Becoming the Top Trader
- Thread starter OnGoing
- Start date
If you have friends that can show you then that's it. It's far better than to ask people you don't even know on this forum.
there are 2 types of traders:
1) the gut feeling trader
2) the "systems" trader
Profitable gut feeling traders exit (?) but they are very rare.
I'm a profitable systems trader and can tell you that it is not that difficult to be profitable........if you find your OWN (!!!!) system to trade. It has to have a robust positive expectancy and that is basically it.
What do I mean with "robust" ? The ratio of backtested return per trade divided by the standard deviation of all returns. The number of trades has to be preferably over 50 per year of data tested. Also the maximum gain of a trade should not be more than 10% of all cumulative gains.
If that ratio is below 3, and the expected return per trade more than 1.5% in a liquid market, then I would feel comfortable trading the system. I'm trading about half a dozen of them.
It all boils down to take the time to develop your own ideas and test them in the market. Sooner or later you will find your profitable system.
For my systems, I do not use ANY technical analysis. My approach is more like: "What happens in the following x days when a company has announced a stock buy back". I then backtest all stock repurchase announcements and if I'm lucky, I find a statistically significant return characteristic. Usually, the more intuitive the idea, the better. In this case (i have not verified it) you should find that the stock has a small positive performance after the announcement. I hope you get the idea.....
OLiver
1) the gut feeling trader
2) the "systems" trader
Profitable gut feeling traders exit (?) but they are very rare.
I'm a profitable systems trader and can tell you that it is not that difficult to be profitable........if you find your OWN (!!!!) system to trade. It has to have a robust positive expectancy and that is basically it.
What do I mean with "robust" ? The ratio of backtested return per trade divided by the standard deviation of all returns. The number of trades has to be preferably over 50 per year of data tested. Also the maximum gain of a trade should not be more than 10% of all cumulative gains.
If that ratio is below 3, and the expected return per trade more than 1.5% in a liquid market, then I would feel comfortable trading the system. I'm trading about half a dozen of them.
It all boils down to take the time to develop your own ideas and test them in the market. Sooner or later you will find your profitable system.
For my systems, I do not use ANY technical analysis. My approach is more like: "What happens in the following x days when a company has announced a stock buy back". I then backtest all stock repurchase announcements and if I'm lucky, I find a statistically significant return characteristic. Usually, the more intuitive the idea, the better. In this case (i have not verified it) you should find that the stock has a small positive performance after the announcement. I hope you get the idea.....
OLiver
was speaking to Ongoing.. he got humbled with a 100k loss.. has taken the time to address psychological issues.. is developing a plan.. sounds like he is on the right track to me..
there is no magic bullet for tading.. and no piece of knowledge that once obtained will make you "the top trader".. im not even sure if being the top trader is something to be desired, because then you have to keep being the top trader or else you become a "has been".. in trading, you take one step at a time toward your goals.. sounds to me like Ongoing is doing just that..
-qwik
SethArb: Consultant business made the money...
Prince Philip: I will definitely study the market movements more. The problem is that I am not living in the US and finding good traders around here is difficult. Also, having a balance in life I believe is really important.
Kicking: I believe you get what you want....and if you do not want it you don´t get it.....
...I am convinced to become extremely good, no matter what it takes.
chs245: Thanks for the advices, really appreciate it. I have done extensive testing and have come far, although I feel I have to blend in some other elements to get an edge and your suggestion is a good one I believe.
Aaron: Yes, I use a higly quantitive and analytical approach for chosing the hedge funds and their relative mix in the portfolio. Based on historical means and standard deviations, I compute correlation and covariance matrices for all funds, then setting a goal standard mean based on what is achievable using equal proportions of the funds in the portfolio. Keeping the mean constant and varying the different proportions I run a simulation which looks for the lowest standard deviation. I have made it in excel and it is quite straigtforward. You want to look for hedge funds that does not correlate to achieve a good mean with low standard deviation.
Prince Philip: I will definitely study the market movements more. The problem is that I am not living in the US and finding good traders around here is difficult. Also, having a balance in life I believe is really important.
Kicking: I believe you get what you want....and if you do not want it you don´t get it.....
...I am convinced to become extremely good, no matter what it takes.chs245: Thanks for the advices, really appreciate it. I have done extensive testing and have come far, although I feel I have to blend in some other elements to get an edge and your suggestion is a good one I believe.
Aaron: Yes, I use a higly quantitive and analytical approach for chosing the hedge funds and their relative mix in the portfolio. Based on historical means and standard deviations, I compute correlation and covariance matrices for all funds, then setting a goal standard mean based on what is achievable using equal proportions of the funds in the portfolio. Keeping the mean constant and varying the different proportions I run a simulation which looks for the lowest standard deviation. I have made it in excel and it is quite straigtforward. You want to look for hedge funds that does not correlate to achieve a good mean with low standard deviation.
If you have a background in engineering, you might be more suited (or more interested) in systems trading.
The good thing about developing systems in known probability. Even if you don't follow the rules of your system exactly, you know the probability of the outcome for a given set up.
This is incredibly helpful when entering discretionary trades. It gives you the confidence to stick with a position, when at least initially it looks likes its moving away from you.
Understanding systems trading stops you getting head faked on your discretionary trades ( assuming they follow a basic system)
Also, you're lucky that you have enough capital to effectively integrate money management rules such as fixed fractional and pyramiding into your trading.
Being able to dedicate a percentage of your trading account to a range of different time frames will play a great part in whether you make money.
Runningbear
The good thing about developing systems in known probability. Even if you don't follow the rules of your system exactly, you know the probability of the outcome for a given set up.
This is incredibly helpful when entering discretionary trades. It gives you the confidence to stick with a position, when at least initially it looks likes its moving away from you.
Understanding systems trading stops you getting head faked on your discretionary trades ( assuming they follow a basic system)
Also, you're lucky that you have enough capital to effectively integrate money management rules such as fixed fractional and pyramiding into your trading.
Being able to dedicate a percentage of your trading account to a range of different time frames will play a great part in whether you make money.
Runningbear
To be more humoristic steve46 should add himself to the "flakes, wannabes, and eccentrics" 
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Quote from steve46:
While I have a moment, I want to express an opinion. There are over 20,000 members here, but I doubt that there are 1000 who are profitable. Also I notice that many of the best traders post very infrequently. Some who I know to be profitable, or to have a history of being solid professionals have stopped posting because they became discouraged (keep reading the posts, you will get the idea) having to weed through the flakes, wannabes, and eccentrics that lurk on the site, waiting to get into the action. My advice would be to maintain a healthy skepticism and to research all claims carefully. It will help to have a lot of patience and a slow fuse. On the positive side, there a people who know plenty about the business of trading, about options trading, testing and systems trading. It will take a while to figure out who they are. I hope you have a good sense of humor. Best Regards, Steve46
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Quote from steve46:
While I have a moment, I want to express an opinion. There are over 20,000 members here, but I doubt that there are 1000 who are profitable. Also I notice that many of the best traders post very infrequently. Some who I know to be profitable, or to have a history of being solid professionals have stopped posting because they became discouraged (keep reading the posts, you will get the idea) having to weed through the flakes, wannabes, and eccentrics that lurk on the site, waiting to get into the action. My advice would be to maintain a healthy skepticism and to research all claims carefully. It will help to have a lot of patience and a slow fuse. On the positive side, there a people who know plenty about the business of trading, about options trading, testing and systems trading. It will take a while to figure out who they are. I hope you have a good sense of humor. Best Regards, Steve46
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