can you get them to work for you. It seems that success is a finding the right system for one's personality/ability to be disciplined/manage risk etc. How else can one explain how one trader can make money using his system while another cannot using the same system.
I think being open to various methods (reading as much as one can about the market and how others have played it), and trying to tinker and incorporate what works for you is one way to come up with a method or "edge" that works for you. Perhaps the edge isn't really the system used for entering and exiting trades after all but rather the traders personality combined with what has to be a somewhat generic edge (I mean how many really find a system that has never bee tried before?)
One other thing that I have observed is that a system needs to be an organic thing, and is always a work in progress (probably not a comforting thought but makes sense that adaptability would be a key requirement for success of a method over time).
As far as the gambling issue goes, I know we want to believe that we are playing the right odds in this game but it is still a gamble as life is a gamble. Just as in Poker one playing the best odds can get crushed at the River, so unexpected things happen in the market (like 9/11) which can not be reasonably factored in to the odds on a consistent basis. Clearly though there is advantage to playing the right odds as shown by occurrences of Market Wizards and the same faces at the final table on the WPT games.
Having said that it seems to me that there are allot of systems that work, the question is can you get them to work for you. It seems that success is a finding the right system for one's personality/ability to be disciplined/manage risk etc. How else can one explain how one trader can make money using his system while another cannot using the same system.
I think being open to various methods (reading as much as one can about the market and how others have played it), and trying to tinker and incorporate what works for you is one way to come up with a method or "edge" that works for you. Perhaps the edge isn't really the system used for entering and exiting trades after all but rather the traders personality combined with what has to be a somewhat generic edge (I mean how many really find a system that has never bee tried before?)
One other thing that I have observed is that a system needs to be an organic thing, and is always a work in progress (probably not a comforting thought but makes sense that adaptability would be a key requirement for success of a method over time).
As far as the gambling issue goes, I know we want to believe that we are playing the right odds in this game but it is still a gamble as life is a gamble. Just as in Poker one playing the best odds can get crushed at the River, so unexpected things happen in the market (like 9/11) which can not be reasonably factored in to the odds on a consistent basis. Clearly though there is advantage to playing the right odds as shown by occurrences of Market Wizards and the same faces at the final table on the WPT games.
Traveller,
I'm assuming that you're specifically looking at daytrading stocks or there abouts. With your skills as someone who consistenly exploit the edge with discipline, perhaps you might want to look into options trading? I don't mean trading by buying premium but doing spreads of various types and adjusting positions and keeping the delta neutral etc. Granted that it's still not easy, but options can be crafted to give you a absolute predefined "edge," or at least a well defined win/loss ratio.
Also, it's been said that taking advantage of volatility is a lot more predictable than defining direction in stocks. Again, it's not easy and some will say there is absolutely no edge in trading options off the floor but good gamblers who constistenly apply the correct risk/reward usually do a pretty good job of adjusting options positions and recognizing things that are out of line and crafting ways to take advantage of them.
I know of a few friends who have gone from successfully betting on the horses to doing options spreads with good success. That may not mean very much but it seems that it fit their personality and approach to such things.
Good Luck!
I'm assuming that you're specifically looking at daytrading stocks or there abouts. With your skills as someone who consistenly exploit the edge with discipline, perhaps you might want to look into options trading? I don't mean trading by buying premium but doing spreads of various types and adjusting positions and keeping the delta neutral etc. Granted that it's still not easy, but options can be crafted to give you a absolute predefined "edge," or at least a well defined win/loss ratio.
Also, it's been said that taking advantage of volatility is a lot more predictable than defining direction in stocks. Again, it's not easy and some will say there is absolutely no edge in trading options off the floor but good gamblers who constistenly apply the correct risk/reward usually do a pretty good job of adjusting options positions and recognizing things that are out of line and crafting ways to take advantage of them.
I know of a few friends who have gone from successfully betting on the horses to doing options spreads with good success. That may not mean very much but it seems that it fit their personality and approach to such things.
Good Luck!
So how have the successful traders here found a method that works.
Simply put...hard work.
"Remember that you are playing against tens of thousands of professionals. Why should you be any better? If it were that easy, there would be a lot more millionaire traders"... J. Schwager-The New Market Wizards...pg.463
Let me re-phrase that...it's not fair to say that "trader A" made it and "trader B" failed, because "trader A" worked harder. Obviously, natural talent plays a role.
It would be like saying Tiger Woods made it and you didn't because Tiger worked harder. I don't think anyone will disagree that Tiger has some natural talent.
So, I guess my point is, that talent helps, too. And, in some cases, could be the only reason a trader succeeded.
Simply put...hard work.
"Remember that you are playing against tens of thousands of professionals. Why should you be any better? If it were that easy, there would be a lot more millionaire traders"... J. Schwager-The New Market Wizards...pg.463
Let me re-phrase that...it's not fair to say that "trader A" made it and "trader B" failed, because "trader A" worked harder. Obviously, natural talent plays a role.
It would be like saying Tiger Woods made it and you didn't because Tiger worked harder. I don't think anyone will disagree that Tiger has some natural talent.
So, I guess my point is, that talent helps, too. And, in some cases, could be the only reason a trader succeeded.
With your skills as someone who consistently exploit the edge with discipline, perhaps you might want to look into options trading? I don't mean trading by buying premium but doing spreads of various types and adjusting positions and keeping the delta neutral etc. Granted that it's still not easy, but options can be crafted to give you a absolute predefined "edge," or at least a well defined win/loss ratio.
I was about to write that you won't be given an edge on a message board when I read agora's post. Maybe not an edge but you won't get better advise anywhere.
You have defined risk in a hedged position and the ability to profit on moves via the sale/purchase of other options and stock.
If you are a successful gambler you most certainly have discipline and are miles ahead in your quest to trade. Start with small size, no paper trading. There is no substitute for experience, none.
I was about to write that you won't be given an edge on a message board when I read agora's post. Maybe not an edge but you won't get better advise anywhere.
You have defined risk in a hedged position and the ability to profit on moves via the sale/purchase of other options and stock.
If you are a successful gambler you most certainly have discipline and are miles ahead in your quest to trade. Start with small size, no paper trading. There is no substitute for experience, none.
As an older person who long ago went to Vegas for other than gambling, I did have an unusual experience.
If you can go back many years, there were single deck 21 games. My visit was an academic one related to rewriting a book thegov't had paid for and gotten an unsuccessful result. we as scientists were there for a while
and naturally we formed into groups to check out the place. Because I lecture on maths I was very familiar and terrifically intregued with the basis of "Beat the dealer". Maybe Thorpe was the author.
Well I did your three steps according to "Beat the Dealer" but only for a week everyday. Silver dollars were used then I got 10 to start and never looked back. I switched to ice buckets and gave my colleagues free dips. I remember people at the arch shaped tables screaming at me.
I am extremely methodical and I can read with almost 100% comp at 1400 wpm. The combination of the three steps you mention using 5's theory is sort of like playing checkers as a I remember it. They used crickets there and clicked them behind the employee. My record was 4 per hour and because people were caustic towards me and thought I was taking their money, I was requested to take a break for a while and have a free mealwith my friends. We did discuss what was going on most of the time and it was not to bright on my part to offer help on their cards.
I know this is just humorous for you.
I cannot imagine using your three steps on the markets. I know why too.
1. In markets an edge is not a good idea for several reasons. The single stopper reason is the statistical basis of the market compared to 21 or gambling. 21 and gambling have rules and defined ingredients. The market does not for one simple reason. This is the ingredient labelled people. A subordinant reason is what maths apply to the individual participating to win. The maths are not macro math that subsume the universe of participants. as you can see from these points onward it really gets crappy for step one. I do know that "an edge" is a defined thing that phenomenally is described by market stuff (my general word for all the aspects). The problem is to connect "the edge" to the individual participant. The two key factors "time" and the "sensory perception set" are not intellectually manageble given the NLP task to clean up the individual.
There is a sweet and convincing alternative.
2. method: Precision and faith emphasis. In gambling you keep winnings in your favor by betting adjustments. In investing all you do is stay on the right side of the contemprary trend. As you do the progression that is required to get the right to trade; you simply learn to be on the right side of the trend when the market tells you when you are allowed to play. No faith required when you are allowed to play.
3. Money velocity replaces bet sizing. There is no capital sizing in trading. You have the capital; you use it to increase your money velocity to an optimum. Optimum is attained by your track record continually increasing the take over time. Time is the key. You determine continually the next skill improvement steps that arerequired. You learn to always increase the percentage of time you are allowed to participate in the market. As you spend more time making the profits that are available, you increase your money velocity.
I will, not interrupt your theme here in the sense that I would redirect the theme. you just need to know that making money can be pusued in a logical manner and that that manner is not like a gambling effort for basic reasons. The two endeavors are not comparable once you get to making money over time.
Hey Guys & Gals,
First let me previse this short story to say that I have not yet traded, and won't be in a position to do so for another 2-3 yrs.
On the subject of gambling, I'd like to throw out a perspective you may not have envisioned. I'm sure all of you successful traders have heard and been told as a matter of fact that of course you can not win in the long run, its a zero sum game, blah,blah, blah. These naysayers know this to be an immutable fact.
Yet on a regular basis you exploit the edges you have developed to increase your bankroll and provide a nice lifestyle for yourself. Even despite the fact that those who are "SMARTER" than you such as professors in finance departments know it can't be done.
Much the same could be said of casino gambling. We all know that blackjack and poker can enrich a skilled player. But know way, know how , can you ever beat craps, roulette, and baccarrat on a long term basis!
Well, at least from my experience I found this may not be true. I say "may" not be true because even though I played Baccarat successfully for 5yrs fulltime - is that the long run ? I know the casinos long run is 24/7/365 to infinity and they do reach mathematical certainty. But for players we all dead in the long run aren't we? This always nagged at me dispite my success.
The system I used in Baccarat was a combination of a simple count , trend analysis , and pattern recognition. It was developed around the assumption that casino dealers can never perfectly shuffle the 8 decks of cards hence you exploit the repeatable patterns that occur from shoe to shoe.
Not to be boastful, but to illustrate to those who know it can't be done- here is what I did over the almost 5 yrs in Vegas. First run I took $150 and tweeked the system until it worked for me, added another$100 .This all took about 6 mths with no ROI. With that $250 bankroll($5 betting unit) over the next 4 yrs I took home over $116,000. I then took 6 mths off and came up with a better money management formula. I started out this time with a $25,000 bankroll($500 betting unit)-WOW I'm going to own Vegas!NOT! After making over $23,000 in less than 2 mths I was politely told I could no longer play Baccarat- any other game was OK for me to play but not Bac.
So I submit it can be done, you can exploit these games that people say can't be beat. (I know others that beat craps and roulette on a regular basis through manipulating the throw of the dice to picking up a roulette dealers signature respectively.)
Don't any of you traders get excited about this (I'm sure none of you are) because worked out on hourly basis on my 1st run I made about $2.75 hr. The 2nd run was very profitable at about $100 hr but was very short lived.
First let me previse this short story to say that I have not yet traded, and won't be in a position to do so for another 2-3 yrs.
On the subject of gambling, I'd like to throw out a perspective you may not have envisioned. I'm sure all of you successful traders have heard and been told as a matter of fact that of course you can not win in the long run, its a zero sum game, blah,blah, blah. These naysayers know this to be an immutable fact.
Yet on a regular basis you exploit the edges you have developed to increase your bankroll and provide a nice lifestyle for yourself. Even despite the fact that those who are "SMARTER" than you such as professors in finance departments know it can't be done.
Much the same could be said of casino gambling. We all know that blackjack and poker can enrich a skilled player. But know way, know how , can you ever beat craps, roulette, and baccarrat on a long term basis!
Well, at least from my experience I found this may not be true. I say "may" not be true because even though I played Baccarat successfully for 5yrs fulltime - is that the long run ? I know the casinos long run is 24/7/365 to infinity and they do reach mathematical certainty. But for players we all dead in the long run aren't we? This always nagged at me dispite my success.
The system I used in Baccarat was a combination of a simple count , trend analysis , and pattern recognition. It was developed around the assumption that casino dealers can never perfectly shuffle the 8 decks of cards hence you exploit the repeatable patterns that occur from shoe to shoe.
Not to be boastful, but to illustrate to those who know it can't be done- here is what I did over the almost 5 yrs in Vegas. First run I took $150 and tweeked the system until it worked for me, added another$100 .This all took about 6 mths with no ROI. With that $250 bankroll($5 betting unit) over the next 4 yrs I took home over $116,000. I then took 6 mths off and came up with a better money management formula. I started out this time with a $25,000 bankroll($500 betting unit)-WOW I'm going to own Vegas!NOT! After making over $23,000 in less than 2 mths I was politely told I could no longer play Baccarat- any other game was OK for me to play but not Bac.
So I submit it can be done, you can exploit these games that people say can't be beat. (I know others that beat craps and roulette on a regular basis through manipulating the throw of the dice to picking up a roulette dealers signature respectively.)
Don't any of you traders get excited about this (I'm sure none of you are) because worked out on hourly basis on my 1st run I made about $2.75 hr. The 2nd run was very profitable at about $100 hr but was very short lived.