Are trader's skills really important?

FIREHAWK:

"These are not new questions and have been studies in academic circles for many years, they ARE legit questions. Then there are those who just choose to believe with little or no evidence."

Wonder why I left college? Because I felt academic is total garbage, people who ask those questions are not traders, they are on the bench. Real traders take pride in what they do for a living, and take it personally when people who don't trade ask those questions.

"Tell me something that I don't know."

There are a lot of things you don't know, and never will, until you throw that luck versus skill crap out of the window and actually play the game. Until you actually make some real trades, you are a newbie, and you are stupid, I was stupid (and still are, ever once in a while), everyone else who started were stupid, even Tony Oz was stupid when he first started, that's what I am trying to tell DT here.

"They help us to form RELIABLE info and opinions about the market, about life."

No it doesn't. Life is not about stats. Trading is definitely not the most likely way to succeed in life if you are talking stats, you are far more likely to lose than to win. If you really need hard evidence that trading is pure skill no luck, I am sorry, it is not there, if the guy at my firm for 4 years can blow up, if those market wizards can blow up, so can you.

"But life is not all about "beliefs"."

When you don't believe in yourself, you are already DEAD.
 
>Wonder why I left college? Because I felt academic is total garbage, people who ask those questions are not traders, they are on the bench. Real traders take pride in what they do for a living, and take it personally when people who don't trade ask those questions.

I have no idea what you are talking about. "Real traders" get upset when the market is studies??? These questions are legit topics for academic inquiry. I would think "real traders" would welcome the additional insight. "Pride"??? Well that and a $1.50 will get you a cup of coffee.

"They help us to form RELIABLE info and opinions about the market, about life."

>No it doesn't. Life is not about stats. Trading is definitely not the most likely way to succeed in life if you are talking stats, you are far more likely to lose than to win. If you really need hard evidence that trading is pure skill no luck, I am sorry, it is not there, if the guy at my firm for 4 years can blow up, if those market wizards can blow up, so can you.

Oh yes...how foolish of me...i forgot the laws of math/probs are suspended with regard to the financial market. they don't apply...it's the one place in the universe that is not subject to rational scrutiny. thanks for reminding me...LOL


FIREHAWK
 
First, I'd like to say that:

You can have a good result not because you're good at trading, but because your strategy had worked with some certain market behavior in the past. That market behavior is beyond your control.

I give an interesting example.
We have a following game. Computer program paints the screen with 2 possible colors: red or green, with probability of displaying each color = 50%. You bet what color will be displayed on the screen. If you predict it, you win 10 bucks. If you're wrong - you lose 10 bucks. Program is displaying colors 1000 times in a row. We bet 1000 times.

No matter what strategy you'll use, your expected P/L is zero. Your result depends only on luck or bad luck.

IF the possibility of trend continuation in the financial markets is 50%, THEN trading is a game similar to one presented above. ( I define trend here as some point or dollar price increase or decrease ).

Now we have the same game, but with one exception - the probability of displaying the same color as previous color is 52%.
In this game we can use some strategy. We know, we can have odds on our side. The only logical strategy here is to always bet on the last displayed color.

Can we know what's the expected P/L in this game? Of course, it's (0.52-0.48)x1000x10 = +400 bucks. Odds are on our side!!! We are skilled players! What's the probability that we'll have P/L below zero?

What's the probability of having 500 or less wins in 1000 bets, with probability of a single win=52%? Answer - 10.858%
So, it's possible to lose, even if you're playing with right strategy/system.

The only unknown issue is: what's the probability of trend continuation of specific financial instruments?

It's easy. Take for example Nasdaq100 historical data for the last 5 years. Including intraday quotes! How many 10 point ups & downs there was? How many times 10 point moves had been continued? And you get the % what was the average probability of trend continuation during that period. You can count what's the probability of having the same or less %-prob. of trend continuation in the future for this instrument.

Your profits or losses from trading depend on:

1) future markets behavior - only when it is non-random you have a chance to win,
2) your system - it must have positive P/L with a future market behavior in order to have a chance to win,
3) commissions - even if your system has a positive P/L, your final result can be below zero due to commissions,
4) liquidity - if there's not enough liquidity for your size, slippage costs can destroy your very positive result.
5) price gaps - if they will occur ( danger of trading non-24 hour/day traded instruments ) possible losses can damage your result.

The last three issues are connected with specific financial instruments. Choosing right instrument to trade, is also very important thing.

Those are the basics, fundamentals.

Hitman: I don't think it is a good idea for me to trade without any preparation, knowledge, tests, stats. I don't want to blow up in the first months. Some time ago another wise man, praetorian2 adviced me ( as a newbie ) to trade options instead of futures ( after SEC rule ). Just beacuse he is good at trading options, and he is not good at futures. I just wait for praetorian advice to trade after a glass of vodka, with comment: "hey, it helps me in trading! I tell you DT-waw, after the night in a bar I had a great day, buy a lot put options on Enron and i'm up 15k!" ok it's a little joke :D
My point is, think about what you're saying before you give an advice to somebody, or before you call someone's work as a "shit" or "garbage". The world, people, ideas aren't black or white, Hitman. The only thing which remains unchanged and should be used in every discussion is logic.

When you begin to ask people bringing you evidence that their numbers come from skill or luck, those of us who have invested our blood and sweat into this game take it very personally.

I didn't say that your profits come only from luck. I've just wanted to know, how big was an impact of luck on your results.

If someone invests blood and sweat in the game, in which there's a serious probability that results will only come from luck - then s/he has made a bad decision to invest in this game.

DT-waw
 
***You can have a good result not because you're good at trading, but because your strategy had worked with some certain market behavior in the past. That market behavior is beyond your control.***

Well, then you can say while there may be equally talented and hard working individuals as Bill Gates, if they try to do the same thing they will not even have a fraction of his success. Or how about all those Cisco engineers who became millionaires with stock options, you try to do the same thing, the window is closed long ago.

Your success in everything requires serious commitment and a window of opportunity. I would say it with confidence that while everyone who is super successful did it with blood and sweat, just about all of them enjoyed being at the right place at right time factor as well.

The trader makes the strategy, the strategy doesn't make the trader, the market will always represent new and different challenges, and to survive in this business you need to make adjustments year after year. The rules are flexible, some can be bent, some can be broken, and all you have to know is there are other people out there making a killing everyday, and ask yourself, can I get a piece of the action?

If the strategy is not working, try something new, you are the one who must adapt to the market, the market doesn't have to work with your strategy.

***I give an interesting example.
We have a following game. Computer program paints the screen with 2 possible colors: red or green, with probability of displaying each color = 50%. You bet what color will be displayed on the screen. If you predict it, you win 10 bucks. If you're wrong - you lose 10 bucks. Program is displaying colors 1000 times in a row. We bet 1000 times.

No matter what strategy you'll use, your expected P/L is zero. Your result depends only on luck or bad luck.

IF the possibility of trend continuation in the financial markets is 50%, THEN trading is a game similar to one presented above. ( I define trend here as some point or dollar price increase or decrease ).***

I will be blunt, this example is neither interesting nor educational, it is the type of garbage come from people who don't trade. You forgot to include the bread and butter of every profitable trader, that our losers are smaller than winners, that we win $20 dollars on good trades and lose $7 on bad trades (or whatever the ratio is).

Because there is something called money management you see that keeps us in the game everyday. That we are flexible on our size depend on our read of the situation. Your example without money management is completely a smart a$$ comment.

***It's easy. Take for example Nasdaq100 historical data for the last 5 years. Including intraday quotes! How many 10 point ups & downs there was? How many times 10 point moves had been continued? And you get the % what was the average probability of trend continuation during that period. You can count what's the probability of having the same or less %-prob. of trend continuation in the future for this instrument. ***

Wrong again, you do not need a 10 point continuation to make money, you are carrying a load of baggage from the breakout day's of 99 and breakdown day's of 00, in this market when I see a 10 point move to one way I would rather go for the other direction. Not to mention as a stock trader there are a ton of other factors I can use to make my best guess, news, sector move, leaders, volume . . .

***Your profits or losses from trading depend on:

1) future markets behavior - only when it is non-random you have a chance to win.***

The market is only random to those who don't trade.

***2) your system - it must have positive P/L with a future market behavior in order to have a chance to win.***

I make the trades, and I either adjust myself to the market, or go the way of dinosaurs.

***I don't think it is a good idea for me to trade without any preparation, knowledge, tests, stats. I don't want to blow up in the first months.***

With this much analysis you will never make your first trade.

***The world, people, ideas aren't black or white, Hitman.***

The end justifies the means, either I succeed as a trader, or fail. The P&L is the only thing that defines a trader, nothing else matters.

***I didn't say that your profits come only from luck. I've just wanted to know, how big was an impact of luck on your results.

If someone invests blood and sweat in the game, in which there's a serious probability that results will only come from luck - then s/he has made a bad decision to invest in this game.***

Read your own comments, you are making lame excuses for sour grapes, and that last paragraph tells me that you still don't believe in yourself, and therefore my diagnosis is that you have no chance to make it until you do.

If you start a small business today, no matter how well planned or prepared, you still can't say that you are sure that you will still be running that business in a few years. Hell, even if you have a high paying job you can't say that you will be able to hold that job forever. Nothing in life is certain, what happened to "let me give it my 100% and see what my blood and sweat is worth?".

The greatest discoveries and wonders were made by people who are not afraid of failing, as I said, no matter how well prepared you are, your chance to make it in this trading business is 1 out of 10, and given your lack of capital, I would say you need some serious luck to pull it through.

Should that deter you from giving it all you got? Hell no, you should be posting, in CAPITAL letters, "F___ YOU, HITMAN, I KNOW I CAN MAKE IT, AND I WILL GIVE IT MY BEST SHOT, ALL THE WAY DOWN TO MY LAST BULLET".

And that will earn a lot more respect from me, and double or triple your chance of succeeding in this business.
 
Hitman,

rah rah rah....

you should go work for tony robbins....

i am...

i wish i was...
i can not fail...

who am i...

i am ...

he???

who??

me??

hahahahah?

oh yeah...
 
FIREHAWK,

Careful, you're giving yourself away too quickly. I know, I know, what am I talking about...
 
DT-waw
I have tried to keep quiet reading this thread but I need to get this off my chest.
My very humble, very unsophisticated advice:
Open IB account. Choose liquid, not the most volatile stock (prefferable listed). Start trading 100 shares only. Make sure not to lose more than 30-40 cents a share. On the profit side just make sure not to turn profit into the loss. Do not think about getting rich just follow the rules. That's all you have to do.

There is a firm at Merc (only one with well organized training program for would-be traders). When they let you go into the pit all they want you to do is to get in and out of trades fast no matter whether you lose or profit. If you don't do that even if you made a nice profit you failed. (The owners of the firm are all career traders.)
Do you understand the point???

Magna! Do you think this is going to wrap-up this thread? I don't.
 
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