Quote from Error 404:
Scientist,
I just wanted to chime in here to say I think you made some very good points both in specifics and in general.
Thank you brother Error 404. I'm only reflecting what others here are already thinking, anyway. I should say that this reply of yours is most excellent indeed. Let me just zoom in on it a little;
It takes the ability to adapt and to be open to adjusting not only style, but trading vehicles to be fully competent in today's market.
If one limits themselves to a particular marketplace, or a particular time frame, or anything else, this is trading with a handicap.
This could be argued. While you can say that lack of a universal overview / trading approach can be a handicap, I can say the opposite, namely that specialization can indeed be a major advantage, particularly in futures trading - Just to fire up the argument a little
You also mentioned that you did not have what you consider a strong understanding of order routing. While it is always good to know more than less, separating what is important from what is not is efficient. Yeah, a lot of us (myself included) have the series 55, which, in theory, means we have a greater than average understanding of routing for stocks. Still, this knowledge serves little use (except for knowing your rights and responsibilities in cases involving errors).
Like driving a car, or using a computer....knowing how the thing works isn't really critical to their use, as long as you know how to get out of it what it was designed to give you.
Oh you're right, we don't need a series 55. However, I think if you want to be very successful scalping stocks, you need to understand ECN's and order routing very well indeed - Which I don't. Which is why I'm handicapped. Which is why I went to futures, where this doesn't exist. Which is why most people eventually went to futures. So yes - I am handicapped here, despite all the other advantages that stock trading brings over futures trading these days.
I don't know about your car or computer argument. I disagree. You see, it's fine if you know how to drive your car. However, if you get stuck (anybody who drives cars for more than a year will sometime), you're going nowhere. I used to be shambles with cars, I'd always have to call my dad up when I'd get stuck. Look at this (real) example of a crisis conversation between me and my dad:
Me: "Dad. My car doesn't move."
Dad: "Might be the battery."
Me: "No, the battery isn't that old yet."
Dad: "What does it do?"
Me: "It just makes a noise"
Dad: "Fast Knocking?"
Me: "Yeah."
Dad: "That's the solenoid of the starter motor trying to kick in."
Me: "Why doesn't it work???"
Dad: "Check your battery leads, they might not be properly connected. Wiggle them around a little, and it might work."
Me: "What? But if there's electricity, there's contact - isn't there?"
Dad: "Yes, but it's not a computer, remember. The battery node needs full contact, and the motor really shakes it. If it's not 100% connected, you may just get a wobble connection that goes contact-non-contact-contact"
Me: "OK. Battery leads. I'll check that."
Dad: "Good luck. It's the main problem that gets people stuck on the side of the road. I always say : Battery leads. 80% of the time, that's the problem."
Me: "Thanks dad. Bye."
Dad (rings back): "How did you go?"
Me: "Great. I'm on the road now. I'm feeling pretty stupid, I should have known that!"
Dad: "Yeah, it's good to have some basic knowledge about cars. It's fine if you're here with your mobile, but if you have the same problem 600 km from from Fitzroy River (Australian desert: snakes, carrion-eating birds, and a lot of nothing), you're pretty stuffed."
Me: "Thanks dad. I'll bear that in mind next time I go there. Or I'll better just not go there."
Dad: "You'll be missing out on something, mate!"
Me: "OK dad. I'll study car mechanics then..."
What's the moral of the story? Well, the moral is that if you're driving any kind of vehicle, you better get to know it bloody well, or you could get stuck. If you don't know it well enough, you can choose to just play it safe and stay close to home. However, you'll never get to drive to "the edge", to explore the possibilities. Exploring those possibilities can give you a completely new view of things, and major advantages as a trader. To make clear what I'm talking about, take as an example a scalping platform like buttontrader. If you understand all the little fiddledybits of its functionality, you're gonna be able have an edge! However, equally, if you don't and you press a wrong button or do a misconfiguration - You could get severely stuck. Does this make any sense? LOL it does to me, cause I've been there...
"Scalping" stocks takes a bit more conviction. No one has perfect timing obviously. So in essence, I believe if your "scalp" of an equity goes against you initially (and in truth, because of spreads and commissions, all trades are against you initially anyway), compelling reasons for entering a trade should be strong enough to withstand a first move against you. Far different from scalping index futures.
You're partially right there. On the other hand, you DO have a "first move against you" in the futures, too, and that is the spread. If you're scalping for a few ticks on the ES, you can be down 2T as soon as you enter, for spread of 1T on each side (entry and exit), which equates to $25. Then you add commission of let's say roughly $5 (just an IB example), you're down $30 as soon as you get in. Now you already need to make 3T just to break-even. If the thing moves 3T against you, you're down 6T or 1.5 pts. Do that 10X a day (15pts), and you need to work a bit harder to make up for the losses. So you better know what you're doing. With stocks this is NOT the same. Not if you're trading i.e. a liquid semiconductor. Trust me - Scalping futures is a tougher game - I've done it for quite a while now.
All in all, I think your posts were fine food for thought for those who consider themselves "specialists" or "experts" in one type of trading. To me, this really just means they have found something they are comfortable with, and win or lose, they stay with it. Which would be fine if this was a result of real experience. But my belief is that in most cases it is more a matter of what they started with, and therefore have been trying to master just one "game". This is great for anyone who has been consistently successful at their "one game". But in truth, I believe it is more a matter of lack of experience (not a bad thing...just reality), or, the unwillingness to educate one's self in other approaches (this IS a bad thing).
Agree!
Nothing is more expensive to a trader than a closed mind.
AGREE!!!
It costs nothing to learn other strategies and other markets. It is not necessary to "learn by losing" just to understand these "new" approaches. Yes, it may cost $ to acquire experience in them, but not to simply understand what they are about.
I have traded stocks, options, futures and done them in different environments and with different basic approaches as well as in different capacities (such as customer, market maker, prop, and pro). Yet still, even though I have been primarily trading equities for the past 9 years or so, the knowledge of other markets has only served me well. certainly NEVER was damaging to my trading.
Learn it all. I have mentioned many times that I think every trader who takes his or her profession seriously should study for (if not take) the series #3 exam. If they never trade a futures contract, it will still help in every other kind of trading imaginable.
Traders never stop being students. Unlike the video games you mentioned, trading cannot ever be "mastered". Sort of like golf.
But still, one must strive to understand what is out there. And even understanding the "WHY"s of what is out there can only help.
How many traders trade stocks and really only know they are something you can buy or sell that may go up or down or not move without knowing what they represent? Sadly, more than most of us would believe.
Series 7 may be a pain in the ass, but at least understanding the difference between equity and debt is knowledge that is essential to all traders. Yet amazingly, there are HUGE numbers of self - styled traders that do not have this most basic understanding. Yet they are trading e-minis, stocks, ETFs, ....name it.
Proof? Just the other day I read a thread about "investing in gold". Not futures, not gold stocks, but gold itself. This was proof enough for me that there are people who seriously need an education. Yet they participate in markets, lose money, and attribute it to poor market conditions, crooked specialists and market makers, and inefficient exchanges and ECNs.
You need to be a citizen to sit on a jury. But you are not required to know how many pennies to a dollar to be allowed to trade.
GET EDUCATED!!!
So back to the driving a car or using a computer analogy. You don't need to know the inner workings of camshafts, or serial ports. But you do need to know to drive on the right (correct) side of the road. You do need to know to be prepared for a drunk or inattentive driver that may run a stop sign and IMPACT YOU. You need to know the RULES OF THE ROAD! They are pretty simple, but essential to survival.
Peace,
RS
Fully agree with you on the education thing. Sorry for replicating the whole post - However, there are some very good points in here that people really should reread once more. Thanks a lot.
All the Best,
~Scientist
Scientist,
I just wanted to chime in here to say I think you made some very good points both in specifics and in general.
Thank you brother Error 404. I'm only reflecting what others here are already thinking, anyway. I should say that this reply of yours is most excellent indeed. Let me just zoom in on it a little;
It takes the ability to adapt and to be open to adjusting not only style, but trading vehicles to be fully competent in today's market.
If one limits themselves to a particular marketplace, or a particular time frame, or anything else, this is trading with a handicap.
This could be argued. While you can say that lack of a universal overview / trading approach can be a handicap, I can say the opposite, namely that specialization can indeed be a major advantage, particularly in futures trading - Just to fire up the argument a little
You also mentioned that you did not have what you consider a strong understanding of order routing. While it is always good to know more than less, separating what is important from what is not is efficient. Yeah, a lot of us (myself included) have the series 55, which, in theory, means we have a greater than average understanding of routing for stocks. Still, this knowledge serves little use (except for knowing your rights and responsibilities in cases involving errors).
Like driving a car, or using a computer....knowing how the thing works isn't really critical to their use, as long as you know how to get out of it what it was designed to give you.
Oh you're right, we don't need a series 55. However, I think if you want to be very successful scalping stocks, you need to understand ECN's and order routing very well indeed - Which I don't. Which is why I'm handicapped. Which is why I went to futures, where this doesn't exist. Which is why most people eventually went to futures. So yes - I am handicapped here, despite all the other advantages that stock trading brings over futures trading these days.
I don't know about your car or computer argument. I disagree. You see, it's fine if you know how to drive your car. However, if you get stuck (anybody who drives cars for more than a year will sometime), you're going nowhere. I used to be shambles with cars, I'd always have to call my dad up when I'd get stuck. Look at this (real) example of a crisis conversation between me and my dad:
Me: "Dad. My car doesn't move."
Dad: "Might be the battery."
Me: "No, the battery isn't that old yet."
Dad: "What does it do?"
Me: "It just makes a noise"
Dad: "Fast Knocking?"
Me: "Yeah."
Dad: "That's the solenoid of the starter motor trying to kick in."
Me: "Why doesn't it work???"
Dad: "Check your battery leads, they might not be properly connected. Wiggle them around a little, and it might work."
Me: "What? But if there's electricity, there's contact - isn't there?"
Dad: "Yes, but it's not a computer, remember. The battery node needs full contact, and the motor really shakes it. If it's not 100% connected, you may just get a wobble connection that goes contact-non-contact-contact"
Me: "OK. Battery leads. I'll check that."
Dad: "Good luck. It's the main problem that gets people stuck on the side of the road. I always say : Battery leads. 80% of the time, that's the problem."
Me: "Thanks dad. Bye."
Dad (rings back): "How did you go?"
Me: "Great. I'm on the road now. I'm feeling pretty stupid, I should have known that!"
Dad: "Yeah, it's good to have some basic knowledge about cars. It's fine if you're here with your mobile, but if you have the same problem 600 km from from Fitzroy River (Australian desert: snakes, carrion-eating birds, and a lot of nothing), you're pretty stuffed."
Me: "Thanks dad. I'll bear that in mind next time I go there. Or I'll better just not go there."
Dad: "You'll be missing out on something, mate!"
Me: "OK dad. I'll study car mechanics then..."
What's the moral of the story? Well, the moral is that if you're driving any kind of vehicle, you better get to know it bloody well, or you could get stuck. If you don't know it well enough, you can choose to just play it safe and stay close to home. However, you'll never get to drive to "the edge", to explore the possibilities. Exploring those possibilities can give you a completely new view of things, and major advantages as a trader. To make clear what I'm talking about, take as an example a scalping platform like buttontrader. If you understand all the little fiddledybits of its functionality, you're gonna be able have an edge! However, equally, if you don't and you press a wrong button or do a misconfiguration - You could get severely stuck. Does this make any sense? LOL it does to me, cause I've been there...
"Scalping" stocks takes a bit more conviction. No one has perfect timing obviously. So in essence, I believe if your "scalp" of an equity goes against you initially (and in truth, because of spreads and commissions, all trades are against you initially anyway), compelling reasons for entering a trade should be strong enough to withstand a first move against you. Far different from scalping index futures.
You're partially right there. On the other hand, you DO have a "first move against you" in the futures, too, and that is the spread. If you're scalping for a few ticks on the ES, you can be down 2T as soon as you enter, for spread of 1T on each side (entry and exit), which equates to $25. Then you add commission of let's say roughly $5 (just an IB example), you're down $30 as soon as you get in. Now you already need to make 3T just to break-even. If the thing moves 3T against you, you're down 6T or 1.5 pts. Do that 10X a day (15pts), and you need to work a bit harder to make up for the losses. So you better know what you're doing. With stocks this is NOT the same. Not if you're trading i.e. a liquid semiconductor. Trust me - Scalping futures is a tougher game - I've done it for quite a while now.
All in all, I think your posts were fine food for thought for those who consider themselves "specialists" or "experts" in one type of trading. To me, this really just means they have found something they are comfortable with, and win or lose, they stay with it. Which would be fine if this was a result of real experience. But my belief is that in most cases it is more a matter of what they started with, and therefore have been trying to master just one "game". This is great for anyone who has been consistently successful at their "one game". But in truth, I believe it is more a matter of lack of experience (not a bad thing...just reality), or, the unwillingness to educate one's self in other approaches (this IS a bad thing).
Agree!
Nothing is more expensive to a trader than a closed mind.
AGREE!!!
It costs nothing to learn other strategies and other markets. It is not necessary to "learn by losing" just to understand these "new" approaches. Yes, it may cost $ to acquire experience in them, but not to simply understand what they are about.
I have traded stocks, options, futures and done them in different environments and with different basic approaches as well as in different capacities (such as customer, market maker, prop, and pro). Yet still, even though I have been primarily trading equities for the past 9 years or so, the knowledge of other markets has only served me well. certainly NEVER was damaging to my trading.
Learn it all. I have mentioned many times that I think every trader who takes his or her profession seriously should study for (if not take) the series #3 exam. If they never trade a futures contract, it will still help in every other kind of trading imaginable.
Traders never stop being students. Unlike the video games you mentioned, trading cannot ever be "mastered". Sort of like golf.
But still, one must strive to understand what is out there. And even understanding the "WHY"s of what is out there can only help.
How many traders trade stocks and really only know they are something you can buy or sell that may go up or down or not move without knowing what they represent? Sadly, more than most of us would believe.
Series 7 may be a pain in the ass, but at least understanding the difference between equity and debt is knowledge that is essential to all traders. Yet amazingly, there are HUGE numbers of self - styled traders that do not have this most basic understanding. Yet they are trading e-minis, stocks, ETFs, ....name it.
Proof? Just the other day I read a thread about "investing in gold". Not futures, not gold stocks, but gold itself. This was proof enough for me that there are people who seriously need an education. Yet they participate in markets, lose money, and attribute it to poor market conditions, crooked specialists and market makers, and inefficient exchanges and ECNs.
You need to be a citizen to sit on a jury. But you are not required to know how many pennies to a dollar to be allowed to trade.
GET EDUCATED!!!
So back to the driving a car or using a computer analogy. You don't need to know the inner workings of camshafts, or serial ports. But you do need to know to drive on the right (correct) side of the road. You do need to know to be prepared for a drunk or inattentive driver that may run a stop sign and IMPACT YOU. You need to know the RULES OF THE ROAD! They are pretty simple, but essential to survival.
Peace,
RS Fully agree with you on the education thing. Sorry for replicating the whole post - However, there are some very good points in here that people really should reread once more. Thanks a lot.
All the Best,
~Scientist
