Bright Trade

[Maverick74]

Quote from Don Bright:

I tend to agree...let's review this "knowledge" question a bit. I have had hundreds of traders in front of me over the years, and 99% did not have the "knowledge" to trade at first. They did not know how to evaluate fundamentals properly to determine the bias of a long short pair...how to determine valuations for Mergers, how the floor traders arb their futures/options/equities/interest rates and all the rest. They did not know how foolish it is to use market orders for "speedy executions" on the NYSE...They didn't understand the "crowd psychology" of pivot points, or the "self fulfilling prophecy" aspect of TA. They didn't understand how to value conversions and reverse conversions on options...and the difference between historical and implied volatility in Black Scholes modeling (or the greeks involved for that matter)...they didn't know about "trade throughs" or how to trade on the same side as the Specialist when it happens with price improvement......

(I'm just taking this off the top of my head, you get the idea)...

Is any of this of value...absolutely.....is knowing all of this going to guarantee trading success....absolutely not.

A mechanic has to have knowledge, tools, and a good ear to fine tune a race car....a trader needs knowledge, capital, tools, and some good intstincts to make money.

The "knowledge" can be explained (hopefully even learned, LOL).. and how you get it is up to the trader...on the floor, part of a trading group at Goldman...sitting next to IndexArb...being an "understudy" ... but I have yet to see it all put together in any book or set of books.

Everyone learns differently...some pay a little, some pay a lot... some just don't try or care and think they can just dive in... which may even work at times.

(OK, enough rambling, I think you get my points).

Don

I'm going to have to take the other side of Don's trade here. Some of the best traders I know don't know shit about the market. I know Eurodollar traders that make millions a year that can't really tell you what a Eurodollar is. I know guys in the spoos pit at the merc that can't name 5 stocks in the freaking index. I knew daytraders in NY that didn't know a chart from a hole in the world. They didn't even know the names of the stocks they traded or what the companies did. The DPM I worked for at the CBOE didn't even know what level 2 quotes were. I'm sorry, this argument is full of fallacies.

You cannot prove with empirical data that teaching anyone this stuff has any correlation to profitability. I'm not saying the info is not useful, because it is. It just cannot be linked to profitability. And trying to sell it as such is not only unethical but irresponsible.

It's analogous to me saying that If Tiger Woods showed me his swing I could become a PGA golfer. Or If Michael Jordan showed me his jumpshot I could too could play in the NBA. Or if I spent time with Robert Deniro and learned his acting techniques I could become a great actor. All of this is simply not true. Nobody really knows what makes Deniro, Deniro. Or Tiger Woods, Tiger Woods. Or Steve Cohen, Steve Cohen for that matter. Some guys just have the mental discipline and the emotional acumen to be able to do this, most people don't. Courses, books, or other so called knowledge is reserved for the PT Barnum's of the world.

 

[kbeck]

I've read most of this post, and it seems that don is saying that even with this knowledge you may or may not make money. I would bet those guys on the trading floor know quite a bit about trading, whether they have book type smarts or not. It does make sense that some people just have a good knack for trading, just like street smarts or something. It would seem that those people making millions on eurodollars or whatever must have learned something, doubtful they were born knowing how to do all that.

kevin

 

[Maverick74]

Quote from kbeck:

I've read most of this post, and it seems that don is saying that even with this knowledge you may or may not make money. I would bet those guys on the trading floor know quite a bit about trading, whether they have book type smarts or not. It does make sense that some people just have a good knack for trading, just like street smarts or something. It would seem that those people making millions on eurodollars or whatever must have learned something, doubtful they were born knowing how to do all that.

kevin

They have an appetite for risk, aggressive personality and strong discipline.

 

[kbeck]

Quote from Maverick74:

They have an appetite for risk, aggressive personality and strong discipline.

Reall? That's sounds interesting. I would think a more passive type nature would be more objective when sitting in front of a computer screen. Discipline seems to be a must no matter what it seems. I am sure you know better than me.

kevin

 

[goldenarm]

A passive person thinking objectively will miss all of the good stock prints. The aggressive trader will be getting his fills at optimal points and the passive one will miss the boat and constantly be a step behind. While both individuals may be trading the same stock and employ the same methodology, the aggressive trader will usually make the winning trades and the passive one will not.

An understanding of price action for a security (volume, speed of prints, knowing "the axe", specialist tendencies, etc.) and the ability to make lightning fast decisions and act on them is what makes great daytraders. You don't need to know fundamentals, technicals or even the names of stocks to be successful. In fact, the more "knowledge" you have, the more susceptible you are to information overload and trading paralysis. You'll tend to second guess yourself or wait for additional confirmation of price movement while the optimal trade passes you by.

In trading, it's best to employ the KISS (Keep It Simple, Stupid) system. More is not necessarily better.

 

[IV_Trader]

Quote from goldenarm:

A passive person thinking objectively will miss all of the good stock prints. The aggressive trader will be getting his fills at optimal points and the passive one will miss the boat and constantly be a step behind. While both individuals may be trading the same stock and employ the same methodology, the aggressive trader will usually make the winning trades and the passive one will not.

An understanding of price action (volume, speed of prints, knowing "the axe", specialist tendencies, etc.) and the ability to make lightning fast decisions and act on them is what makes great daytraders. You don't need to know fundamentals, technicals or even the names of stocks to be successful. In fact, the more "knowledge" you have, the more susceptible you are to information overload and trading paralysis. You'll tend to second guess yourself or wait for additional confirmation of price movement.

In trading, it's best to employ the KISS (Keep It Simple, Stupid) system. More is not necessarily better.

is trading your only source of income ?

 

[goldenarm]

I stopped daytrading in 2003 after five good years. I cashed in my chips and have never looked back. Now I'm a business owner who swing trades on the side.

 

[smilingsynic]

Quote from goldenarm:

A passive person thinking objectively will miss all of the good stock prints. The aggressive trader will be getting his fills at optimal points and the passive one will miss the boat and constantly be a step behind.

I think the "passive" versus "active" confuses things. Even though I really do not like baseball, but love trading, I offer the following:

Good hitters in baseball are patient and disciplined enough to wait for their pitch. When it comes, they swing. Not half-heartedly, but with good execution. If they miss, they miss. So what. You still have two strikes to spare. Unless you end up hurting yourself because of poor mechanics, you'll get another chance.

Good traders passively wait for the good set-up, and then actively go for it. If you miss, you miss. As long as you don't blow up your account with one losing trade (and if you do, you're not emotionally or mentally disciplined enough to make it anyway), you can wait for the next set-up.

If a good pitch comes again, you swing again, not letting that prior miss mentally make you too hesitant to swing. If you are a good hitter, you know you're going to have slumps (and streaks) that have everything to do with probability and little to do with your ability.

Dealing with the slumps and streaks is one of the most difficult things I have to deal with in this business. Sometimes you're kicking ass, and other times you're getting your ass kicked. Either way, you have to keep fighting. Because if you don't, there are plenty of traders just waiting to take the money out of your pocket.

 

[goldenarm]

I think by "passive" you really mean "patient." I've heard of patient hitters in baseball but NEVER a passive one.

A passive person is submissive by nature, doing things half-heartedly and without conviction, i.e. a meek pussy.

 

[DHOHHI]

Quote from Maverick74:

It's analogous to me saying that If Tiger Woods showed me his swing I could become a PGA golfer. Some guys just have the mental discipline and the emotional acumen to be able to do this, most people don't. Courses, books, or other so called knowledge is reserved for the PT Barnum's of the world.

Actually, golf is a good example. Tiger started young. He gained some basic fundamental knowledge regarding the golf swing. Over time he fine tuned it, improved his execution as he matured and learned more about himself, how to attack a course, as well as the psychological aspects of playing tournaments (amateur and then pro). He found what worked for him. Tiger might be analogous to a Steve Cohen. Trading (to me) is very similar in the evolution of many traders. But Tiger & Cohen are the extremes and fairly rare. But there are plenty of successful, lesser known pros on the PGA tour. They just haven't been able to take their game to Tiger's level. The differences can be small and can be physical and/or mental. But they plug away and make a decent living on tour. They continually work at those small incremental improvements. They work with sports psychologists. And then there are the guys who aspire to play the tour, who go to the qualifying tourament year after year. Maybe they finally get their card to play the big (PGA) tour. They go out and week after week they either make the 36 hole cut and make some $$$ that week or they miss the cut and head on down the road to the next stop. A lot like trading. You try to learn more, both about yourself and what works for you, over time. And eventually you either make it where you can make a living or you throw in the towel. And just as with trading, many of these aspiring pros "wash out". There not necessarily bad golfers. They just lack something that would get them to the next level to actually make a living on tour.