My first post; some observations on trading.

[Biog]

Quote from abc1:

Exactly, this is the point I am trying to make.

At most one can assume/make/ even hope (!) for a certain outcome with reasonable expectation but cannot guarantee it.

Therefore with results outside of one's control how can any one trader claim skill.

Traders saying they have skill is like me suggesting that a successful bet placed on Chicago Bulls winning a basketball game in the 1990s makes me Michael Jordan.

abc1

abc1 has started a very interesting discussion.

Here is my take from the perspective of a fulltime trader. I've been trading for 10 years (broke even first 2 years and have made at least six figures every year of the last 8 years).

The first couple years of making money more often then not felt like luck. However, I felt at times really 'skillful and smart'. The markets have gone through many changes since then and so has my viewpoint. Most of the time during those first few years I felt my luck would run out so I saved as much as I could.

But as each year goes by and I continue to increase my income...my view point as changed and I have become more comfortable with my trading future. I now liken trading successfully as more akin to being a casino. The casino (myself) has an edge over the gambling public. Over the short run, some gamblers might take some money from the casino. But over the long run, the casinos make money due to a built in edge (odds). I'm never 100% sure that a single trade will be a winner. But over the longer run, I'm more confident in my 'ability' to generate income.

 

[Don Bright]

Quote from Mercor:

Trading consists of buying inventory at one price and selling it at a higher price.

Traders look at indicators either technical or fundamental and decide what is the mostly likely setup that would entice someone else to pay more for that same inventory. That is called profit.

Best Buy buys inventory of Flat screens. It uses demographics and cost ..(ie fundamental and technicals) To determine if it can sell at a profit. To entice a customer to come to the store to pay more for that inventory best buy needs to have the edge...ie..low cost and popular product

....Both trader and retailer need the same thing...inventory that is priced right and in demand.

Both trader and best buy are exposed to equal risks

Just a comment on your first sentence above. I think you're describing investing vs. trading, IMO. We tend to "enter" trades, either long or short, based on a set of criteria. The "buy first" types don't tend to last very long, and many go broke "waiting" for the stock to go up.

Retail traders are limited to what they can do, and I realize that. And I realize that your broker basically steals your interest money on the cash generated from short sales (our guys get a full 5% from Goldman Sachs)...this allows for more working strategies, like opening only, mergers, and pairs, etc.

Regardless of all that, if you limit yourself to "buy first" - then you've eliminated 50% of your profit opportunities. The market is guaranteed to go up, and go down, every day.

FWIW,

Don

 

[sjd231]

actually, i am implying that more leverage allows me to take on less risk. it is the strategy you use that determines the risk you take, not the amount of leverage you are given.

 

[TimothySykes]

Quote from abc1:

Having spent over a year lurking on this forum without posting I have now decided it is time to post.

My thoughts on trading come from experience as a trader, having seen other people trade, some reading and an open philosophical mind among other things.

For a start there are several things that hold true for 99% of traders; that is that they all are making money and lots of it, that there is a skill or secret to successful trading and above all that you must hear all about it.

The realities of trading are somewhat different. Very few make money - at least consistently. More importantly is my ultimate belief that there is no skill or secret to trading; that trading is pure chance. I have yet to meet anyone who could convince me otherwise. I have met plenty of people with varying degrees of experience, who will tell me otherwise, often giving me a despairing look or attempt to educate me with the 'facts' but to no avail. These people I call 'the believers' and it looks like there are plenty of them here.

They will point out the charts, talk about TA, resistance, support, economic indicators, their bad luck on the last trade etc. They can even read the morning newspaper informing them what happened yesterday.

The belief in 'an edge' is another of my pet favourites. True there are edges in trading but it is limited to a very small percentage of people. They include brokers, exchanges and those with insider knowledge, i.e., those who make money on every trade and those who really are trading ahead of the curve.

What a lot of people really don't understand or want to believe is that it is the future that determines what happens and very little in the past can tell you what that will be. A stock chart might show a high or a trend but it won't tell you the company is going bankrupt tomorrow, that the company's latest profit generating product has a flaw and is about to be recalled from retail, that several brokers are about to upgrade the stock (bad news for those that are shorting) etc.

While this might seem painfully obvious, very few realise the significance of it. Anyone can use plenty of information to make a trade but nobody can guarantee profit or a loss. Fate, chance or simply tomorrow's news will decide that.

ABC1

Wow man, you need to read some trading books, I don't even know where to begin, your conclusions are almost all off

 

[abc1]

Quote from man:

either you are a trader then how can you claim it is impossible,
since everything is random. that is contradicting. or you are not
a trader, then your post is not contradicting, just useless. and
if your perspective had ever extended to rentec, you would not
claim that edge is impossible.

funny topic for a first post. what did you expect out of this thread?
useful interaction? doesn't make sense in the first place, remember?
everything's random ...

I've not used the word random.

My point is that while one can use information to place a trade; the moment they enter that trade the profit or loss is generally out of their control (stops/limits aside.) The reasons for this include :-

- Price movement is not predictable

- Price movement at any time is rarely in one person's control; certainly not the average trader. Think of the size it would take one person/entity to create and maintain a large movement in one direction.

- You are just one of many other market participants out there using different reasons to buy and sell all day long.

- Company news may appear which was not in one's grasp at the point of opening the trade.

- Larger market forces (econ data, political etc)

- In short, unforseeable events post trade.

It follows that it is difficult to claim skill for successful trading. At the very least it is difficult to prove.

All I wanted was some well considered discussion on my thoughts; not insults or bashing.

abc1

 

[TimothySykes]

Quote from abc1:

I've not used the word random.

My point is that while one can use information to place a trade; the moment they enter that trade the profit or loss is generally out of their control (stops/limits aside.) The reasons for this include :-

- Price movement is not predictable

- Price movement at any time is rarely in one person's control; certainly not the average trader. Think of the size it would take one person/entity to create and maintain a large movement in one direction.

Just have to tackle these 2 points as there are times when price movement is predictable and able to be controlled and those are during times of breakouts or breakdowns when stop losses get taken out. Average traders love to use big fat round numbers so these price levels, when taken out, open the door to a tsunami of buying or selling (depending on resistance or support getting taken out). These tsunami create predictable price moves of 25 cents - $2, depending the stock. You don't need a big account to control the price during these times, just surf the wave of price momentum

 

[abc1]

Quote from man:

and that is the best example for selfcontradicting i read in quite
a while. how do the "few make money ... consistently" if "trading
is pure chance"?

Think of it like this.

Call the toss of a coin 1 years worth of trading. A head is an up year, a tail a down year.

Now say 100,000 people toss the coin 10 times. You would expect 5 of each head and tails for the majority. At the extremes are 10 up years or 10 down years, both of which are very unlikely combinations.

Also, every toin coss costs money (for comission, living cost etc)so skew the results accordingly.

I hope you can see the point I am trying to make.

abc1

 

[abc1]

Quote from sunggong:

Man, another thread started by a loser who can't figure out how to make money consistently via trading....


Instead of keep posting here, Mr. Alphabet, just go get a corporate job because it's obvious that you do not have what it takes to become a successful trader.

Actually, with your attitude, I'm not sure if you have what it takes to be successful in any career.

Again, where has any concept of failure come from ?

abc1

 

[abc1]

Quote from sjd231:

actually, i am implying that more leverage allows me to take on less risk. it is the strategy you use that determines the risk you take, not the amount of leverage you are given.

The concept of leverage to me implies margin trading or trading on borrowed funds or a combination of the two.

Even if you are using leverage to become more hedged/reduce risk you are still leveraged at least one if not both sides.

It is certainly increased risk; although to varying levels as your situation suggests.

abc1

 

[abc1]

Quote from TimothySykes:

Just have to tackle these 2 points as there are times when price movement is predictable and able to be controlled and those are during times of breakouts or breakdowns when stop losses get taken out. Average traders love to use big fat round numbers so these price levels, when taken out, open the door to a tsunami of buying or selling (depending on resistance or support getting taken out). These tsunami create predictable price moves of 25 cents - $2, depending the stock. You don't need a big account to control the price during these times, just surf the wave of price momentum

Fair point Mr Sykes and I'll take a bow.

However, how many people have access to see where stops are ? Even if these are listed on say level 2/order book it is surely a judgement call whether it is support or resistance, e.g., buy limits or sell stops etc ?

Again that momentum you describe is probably quite difficult to jump on. Surely if stops get triggered and executed the market will adjust to the new level before traders can jump on at the stop price ?

abc1