Do you fully appreciate the complexity of the markets?

[mhashe]

Quote from nitinparmar:

Steenbarger should stick to psychology. There are thousands of ways of making money in the markets. From the list of 5 things he has observed, it seems like he has talked to once class of trader.

1) Scalpers do not have to know about intermarket relationships.

2) Scalpers do stick to particular instruments.

3) Sclapers market is the market.

4) Agreed.

5) This is a mental game and sharing ideas does not mean losing an edge.

Steenbarger's article reminds me of Alexander Elder's advice on trading setups. Elder was inventing new indicators and once said he thought he had found the holy grail. No one who has been trading successfully ever thinks that.

These people are just trying to make a buck. They should stick to what they are trained in.

I disagree with your post. It seems after the recent mention of ET on Barrons and other financial sites, ET has become rife with Yahoo board type posters. I fully enjoy reading Mr. Steenbargers *FREE* research that he regularly posts on his various sites and I felt compelled to reply.

When you say "it seems like he has talked to once class of trader."
.......... yeah, successful ones.

when you say "These people are just trying to make a buck. They should stick to what they are trained in...."

......Mr.Steenbargers research is provided to the public for *FREE*. If you are dissatisfied, you can always ask him for a refund. Btw, he has posted several times that he strives to study the habits and methodologies of successful traders because he realizes his own inabilities as a trader. I follow his articles and posts with interest since much of it deals with the fundamental aspect of the market that precedes its value/price construct , ie the psychology/sentiment of the participants

 

[kiwi_trader]

Brett,

An interesting article although I don't believe that it encompasses "all successful traders." It is however interesting that it represents a group with whom you have recently interacted.

Personally I have observed other ways to success --- although my sample is also small and it may be that the ways I am aware of would suffer scale affects if applied in the size that I suspect you might be implying with some of your traders.

I shall have to keep working at my niche

Kiwi

 

[TSGannGalt]

I didn't know markets were "complex"

 

[bali_survivor]

Quote from TSGannGalt:

I didn't know markets were "complex"

My thoughts exactly.

Maria

 

[bali_survivor]

Quote from steenbab:

......


IMHO, these are the complexities that underlie new market trends.

Brett Steenbarger

Once you REALLY understand how the psyche of the market works then you'll see that the markets are following a very simple pattern.

Maria, over and out.

 

[GlobalFinancier]

Thanks for most of the replies.
Yes, I currently use quite a simple system emcompassing a bit of subjectivity, but relies on intermarket analysis, technical analysis fundamental analysis and contrarian(see my post at GM?) It has experienced some degree of success.
The reason I asked this question was:
1)I am not sure if my system represents an edge that will continue. Though I think it will, there's no way to *know* it will. And I don't want to lose a fortune of money before knowing that my system started becoming flawed or was never a good one
2)I may head into professional money management later on(not now of course, maybe 5-10 years) so I'm wondering IF such complexivity is needed to make money? Would my simplicity still be useful if I become an institutional investor later on in life?(I would need to start working on necessary skills now if I don't have them yet )

 

[GlobalFinancier]

Quote from nononsense:

Do you fully appreciate the complexity of the markets?
Who cares?
Better teach us some tricks for squeezing money out of the markets.

Hehe, it's much more important to have some grasp over the nature of things.
Besides, even if I told you a strategy
1)You wouldn't believe I was sharing something truly valuable
2)You would ask me why I wasn't in Hawaii already if it worked that well.

 

[nononsense]

Quote from GlobalFinancier:

Hehe, it's much more important to have some grasp over the nature of things.
Besides, even if I told you a strategy
1)You wouldn't believe I was sharing something truly valuable
2)You would ask me why I wasn't in Hawaii already if it worked that well.

Hehe,
ya don't know when a guy is pulling your leg.
(Bad omen when dabbling in markets)

 

[steenbab]

Thanks for the many comments on my article. The purpose of the article was merely a piece of reporting. I was wanting to describe "the differences between the highly successful traders I recently talked with and their less successful counterparts". I did not mean to imply that people cannot make money in other ways, or that simple strategies cannot be effective in the market.

I work in a professional trading firm in which a large proportion of the traders are scalpers and short-term traders of individual instruments. In that role, I have also had the opportunity to meet many traders in Chicago who are also very active market participants. Most recently, I've also had the privilege of working with traders in New York hedge fund and bank settings.

In all, my experience is that the very short-term traders who have stuck with stock index trading are having the most trouble sustaining profitability. Traders who have been utilizing global/macro strategies over longer time frames in multiple markets have been more successful.

Of the consistent multi-million dollar earners I have personally known (and verified their performance), none of have been scalpers and all but one has employed strategies that I would describe as complex. By that, I mean that they are looking analytically at multiple markets, forming ideas based on that analysis, etc. They are not just trading off charts or simple indicators.

Once again, I stress that this is simply my experience with a group of several hundred traders over a period of several years. It is quite, quite possible that other traders exist with other patterns of success. I don't at all mean to denigrate the methods of others. Rather, it was my hope to share my experience with others, since most traders probably don't get an opportunity to be inside professional trading firms and directly observe what is working and what is not.

Ultimately, as Kiwi eloquently put it, the goal is to find your niche, not imitate others. Your trading style must fit who you are. Observations of others' success might be informative, but self-knowledge is probably most important of all.

Thanks for the opportunity to be part of this thread.

Brett

 

[Cariocas]

Dr.,

I'm an avid reader of your blog and find it quite enlightening and refreshing. Your research columns that look at the markets differently using QUANT analysis are thought-provoking.

Nevertheless, I agree with some posters here that you've described a group of traders as there're those who make a very decent living daytrading.

Keep up the good work.

Cariocas

Quote from steenbab:

Thanks for the many comments on my article. The purpose of the article was merely a piece of reporting. I was wanting to describe "the differences between the highly successful traders I recently talked with and their less successful counterparts". I did not mean to imply that people cannot make money in other ways, or that simple strategies cannot be effective in the market.

I work in a professional trading firm in which a large proportion of the traders are scalpers and short-term traders of individual instruments. In that role, I have also had the opportunity to meet many traders in Chicago who are also very active market participants. Most recently, I've also had the privilege of working with traders in New York hedge fund and bank settings.

In all, my experience is that the very short-term traders who have stuck with stock index trading are having the most trouble sustaining profitability. Traders who have been utilizing global/macro strategies over longer time frames in multiple markets have been more successful.

Of the consistent multi-million dollar earners I have personally known (and verified their performance), none of have been scalpers and all but one has employed strategies that I would describe as complex. By that, I mean that they are looking analytically at multiple markets, forming ideas based on that analysis, etc. They are not just trading off charts or simple indicators.

Once again, I stress that this is simply my experience with a group of several hundred traders over a period of several years. It is quite, quite possible that other traders exist with other patterns of success. I don't at all mean to denigrate the methods of others. Rather, it was my hope to share my experience with others, since most traders probably don't get an opportunity to be inside professional trading firms and directly observe what is working and what is not.

Ultimately, as Kiwi eloquently put it, the goal is to find your niche, not imitate others. Your trading style must fit who you are. Observations of others' success might be informative, but self-knowledge is probably most important of all.

Thanks for the opportunity to be part of this thread.

Brett