Beginning and Struggling Traders: START HERE

J

journeyman

I am both saddened and concerned by a few of the threads that exist in this forum directed at beginning and struggling traders. These posts are full of waffle, lack any concrete assertions or propositions, and generally seem to simply go on about vaguely nothing. I personally believe that the main posters in these threads see the thread itself as some sort of career opportunity – that is they are imagining the follow-on website which leads to some talks and webinars, then a new trading guru is born.

Anyway, here is my raw advice for any starting and especially struggling trader, preceded by a necessary preamble upon the nature of trading. Take it for what it is.

If one hundred people are told to sit down in a room connected to trading terminals and told simply to buy when they feel like it and sell when they feel like it, a random number of them will be profitable at the end of the day. Could be one. Could be 100. But the important thing to get is this: the probability that none (0) will be profitable is far more remote (far less likely) than the probability that at least one (1-100) will be profitable. If we repeat this experiment over N days, do you think that this statement above changes? The answer is no, it remains valid even as N approaches infinity. If (and this is a big IF) we knew the exact distribution of returns for the market we having our 100 people trade we could calculate the probabilities of more than none versus none being profitable as N approached infinity and the former would be greater than the later.

My coming of age as a trader sprung from my comprehension of the above. It led me to realize that determining whether my results were other than random was the most difficult and essential core of trading. You should appreciate how wildly different this is from the simple score card of ongoing profitability as we have just seen that profitability can be purely random. I was down mid five figures on an account that started low six before I started to get a grip on randomness. The process that worked for me was one of questioning. Asking myself questions, and then asking myself if the answers to the questions were correct, and if correct exactly how correct?

The essential questions follow. An answer to them is precise and quantitative, otherwise it does not constitute an answer but rather the avoidance of an answer. Addiction to randomness is a known psychological fact, so beware. The lettered points are really just simple comments upon the questions which are numbered.

1) What is my edge?

a. What events constitute an entry?
b. What events constitute an exit?
c. How much money do I commit to a given entry?

2) Does my edge have positive expectation?

a. If not, reject the edge.
b. If yes, what are its characteristics and can you model the expectation as a forecast?
c. Does the forecast model fit your expectations of return versus risk?
d. If yes to c. then you have a possible tradeable edge.

3) Is my edge performing within the forecast model parameters?

a. If yes, continue.
b. If no, recast the forecast given the new data and re-ask the questions.

There are no, zero, long term professional, successful traders who do not in their own ways struggle with and successfully answer these questions. All of your precious time and energy should be devoted to answering these questions and nothing else matters.

Everything else is waffle. Everything else is entertainment. All other types of trading are a trip to the casino. This can be fun. Some people can win big. I guess the real question becomes what do you really want? There are many many players who will make money off your decision to be an entertainment trader. If that’s your choice, be prepared to pay.

I wish you good luck, not with your trading, but with your attempt to become the person who can answer the above questions.

Cheers...
 
1) What is my edge?

a. What events constitute an entry?
b. What events constitute an exit?
c. How much money do I commit to a given entry?

2) Does my edge have positive expectation?
More...

You know, I appreciate those who wish to help others, those who give advice and all. However, this part shows exactly why you should not give advice to anyone. Edge= debriefing. The only edge that truly exists is in your mind.

Every market in the world moves because there are transactions going on. all you have to do is compare the magnitude of the transactions(volume) to determine how strong the magnitude of a future price movement will be. No probability, guessing, predicting involved. Those who use an edge have no idea what the market is all about.

We live in an era of computers. The markets of the old days are over. Everything is automated by the big guns. The small guns use the same type of signals of indicators. Both guns have one thing in common: no spontaneity whatsoever. Don't be one of those. Robotic behavior leads to repetition. This is exactly what is happening globally.
For goodness sake, just put up a real time chart of the YM, ES, NQ, ER2, DAX, CAC40, EUROSTOXX, Z liffe, AEX,..

They all reverse at the same cross points. When you look at the volume bars, 80% are the same value. who the f**k does that? It means at the same moments, to the very second, the big money flows in on All Indexes. No way this is human behavior.

People who wish to become a trader seek for advice. They start researching with full motivation, then all of a sudden they find a topic of some guy who think he knows. That person reads it, thinking he's becoming wiser, yet his mind gets indoctrinated. This is why nobody on this site(except the few strong minded) actually make it as a trader.

You just have to look at those guys with 4000,5000 posts. At some point in their posting history you will find a thread of this person asking why he can't make it as a trader.

Do not reply to this post, as I do not wish to argue, because there's nothing to argue about, only your ignorance.:)
 
<i>"For goodness sake, just put up a real time chart of the YM, ES, NQ, ER2, DAX, CAC40, EUROSTOXX, Z liffe, AEX,..

They all reverse at the same cross points. When you look at the volume bars, 80% are the same value. who the f**k does that? It means at the same moments, to the very second, the big money flows in on All Indexes. No way this is human behavior."</i>

Sometimes. But not always, and not even most of the time.

Anyone who watches all eminis will commonly see NQ going one way, ES another as the Dow & Comp diverge. Most of the time one or other (random odds) will lead and follow up or down.

Meanwhile, the ER2 marches to its own distinct drummer.

A minority of times each market moves in synch when broad-based buying or selling is underway. Most of the time, each index ebbs & flows separately thru sector rotation or just plain market lulls.

That's why a trader cannot simply go long or short all markets at the same time and prosper. Each symbol has its own flow, depending on which sectors are doing what or if it's a broad-based market move.

Trying to paint them all with one brush will result in one stark color on the walls of your trading account: bright red.
 
Here we go again: Another misinformed person that looks at a price chart from an historical jaundiced perspective because someone told him volume causes price to move instead of the reality that it is price change and price change alone that causes traders to react.

What is so hard about understanding that without a price change there is absolutely no reason to make a trade except to exit the trade because of expiration or plain ole boredom?

EXAMPLE: A high end dept store gets a new shipment of handbags and sets up a didplay in a high traffic premium spot in the store to move the goods. The display captures the attention of the shoppers and as excited as the ladies get with the appeal and quality ( not to mention the snob factor) of the handbags many are turned off because the price at $5,000.97 is a little high even for well heeled shoppers.

The dept manager notices the handbags are not moving as well as planned and is getting concerned because she needs the spot to put out some new seasonal goods to be arriving any day now.

She informs the store manager of her concerns and she agrees and states " well, lets drop the price now because the fools that bought at the inflated profits price seem to be exhausted"..

The dept manager slaps a sign on the display "1/2 off, BUY 2 and 3rd FREE" BOOM, the display is mass hysteria with crazed women and the handbags fly out the door as the dept head smiles as they pass by.

PRICE is the CAUSE of volume. Stocks and anything else that has prices changing are motivated by PRICE CHANGES.

IN a post above some clown wrote this. he is wrong, but HEY, HOGGIE is here to set him straight.

HE SAID: Every market in the world moves because there are transactions going on. all you have to do is compare the magnitude of the transactions(volume) to determine how strong the magnitude of a future price movement will be. No probability, guessing, predicting involved. Those who use an edge have no idea what the market is all about. .....

good weekend all.... Ban the use of volume and just watch price. <a href="http://www.sweetim.com/s.asp?im=gen&ref=11" target="_blank"><img src="http://content.sweetim.com/sim/cpie/emoticons/0002020A.gif" border=0 ></a>

PS: I do not make this stuff up ha http://www.youtube.com/watch?v=mnA0-Vg25J8
 
Quote from journeyman:

I am both saddened and concerned by a few of the threads that exist in this forum directed at beginning and struggling traders. These posts are full of waffle, lack any concrete assertions or propositions, and generally seem to simply go on about vaguely nothing. I personally believe that the main posters in these threads see the thread itself as some sort of career opportunity – that is they are imagining the follow-on website which leads to some talks and webinars, then a new trading guru is born.

Anyway, here is my raw advice for any starting and especially struggling trader, preceded by a necessary preamble upon the nature of trading. Take it for what it is.

If one hundred people are told to sit down in a room connected to trading terminals and told simply to buy when they feel like it and sell when they feel like it, a random number of them will be profitable at the end of the day. Could be one. Could be 100. But the important thing to get is this: the probability that none (0) will be profitable is far more remote (far less likely) than the probability that at least one (1-100) will be profitable. If we repeat this experiment over N days, do you think that this statement above changes? The answer is no, it remains valid even as N approaches infinity. If (and this is a big IF) we knew the exact distribution of returns for the market we having our 100 people trade we could calculate the probabilities of more than none versus none being profitable as N approached infinity and the former would be greater than the later.

My coming of age as a trader sprung from my comprehension of the above. It led me to realize that determining whether my results were other than random was the most difficult and essential core of trading. You should appreciate how wildly different this is from the simple score card of ongoing profitability as we have just seen that profitability can be purely random. I was down mid five figures on an account that started low six before I started to get a grip on randomness. The process that worked for me was one of questioning. Asking myself questions, and then asking myself if the answers to the questions were correct, and if correct exactly how correct?

The essential questions follow. An answer to them is precise and quantitative, otherwise it does not constitute an answer but rather the avoidance of an answer. Addiction to randomness is a known psychological fact, so beware. The lettered points are really just simple comments upon the questions which are numbered.

1) What is my edge?

a. What events constitute an entry?
b. What events constitute an exit?
c. How much money do I commit to a given entry?

2) Does my edge have positive expectation?

a. If not, reject the edge.
b. If yes, what are its characteristics and can you model the expectation as a forecast?
c. Does the forecast model fit your expectations of return versus risk?
d. If yes to c. then you have a possible tradeable edge.

3) Is my edge performing within the forecast model parameters?

a. If yes, continue.
b. If no, recast the forecast given the new data and re-ask the questions.

There are no, zero, long term professional, successful traders who do not in their own ways struggle with and successfully answer these questions. All of your precious time and energy should be devoted to answering these questions and nothing else matters.

Everything else is waffle. Everything else is entertainment. All other types of trading are a trip to the casino. This can be fun. Some people can win big. I guess the real question becomes what do you really want? There are many many players who will make money off your decision to be an entertainment trader. If that’s your choice, be prepared to pay.

I wish you good luck, not with your trading, but with your attempt to become the person who can answer the above questions.

Cheers...
More...
I wish someone would have directed me to think along the lines Journeyman has laid out when I began trading long ago. The man is right. Hopefully people will take it to heart.

Research, do the work and if it doesn't result in a tradeable edge or market characteristic to make money from then there is nothing to trade.

However, if something is found then test it, examine it as much as possible to have a foundation to trust in, build a trading and position sizing plan and put it into practice with determination and discipline.

A nice thing about trading is that one can research and come to a position to know what one is doing even if one doesn't know the future. This advantage should be used, IMO.
 
Quote from journeyman:

I am both saddened and concerned by a few of the threads that exist in this forum directed at beginning and struggling traders. These posts are full of waffle, lack any concrete assertions or propositions, and generally seem to simply go on about vaguely nothing.
More...

Are you really that surprised?..everyone on ET is a god damn expert with their "advice", but when challenged to back up their claims with an account statement, they just draw a blank....why?...not because:

1. We dont deserve to see it
2. They dont want to take the 5 seconds needed to do so
3. Its personal information
4. or other

...no..its because its not there. Trading is the one of thoes careers you cant bullshit your way through....either you make money to support youself, or you dont...OBVIOUSLY we know what side of the fence most the traders on this site stand.
 
Quote from astral:

You know, I appreciate those who wish to help others, those who give advice and all. However, this part shows exactly why you should not give advice to anyone. Edge= debriefing. The only edge that truly exists is in your mind.

Every market in the world moves because there are transactions going on. all you have to do is compare the magnitude of the transactions(volume) to determine how strong the magnitude of a future price movement will be. No probability, guessing, predicting involved. Those who use an edge have no idea what the market is all about.

We live in an era of computers. The markets of the old days are over. Everything is automated by the big guns. The small guns use the same type of signals of indicators. Both guns have one thing in common: no spontaneity whatsoever. Don't be one of those. Robotic behavior leads to repetition. This is exactly what is happening globally.
For goodness sake, just put up a real time chart of the YM, ES, NQ, ER2, DAX, CAC40, EUROSTOXX, Z liffe, AEX,..

They all reverse at the same cross points. When you look at the volume bars, 80% are the same value. who the f**k does that? It means at the same moments, to the very second, the big money flows in on All Indexes. No way this is human behavior.

People who wish to become a trader seek for advice. They start researching with full motivation, then all of a sudden they find a topic of some guy who think he knows. That person reads it, thinking he's becoming wiser, yet his mind gets indoctrinated. This is why nobody on this site(except the few strong minded) actually make it as a trader.

You just have to look at those guys with 4000,5000 posts. At some point in their posting history you will find a thread of this person asking why he can't make it as a trader.

Do not reply to this post, as I do not wish to argue, because there's nothing to argue about, only your ignorance.:)
More...


Brilliant :cool:

Absolutely Brilliant :cool:
 
Quote from cashmoney69:

when challenged to back up their claims with an account statement, they just draw a blank....why?...
More...

Should I also put a picture of my penis on this site too just to make you happy :p

I won't even tell my girlfriend (whom I intend on marrying) what I make and you want me to show it here?

hahahahahahaaa
 
Quote from journeyman:



1) What is my edge?


2) Does my edge have positive expectation?
More...

Here is the problem.

Each day and every moment there are always DIFFERENT buyers and sellers interacting.

An edge would only truly be able to exist IF the buyers and sellers were always the same.

Think in terms of "possibilities" rather than edge and now your in a better direction.
 
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