Maybe they didn’t know how to short? ROFL
Is Trading Itself a Bad Trade? I Analyzed the Industry- Prove Me Wrong
- Thread starter cityboy12
- Start date
ROFLMAO I remember the days of guaranteed pricedrivers..etc surf used to spin...i suppose he went the way of his mentor.
Thanks for your responses.
1. I had a similar experience in my role as a stockbroker to 'Tickmagnet'...the speculators always lose in the end. They sometimes briefly shine with profits but if they keep trading they always lose. You can point at outliers (while they briefly shine) but an exception does not prove a rule unless it is long-term success. The brokers and market makers always win, however, in the form of commissions.
2. The argument of 'it is all your fault' and 'you did not work/study/sacrifice enough' is as bad as the 'you were not positive enough/ had faith enough/gave up' (i.e. suspend your critical reasoning) argument. How hard you work is only part of the multi-variate equation. I can assure you that Mr Buffet worked hard and educated himself (albeit he came from a rich family) but he only has the same amount of hours in a week that we all do. It is the 'choice of game' that he mastered.
I thank Mr Morse for his comprehensive answer. I had limited space so was generalizing on some areas
#1: I think for those without true mentors, an educator can help provide a process but it is up to the trader to expand on that and make it work for them.
What is a 'true mentor'? They seems as mythical as unicorns. By definition this would have to be someone who makes x money long-term adjusted for risk who is in the fraction of 1% who successfully make money trading and make more than e.g. a school teacher. Also, what benefit would they have to teach you? I never found a real one or know anyone who has...try asking for the P&L of any mentor/training firm and you will see what I mean.
#2: I'm not a fan of JBO type prop firms where you money is first loss-unless-they provide technology you can't get on your own.
Technology or not, who is on the winning side of the trade? Usually, the prop shop is on the good side of the risk/reward. If the technology is useful to make a profit then it is the technology you need as a trader (perhaps on license) and should cut out the middle man. However, if it does not give you an edge then the argument is void.
#3: IMO, MM are very important to depth and liquidity. Most would complain more if they did not exit as equity and options markets spread.
I agree on this one. In less liquid instruments/markets.
#4: ??
Here I am referring to the risk reward balance. If you are self-financed and have had numerous background and regulatory checks then you are essentially taking on more business risk than, for example, a financial advisory company or shop which 'hires' you. They bring X to the table but you bring X+10. But they often expect a profit/risk ratio more favourable than you receive. An extreme example is financial advisory companies who 'hire' self employed financial advisors (who take on practically all the business risk) then take all their clients when they leave.
#5: I'll revert to #3 and so, so what. We need them.
Need them or not is irrelevant (I am not talking altruism here or the common good). You don't go into the ring with Mike Tyson in his prime. You choose a different opponent where your consistently win. Unless, of course, you are paid to lose.
#6: In the US, this is beauty much a thing of the past, but we still need to look out for those that might fall for these sales pitches.
Sales is the ultimate arbitrage. Sales tactics have evolved from the Wolf of Wall Street days but they are still in the industry, and have not gone away (I am sure most people on this forum would agree).
#7: IMO, stick with Listed stocks and stay away from OTC.
In which case, you are in an area where you cannot realistically compete as there is little informational or other kind of edge.
#8: Trading for some does look like a gambling addiction. To me the sign is destructive behavior. And, the comment, "I need to make that money back" by playing bigger.
Agree.
#9: Not sure what to do with that. The law is the law. We have to adapt.
Business success is often a multi-year thing with initial years often being below break-even and a pay-off coming later. Compared to other industries,financial services regulations can wipe out business models (in the UK RDR, MIFID2, ESMA, GDPR)...adding to lack of longevity of business models and thereby increasing risks.
#10: Most traders are still manual. Robo advisors just put together portfolio for those that prefer a programmed AI to do it for lower fees. For investing, I'd rather just buy the QQQ or SPY and manage risk with the size of my portfolio. AI are not smart enough yet and not enough time has passed to see if they are smarter yet.
The trend is what I was talking about. To quote ..'the trend is your friend until the end.' Every year, it becomes more automated. AI is coming on in leaps and bounds and cannot be under-estimated.
#11: It does get harder over time to find your edge,
I was talking about hedge funds with teams of 100s of sharp analysts and employees with high tech infrastructure who are increasingly finding it difficult to produce alpha. The trend is against the hedge fund model let alone the lone retail trader working from home.
#12: I'll pass on that one.
Various studies and personal experience. But won't comment further.
#13: ?? Not sure what that means, but many traders turn to trading early with little saving and debt. Not a good way to start.
There is a 'college bubble' in the US and also the UK. A student with £100k student debt is an ideal employee...desperate, hard-working and competitive. Many business models in finance rely on extracting from such cannon fodder. Often employees are 'sold a dream' not a truth. A similar situation can exist with someone who has been made redundant and may have home equity, for example.
The key point isn't whether some (outliers) can make money trading. I am sure that some tiny percentage do (of which an even tinier percentage do it long-term)...but a choice of trade or game.
In other words, is the risk/reward good enough compared to other 'trades'? I would add the fact that you risk not just money but a finite resource (time) with a statistical probability of a reward being tiny.
Prove me wrong guys.
1. I had a similar experience in my role as a stockbroker to 'Tickmagnet'...the speculators always lose in the end. They sometimes briefly shine with profits but if they keep trading they always lose. You can point at outliers (while they briefly shine) but an exception does not prove a rule unless it is long-term success. The brokers and market makers always win, however, in the form of commissions.
2. The argument of 'it is all your fault' and 'you did not work/study/sacrifice enough' is as bad as the 'you were not positive enough/ had faith enough/gave up' (i.e. suspend your critical reasoning) argument. How hard you work is only part of the multi-variate equation. I can assure you that Mr Buffet worked hard and educated himself (albeit he came from a rich family) but he only has the same amount of hours in a week that we all do. It is the 'choice of game' that he mastered.
I thank Mr Morse for his comprehensive answer. I had limited space so was generalizing on some areas
#1: I think for those without true mentors, an educator can help provide a process but it is up to the trader to expand on that and make it work for them.
What is a 'true mentor'? They seems as mythical as unicorns. By definition this would have to be someone who makes x money long-term adjusted for risk who is in the fraction of 1% who successfully make money trading and make more than e.g. a school teacher. Also, what benefit would they have to teach you? I never found a real one or know anyone who has...try asking for the P&L of any mentor/training firm and you will see what I mean.
#2: I'm not a fan of JBO type prop firms where you money is first loss-unless-they provide technology you can't get on your own.
Technology or not, who is on the winning side of the trade? Usually, the prop shop is on the good side of the risk/reward. If the technology is useful to make a profit then it is the technology you need as a trader (perhaps on license) and should cut out the middle man. However, if it does not give you an edge then the argument is void.
#3: IMO, MM are very important to depth and liquidity. Most would complain more if they did not exit as equity and options markets spread.
I agree on this one. In less liquid instruments/markets.
#4: ??
Here I am referring to the risk reward balance. If you are self-financed and have had numerous background and regulatory checks then you are essentially taking on more business risk than, for example, a financial advisory company or shop which 'hires' you. They bring X to the table but you bring X+10. But they often expect a profit/risk ratio more favourable than you receive. An extreme example is financial advisory companies who 'hire' self employed financial advisors (who take on practically all the business risk) then take all their clients when they leave.
#5: I'll revert to #3 and so, so what. We need them.
Need them or not is irrelevant (I am not talking altruism here or the common good). You don't go into the ring with Mike Tyson in his prime. You choose a different opponent where your consistently win. Unless, of course, you are paid to lose.
#6: In the US, this is beauty much a thing of the past, but we still need to look out for those that might fall for these sales pitches.
Sales is the ultimate arbitrage. Sales tactics have evolved from the Wolf of Wall Street days but they are still in the industry, and have not gone away (I am sure most people on this forum would agree).
#7: IMO, stick with Listed stocks and stay away from OTC.
In which case, you are in an area where you cannot realistically compete as there is little informational or other kind of edge.
#8: Trading for some does look like a gambling addiction. To me the sign is destructive behavior. And, the comment, "I need to make that money back" by playing bigger.
Agree.
#9: Not sure what to do with that. The law is the law. We have to adapt.
Business success is often a multi-year thing with initial years often being below break-even and a pay-off coming later. Compared to other industries,financial services regulations can wipe out business models (in the UK RDR, MIFID2, ESMA, GDPR)...adding to lack of longevity of business models and thereby increasing risks.
#10: Most traders are still manual. Robo advisors just put together portfolio for those that prefer a programmed AI to do it for lower fees. For investing, I'd rather just buy the QQQ or SPY and manage risk with the size of my portfolio. AI are not smart enough yet and not enough time has passed to see if they are smarter yet.
The trend is what I was talking about. To quote ..'the trend is your friend until the end.' Every year, it becomes more automated. AI is coming on in leaps and bounds and cannot be under-estimated.
#11: It does get harder over time to find your edge,
I was talking about hedge funds with teams of 100s of sharp analysts and employees with high tech infrastructure who are increasingly finding it difficult to produce alpha. The trend is against the hedge fund model let alone the lone retail trader working from home.
#12: I'll pass on that one.
Various studies and personal experience. But won't comment further.
#13: ?? Not sure what that means, but many traders turn to trading early with little saving and debt. Not a good way to start.
There is a 'college bubble' in the US and also the UK. A student with £100k student debt is an ideal employee...desperate, hard-working and competitive. Many business models in finance rely on extracting from such cannon fodder. Often employees are 'sold a dream' not a truth. A similar situation can exist with someone who has been made redundant and may have home equity, for example.
The key point isn't whether some (outliers) can make money trading. I am sure that some tiny percentage do (of which an even tinier percentage do it long-term)...but a choice of trade or game.
In other words, is the risk/reward good enough compared to other 'trades'? I would add the fact that you risk not just money but a finite resource (time) with a statistical probability of a reward being tiny.
Prove me wrong guys.
He went broke buying fake Swiss watches.
Most of the population does not attempt trading at anytime in their life. Most of the population dies in debt. Is the conclusion that everything except trading will leave you broke let alone waste all of your valuable time?
https://www.msn.com/en-us/money/per...-with-dollar61000-in-debt-who-pays/ar-BBMBgqM
Let's say a would be trader has $100,000 of risk capital (or equivalent currency denomination in a western country). What are the odds he is going to be able to consistently provide himself with enough money to live on (let's say $80,000 per year) and have health insurance and save for retirement? I would guess less than 1%. What are the odds that same person can get a skill which will provide almost guaranteed income (let's say $80,000 per year) and have health insurance and save for retirement? I would guess greater than 95%. Now, if the risk capital increases to $500,000 or greater, than the odds of solely living off of trading go up.
In my situation, I prefer making non related trading income of at least $100,000 all the while letting my trading account grow. I took a break from guaranteed income to get my trading enterprise off the ground but now that everything is fully automated and can run unattended, I can focus on other money making pursuits while my trading strategies run.
You are funny
There is a guy in another thread who invested his own monies and made $2.3 billion. He is now a billionaire. He probably, had more monies to start to begin with but, you still had to manage your monies wisely. Curiously, there are traders who lost their monies then, went on to become top hedge fund managers like Paul Tudor Jones, Steven Cohen, Ed Seykota to name a few! Like any field, there are going to be the best ones and those who do not measure up! If you want to be a good trader atleast, you have to put in the time and the effort! When I started, I had to pay for seminars, books, dvds. Now, the internet is full of free information you do not even have to pay for! Remember, you are competing against the very best! You have to have your A game each and every time you place a trade! Not everyone trades the same way which I think is lost in your post. You have day traders, swing traders, position traders, scalpers, etc. Each is different and has its own challenges. Your job is to determine your skills and apply it in the strategies that would work for you!
Robert Morse
Sponsor
I would say a friend, family member or work "buddy" that has your best interest in mind and wants to share knowledge. My first boss taught me a lot about trading when my role was wire clerk/floor broker. He did not have to take his personal time to share "why" our clients did what they did and where the edge was with option at that time. I only needed to know how to execute the trades not why. I'd say he was my first true mentor.
Yes, it's a bad trade for your time. Very important to be clear on the why.
There was a time I was looking to buy some Franchise business. Some of the most profitable ones were the least glamorous ... Like janitorial services. The "cool" ones, not so much. Maybe the janitors of financial industry are the ones who consistently "clean up" while everyone is trying to be the super star. Is it so unusual?