Is Trading Itself a Bad Trade? I Analyzed the Industry- Prove Me Wrong

Without realizing you proved my point.

1. The guy you mentioned. Started as an entrepreneur/had a hard marketable skill/product then used compounding and value investing. Not a trading.
2. Paul Tudor Jones, Steven Cohen and Ed Seykota. Again you prove my point, the 'momentum trading' strategies of decades gone by no longer work (a Windows PC can do it).

Steven Cohen had a non-standard mindset and proves my point. He did not 'play the game' like everyone else did. instead he used insider information for an edge and then used good lawyers to beat the Feds while other people beneath him took the risk/fall.

You also confuse business owners (who extract knowledge capital from their employees) with traders. This is a common mistake, you have to compare like with like. A trader with a trader and not a trader with a business owner or team manager .
 
cityboy12 said:
Bear with me on this one... Ultimately, as traders we are looking for risk/reward, managing our resources (including finite time) and risk... and making a profit.

I have working both as a stockbroker, portfolio manager, in sales and also within the brokerage industry on behalf of platform on a journey of discovery which took a number of years. I found

1. Fraudulent educators (behaving much like carnival barkers or snake oil salesmen).
2. Arcades/prop shops (those that are still around) essentially pyramiding off of their traders (desk fees, commissions) as their business model.
3. Market makers (ahem..bucket-shops) whose business model is incentivized by you losing money.
4. Transfer of risk onto 'staff' members (self-employment is not employment unless you own equity in the company) and a promise of earnings does not pay the bills and is a risk-less promise to the person making it.
5. Big well-resourced HFT funds with huge advantages- essentially, cartels or monopolies within their spaces.
6. Aggressives sales practices - often defrauding the elderly, naive and weak.
7 Stock price manipulators (pink sheets, AIM anyone?)
8 Gambling addiction - destroying lives, relationships and net worths - some people need help.
9 Structural changes in the industry - including constant regulatory change
10 Automation - roboadvice and AI reducing the need for human trading (it is not 2009 but 2019 , traders are now programmers).
11 Less and less alpha- witness the decline in the HF industry.
12 Psychopathic managers - finance seems to attract them.
13 Indebted students being taken advantage of by employers

I could go on...but the biggest statistic is the very very low chance of success (depending on which study you read, less than a fraction of 1% and, even there, you will probably make less money than a teacher or policeman). Don't forget that ROI means that you invest resources (including the precious commodity of your time) with an anticipation of reward. Investing in trade school certifications will give you a higher ROI over time at lower risk (particularly if you save early and use point 3 below).

I applied analytical tools like the Carver Matrix or Game Theory then I researched/ looked at options like...

1. Own the house - become a market maker or retail broker. But the regulations (such as capital adequacy) have 'gamed out' the new entrants and protected the cartel. Increasing changes away from commission to fee models and transparency.
2. Use other people's money (heads we win, tails you lose). People forget that hedge fund managers don't pay out when performance is negative, they just reap the rewards when/if it is. Regulations also a barrier. However, usually you are undercapitalized and can't compete. A start-up hedge fund managing millions can make you less than a good tradesman. Less and less alpha.
3. Choose another investment game - the power of compounding ? (Remember Buffet's bet anyone?) Wealth management (using low cost ETFs etc)
4. Get a skill and charge a fee- I now have a fee-based business and my income grows steadily. Ultimately, unlimited upside and limited downside.
5. Get evil - create a training school for prospective traders, set up an offshore FX shop, fleece your 'employees',etc
6 etc

I went with 3 & 4 with 2 kicking in in a year or two (specialising in very niche areas of the markets) once I have solid cashflow elsewhere.

I remember the lyrics of a song ...'Suppose they gave a war and no-one came..'.? Isn't trading about analyzing the game itself?

Prove me wrong guys...am I missing something?
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"If you think you can do a thing or think you can't do a thing, you're right."
- Henry Ford
 
"Is Trading Itself a Bad Trade? I Analyzed the Industry- Prove Me Wrong"

It is for the masses, it is about equal as starting a non franchised restaurant. People see the wealth of other people as their driving force. Exchanges were not built with retail in mind, those with volume.

I see trading like real estate rentals, always fixing, adapting, rebuilding and if you stay with it, you get very good at it cause it was something YOU want to do at a cost, loss of time, loss of family in some cases, it becomes an obsession for some. Many cons in real estate as well as trading, often think more in real estate than trading. Unless you sell your properties yourself, you have to use a broker or become a broker. And you making trades property for cash or property for property.

Many many more long term investors that made good than traders. Traders do not realize how much fees really accumulate, and those who trade Forex, you paying them too but in different way as so many are naïve of bigger the spread, bigger the fees and they usually trading against the ones who charge the fees, LOL.

Very very few good mentors, cause whatever you can pay them, they make that in a trade or two. If not family or close friend, people who care for your welfare, you can't learn in a weekend or a month, least I never could.

Trading is the hardest overall for most people, too many choices and way too little time, but so very easy to open an account at a brokerage.

But I see it no different than any other business, you don't do your homework before opening your business, you most likely will lose it all.
 
I think the typical solo retail aspirant with no expert guidance/mentoring or training, very limited risk capital, and no alternative income source is basically doomed before they begin, with probably under 1% odds of long-term success.

If you have any two of the above three (and better yet all three) then the odds of success are high, certainly high enough to make the effort worthwhile, if you have the necessary personal qualities and it's what you want to do.
 
My point is investing long term , adding shares , collecting dividends is the better way to get involved with the investment products.

The idea that you need large capital to trade is total BS , why would you want risk big to gain small , it should be the other way around.
 
Elochocinco, believe me I have no sense of entitlement and I forgive you for the expletive.You picked me up wrong.

Rather than being another person on the 'losing side of a trade', I chose simply to work within the industry. I methodically studied the industry from the inside out for a number of years both inside companies (where I obtained employment) and outside them. I studied and researched the business models of countless companies and individuals and conducted countless hours of secondary research in order to find 'an edge' or pfofit.

My preliminary conclusions are what I am sharing based on personal evidence, data gathered and not on smoke and mirrors or hearsay. In fact, I applied a dispassionate mindset to my research, much as a trader is supposed to (I am told). In other words, on a simple level.

1. A dispassionate analysis without any emotional bias
2. An understanding of the relationship between risk and reward
3. 'Choosing your trades'
4. Only committing in full when you have a verifiable 'edge'.

I am open-minded and would love some objective evidence (not hearsay, fake P&Ls or 'I know a guy who.') to complement my analysis. As an example, there are circa 97k members here. Assuming a 1% success rate, that would be some 970 consistently profitable traders. Of these, a fraction would make a reasonable income for the time and risk/reward...say a couple of hundred. This forum is a fantastic opportunity to post audited P&Ls and propose mentoring others.

However, in essence, so far my analysis points to the conclusion that different strategies such as obtaining a good marketable skill (e.g. CPA, doctor..) and saving and compounding has a lower risk to reward ratio. In other words, 'another trade.'
 
cityboy12 said:
Prove me wrong guys.
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Those who can proof it, are not interested for many reasons. A waste of time for them. Why would they keep themselves busy with losers? Because only losers ask to proof they are wrong. Winners will never ask that question. They see the answer in their bank account(s).

Stockbrokers, portfolio managers, in sales and also within the brokerage industry, are typical jobs for people who did not make it as a trader. I have meet, and sometimes still meet, quite a few of them.
 
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