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

Quote from oldtime:

I hear ya, it's a rough business, Except for the fact "There are traders with an actual edge."
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you are always betting on something

you may think you have an "edge" because of what? You think you know something someone else doesn't?

it all comes down to who is the best gambler

at times, it seems you are not gambling, because you can do something that is mathmatically consistent

but eventually, it all comes back to gambling

and you have to make your bet

and you can claim your bet has an "edge" because of this or that

and if it doesn't work out, you can do it over and over again, because you will eventually win, because you have an "edge"

and if that doesn't work

you have to make a big bet
 
Quote from oldtime:

I hear ya, it's a rough business, Except for the fact "There are traders with an actual edge."
More...

There are traders with actual edge. But they aren't on elitetrader and it isn't by having some system. It's the business platform and the seat you have.

Traders at large banks fund better than libor - making many carry trades profitable that otherwise can't hold.

Traders at large banks or large hedge funds have access to information flow others don't. Banks and multi strategy hedgefunds can see other markets faster than everyone else.

And then there are traders who have access to non-public information. That's a lot more common than people think. SAC isn't the only one trading on that kind of information.

Some investors get access to special investment opportunities by virtue of their position? How many people would have done those deals that Warren Buffet did with Goldman, GE, and BAC? How many were offered that deal?

Traders on the floors used to have an edge by getting prefential execution treatment and access to customer information.

You can have a profitable system without having an edge, but a profitable strategy is not an edge.

Example: Selling options (which are statistically overpriced) is not an edge even if there is positive expectancy. Anyone can sell an option. Even being able to figure out the most overpriced options is not an edge. Though it would help in making more money.

Given it was championship weekend: an edge isn't able to kick a 60 yard field goal. It's having 5 downs while the other guy only gets 4.
 
Quote from newwurldmn:

There are traders with actual edge. But they aren't on elitetrader and it isn't by having some system. It's the business platform and the seat you have.

Traders at large banks fund better than libor - making many carry trades profitable that otherwise can't hold.

Traders at large banks or large hedge funds have access to information flow others don't. Banks and multi strategy hedgefunds can see other markets faster than everyone else.

And then there are traders who have access to non-public information. That's a lot more common than people think. SAC isn't the only one trading on that kind of information.

Some investors get access to special investment opportunities by virtue of their position? How many people would have done those deals that Warren Buffet did with Goldman, GE, and BAC? How many were offered that deal?

Traders on the floors used to have an edge by getting prefential execution treatment and access to customer information.

You can have a profitable system without having an edge, but a profitable strategy is not an edge.

Example: Selling options (which are statistically overpriced) is not an edge even if there is positive expectancy. Anyone can sell an option. Even being able to figure out the most overpriced options is not an edge. Though it would help in making more money.

Given it was championship weekend: an edge isn't able to kick a 60 yard field goal. It's having 5 downs while the other guy only gets 4.
More...
yes, but those of us that are just retail podunck traders don't have any kind of the edges you talk about

otherwise, I agree, you can have a profitable system without having an "edge"
 
Quote from oldtime:


if you want an edge, buy a casino, or become a broker
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Or you could do major years of research and find areas that tend to react more often than not, in many cases offering more reward than the risk.
 
Quote from oldtime:

yes, but those of us that are just retail podunck traders don't have any kind of the edges you talk about

otherwise, I agree, you can have a profitable system without having an "edge"
More...

Yeah. No one here has any real edge.

They may be good at what they do, but they don't have any real advantage over SAC, Goldman Sachs, etc.
 
Quote from newwurldmn:

There are traders with actual edge. But they aren't on elitetrader and it isn't by having some system. It's the business platform and the seat you have.

Traders at large banks fund better than libor - making many carry trades profitable that otherwise can't hold.

Traders at large banks or large hedge funds have access to information flow others don't. Banks and multi strategy hedgefunds can see other markets faster than everyone else.

And then there are traders who have access to non-public information. That's a lot more common than people think. SAC isn't the only one trading on that kind of information.

Some investors get access to special investment opportunities by virtue of their position? How many people would have done those deals that Warren Buffet did with Goldman, GE, and BAC? How many were offered that deal?

Traders on the floors used to have an edge by getting prefential execution treatment and access to customer information.

You can have a profitable system without having an edge, but a profitable strategy is not an edge.

Example: Selling options (which are statistically overpriced) is not an edge even if there is positive expectancy. Anyone can sell an option. Even being able to figure out the most overpriced options is not an edge. Though it would help in making more money.

Given it was championship weekend: an edge isn't able to kick a 60 yard field goal. It's having 5 downs while the other guy only gets 4.
More...

Yeah, I hear ya, but joe sixpack can get in and out without moving price . Where as Mr. Banker or Hedgie might take hours,days or weeks to get out of something. Each participant has their strengths and weaknesses.

I don't like the word edge. I think the market is just a utility.

When you go to the grocery store , who has the edge? They're just trying to bring the most sellers"wholesale" and buyers "retail" together at an agreeable price while making a little off the top.

Wholesalers make some money (sellers producers), Grocerystore(exchange) make some money off the top, Retail, (buyers) get to eat food and live another day. Each market is a utility bringing willing buyers and sellers together. Each may get a different benefit or loss from market depending on what they are trying to do.

Edge was a word used to describe the spread in the pit. It's more or less used as a ways to describe someone having "advantage" over others now days.

Having 1 billion capitalization can be an advantage and disadvantage.

Having 2k capitalization can be an advantage and disadvantage.


Just my 2 subpennies

Good convo.

Regards
 
Quote from Zr1Trader:

Yeah, I hear ya, but joe sixpack can get in and out without moving price . Where as Mr. Banker or Hedgie might take hours,days or weeks to get out of something. Each participant has their strengths and weaknesses.

I don't like the word edge. I think the market is just a utility.

When you go to the grocery store , who has the edge? They're just trying to bring the most sellers"wholesale" and buyers "retail" together at an agreeable price while making a little off the top.

Wholesalers make some money (sellers producers), Grocerystore(exchange) make some money off the top, Retail, (buyers) get to eat food and live another day. Each market is a utility bringing willing buyers and sellers together. Each may get a different benefit or loss from market depending on what they are trying to do.
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Being small isn't an edge, because SAC has lots of guys who run 1MM books making 500k-1MM/year.

Grocery store analogy doesn't apply because you buy food to consume it not to resell. Nor the supply chain apply because in b2b business everyone is okay with everyone else making a profit. In fact it's encouraged because it helps foster consistent supply.

In trading, a dollar in my pocket came from someone else.

I was on the institutional trading side. I'm now in the b2b manufacturing space. The expecations from your customers and those to whom you are a customer are VERY different.
 
Knowledge creates money - money does not create itself

If you knew an exact way to compound money faster than all trading methods you wouldn't care what amount of money you have to start with.

:) Once you have the master seal unlock you can always make money, but I stated before there is Nadex in Binary Options too.
 
Quote from daniel33:

Or you could do major years of research and find areas that tend to react more often than not, in many cases offering more reward than the risk.
More...

Yes...

I think it boils down to semantics about the word "bet." My original premise that trading and gambling are very similar concepts, but different in my mind primarily rests on the notion that one has a skill correlating to a studied and acquired statistical advantage, and the other relies strictly on luck.

A good illustration could be used with poker. On the occasion when I play poker, I know that compared to the friends I compete with, I don't know what the hell I'm doing. The longer I play, the more I loose. I know I'm just gambling for fun with friends. They know I'm the sucka! :) But I place my bets the best I can. However, for professional poker players, they place bets as well, but have acquired a skill where they know their likelihood of winning cumulatively increases the more they play.

When I went to Vegas, I set aside some dollars to gamble with. I expected to loose it all, but was in it for the experience for fun. However, at the blackjack table, I got lucky with my first few bets. I immediately stopped. I had won enough to cover my flight expenses and knew the longer I played, the higher the probability I would give it back to the casino. So I bowed out and watched my other friends go higher than me, but eventually loose all. In the end, I was the only one who ended positive dollars that night out of the group, yet played the shortest.

When I was a newbie, my naivety prohibited me from realizing I was just gambling in the markets. I quite quickly got my ass kicked! I had grossly underestimated just how long and difficult it was going to be to develop a system that I felt had a positive expectancy over time.

Years later, I still place "bets" in the market, however, now I don't consider it gambling. I consider it a statistically viable placement of money for return over time.

So getting back to the original poster, I believe undercaptalization in and of itself is not the reason most traders fail. I was still undercaptalized when I finally started "getting it." The key was making sure I was confident I had past the threshold from gambling, to making bets as a statistically viable placement of money for return over time.

If one is starting with a humble account size, but passes the above stated threshold through long research and practice, success can be achieved.

I do concede many many people who start undercaptalized loose, but it's not just because they are undercaptalized.

So anyone want to play me in poker!?

Wait... never mind... let me grab my wallet and just give you the money right now :D
 
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