A Random Walk Down Wall Street

F

FlyingTortoise

Hello everybody. I’ve been actively trading on and off for the past 6 years without much long term success, mostly using momentum based strategies. My lack of success and my recent reading of the book, “A Random Walk Down Wall Street” have cast some serious doubts in my mind about how feasible it is to be successful as an individual day trader. By successful I mean consistently beating the market by a significant margin to make it worthwhile. In the book the author is very critical of the ability technical analysis to produce any information useful for beating the market. Not only that, but he says that there is no momentum in the stock market, that it is only an illusion that the market moves in trends. Apparently he has scientific tests to prove his statements. He also claims that fundamental analysis is basically useless as well, as is the market is pretty efficient. Since a lot of day trading strategies are based on following the trend or other technical indicators, I’m wondering how you guys here feel about this book and these statements and whether anyone here has been consistently successful using momentum or technical analysis in their trading and if not what sort of techniques and strategies are traders who consistently make money are using?
I don’t want to give up on day trading just yet, unless it is truely a futile pursuit.
How many here have been successful in the long term as day traders?
Thank you for the wonderful forum.
 
Quote from FlyingTortoise:

Hello everybody. I’ve been actively trading on and off for the past 6 years without much long term success, mostly using momentum based strategies. My lack of success and my recent reading of the book, “A Random Walk Down Wall Street” have cast some serious doubts in my mind about how feasible it is to be successful as an individual day trader. By successful I mean consistently beating the market by a significant margin to make it worthwhile. In the book the author is very critical of the ability technical analysis to produce any information useful for beating the market. Not only that, but he says that there is no momentum in the stock market, that it is only an illusion that the market moves in trends. Apparently he has scientific tests to prove his statements. He also claims that fundamental analysis is basically useless as well, as is the market is pretty efficient. Since a lot of day trading strategies are based on following the trend or other technical indicators, I’m wondering how you guys here feel about this book and these statements and whether anyone here has been consistently successful using momentum or technical analysis in their trading and if not what sort of techniques and strategies are traders who consistently make money are using?
I don’t want to give up on day trading just yet, unless it is truely a futile pursuit.
How many here have been successful in the long term as day traders?
Thank you for the wonderful forum.
More...

Read the book in college years ago; read it again about 2 years ago. Market is essentially efficient; occasionally arbitrage opportunities occur, but often not for small investors to profit from. Technical analysis is astrology at best, in my opinion. Another author also wrote an analysis on technical analysis few years ago, and his conclusion was that technical analysis failed when subject to any rigorous analysis. I don't remember the title, but the author is Aaron. You can probably search on Amazon. There are opposing opinions in the book "Far from Random." For me, support and resistance are probably ok to use, though I don't have much faith in them either.
 
Quote from FlyingTortoise:

Hello everybody. I’ve been actively trading on and off for the past 6 years without much long term success, mostly using momentum based strategies. My lack of success and my recent reading of the book, “A Random Walk Down Wall Street” have cast some serious doubts in my mind about how feasible it is to be successful as an individual day trader. By successful I mean consistently beating the market by a significant margin to make it worthwhile. In the book the author is very critical of the ability technical analysis to produce any information useful for beating the market. Not only that, but he says that there is no momentum in the stock market, that it is only an illusion that the market moves in trends. Apparently he has scientific tests to prove his statements. He also claims that fundamental analysis is basically useless as well, as is the market is pretty efficient. Since a lot of day trading strategies are based on following the trend or other technical indicators, I’m wondering how you guys here feel about this book and these statements and whether anyone here has been consistently successful using momentum or technical analysis in their trading and if not what sort of techniques and strategies are traders who consistently make money are using?
I don’t want to give up on day trading just yet, unless it is truely a futile pursuit.
How many here have been successful in the long term as day traders?
Thank you for the wonderful forum.
More...


Sorry to say, the problem is YOU, not trading itself.

If/when you break your denial about the repetitive mistakes you make, then you'll make it profitable. (most likely your edge or money management skills suck)

The only question is whether you go the distance or not. And since you have such doubts, you have probably already given up and most likely will not do what it takes to make it long-term.

" Off/On trading for 6 years" is really only a year or 3 of solid trading. Many who eventually make it take 5 years plus of solid trading.

How "expert" do you think you get to be after only a couple of years at anything?

You are like a yellow belt wondering why you can't beat up a 4th degree black belt.
 
Quote from slapshot:

Sorry to say, the problem is YOU, not trading itself.

If/when you break your denial about the repetitive mistakes you make, then you'll make it profitable. (most likely your edge or money management skills suck)

The only question is whether you go the distance or not. And since you have such doubts, you have probably already given up and most likely will not do what it takes to make it long-term.

" Off/On trading for 6 years" is really only a year or 3 of solid trading. Many who eventually make it take 5 years plus of solid trading.

How "expert" do you think you get to be after only a couple of years at anything?

You are like a yellow belt wondering why you can't beat up a 4th degree black belt.
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I don’t doubt that there are traders out there making money, just wondering what types of strategies they are using that are making them money.

I don’t want to spend 5 years and lose all my money if I’m trying to follow a strategy that cannot possible make money no matter how good you are at following it.

I want to become a successful trader, however I still feel very much like a beginner and I’m not sure who or what to trust as far as books, strategies, etc.

Also wanted to get the opinion of professional traders about the random walk book as it was quite disturbing to my trading mindset. I wanted to know if you guys feel the weak form of the random walk theory is true, which just says that past price information cannot be used to predict future price movement? If it is true than it would make a lot of momentum type strategies futile, but there still could be other strategies that could make money with the random walk theory being true. I am still very much a beginner and I’m trying to learn as much as possible, just trying to steer myself in the right direction.
Thank you for the help.
 
What the author says is essentially correct but that doesn't mean people can't make money in the market consistently, and beat the market consistently. The market does one of two things -- moves in volatile waves or trends. Right now we trend. The previous two years have been extreme volatility. A trader has to be able to adjust to both of these markets and occasionally switch back and forth between both market types frequently. The markets absolutely are random and technical and fundamental analysis present more questions than answers but some people can do it, consistently.
 
Quote from FlyingTortoise:

I don’t doubt that there are traders out there making money, just wondering what types of strategies they are using that are making them money.

I don’t want to spend 5 years and lose all my money if I’m trying to follow a strategy that cannot possible make money no matter how good you are at following it.

I want to become a successful trader, however I still feel very much like a beginner and I’m not sure who or what to trust as far as books, strategies, etc.

Also wanted to get the opinion of professional traders about the random walk book as it was quite disturbing to my trading mindset. I wanted to know if you guys feel the weak form of the random walk theory is true, which just says that past price information cannot be used to predict future price movement? If it is true than it would make a lot of momentum type strategies futile, but there still could be other strategies that could make money with the random walk theory being true. I am still very much a beginner and I’m trying to learn as much as possible, just trying to steer myself in the right direction.
Thank you for the help.
More...


OK, then here is a suggestion - use a broker with a good real-time simulator like NinjaTrader or Tradestation. In liquid markets, you can hardly tell it apart from the real thing anyway. Both of these programs generate Performance Reports and stats that help you see what is wrong with your edge or money management. They even plot the "trades" on the chart. And Ninja even allows you to record market data and practice "live" trading on the weekend.

Once you are consistently profitable with the simulator, then at least you have a method and risk management that may be viable.

Then you only have to overcome the emotional transition from sim to live. This is harder than it sounds but is doable.
 
Quote from FlyingTortoise:

If technical analysis is astrology and momentum doesn’t exist and the random walk theory is true then how are traders making money?
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Wall Street doesn't make its big money trading, it makes it selling things that trade.
 
Quote from Random.Capital:

Wall Street doesn't make its big money trading, it makes it selling things that trade.
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That’s what scares me. It’s like those late night infomercial con men selling real estate investment courses, who make all their money telling people how easy it is to make money as a real estate investor and anyone can do it, just give me all your money and I’ll tell you how. Most of them probably never even made money in real estate themselves.
 
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