I hate when people say most traders fail because they are undercapitalized

at anyrate

when it's all said and done

the number one reason for failure

will be

undercapitalization

don't you just "hate it"

when they say that?
 
Quote from Look4aSine:

You haven't seen much, have you.

There's a lot more going on than you think (a lot):
http://en.wikipedia.org/wiki/Arbitrage
http://en.wikipedia.org/wiki/Algorithmic_trading
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I'm familiar with HFT, arbitrage, and programs that recognize and instantly react to price movement off keywords/numbers during news releases.

I wasn't clear that my post was in reference to individual retail traders (this thread is about "undercapitalized" traders failing, not what large asset managers and iBanks are up to).

The footprints (graphic representations of price/volume) left by institutional traders gives the educated and experienced small retail trader clues to what till happen next more often than not.

The small retail trader can develop and trade a plan based on these edges or can develop an automated system to do the same.

If you're a fund manager running billions of OPM, then Surf is indeed correct that it will take more than trading simple TA patterns to outperform one's institutional peers because it's the institutional traders/investors' very size that forms these price and volume patterns that us little guys make a living off of.
 
Quote from newwurldmn:

Actual businesses can have an edge. These are called economic moats.

They can be lower raw material costs; economy of scale; permits for operations; etc.

AAPL is the largest consumer of DRAM on the planet. They have pricing power no one else has.


There are traders with actual edge, but there are very few of them.

Edges would be: favorable funding rates, access to non-public information, truly superior execution, etc. Only the smartest hedgefunds and banks have these kinds of edge which is why they can make money year in and year out.

Having a system isn't an edge even if it's statistically profitable. A profitable system can beat the fact that you don't have an edge or it can exploit an edge that you have.
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I hear ya, it's a rough business, Except for the fact "There are traders with an actual edge."
 
Here's an example of an intraday trading "edge" based on the price footprints of "big money" surrounding a major news release (FOMC, CL/NG inventories, NFP, etc.):

If price makes a directional move of at least X on a 5-min chart, then pulls back no more than Y on a 1-min chart, buy or sell a break of the previous high or low just prior to the 1-min pullback. Place a stop loss no greater than A and target a minimum profit of B (or better).

The values of the letters are based on a thorough study of average relative price movements of your chosen trading instrument around major news releases. Once you analyze the stats over a significant period of time (say, 3-6 months), you create a set of rules like those above with real values based on probabilities in your favor.

Once you do this, you don't need huge capitalization to make steady and considerable profits.
 
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