I beat the market albeit not everyday.
No one on EliteTrader will beat the market⦠here is why
- Thread starter neutrino
- Start date
i feel the same, especially after
watching the interview http://www.youtube.com/watch?v=ABXPICWjFIo
done by the author of "The Black Swan"
I think it's much better if the client knows that the money manager is in this business for the money. This will make the client much more careful to pick a manager whom he trusts. An honest manager is better than simply a smart manager, because if at some point he realizes that he cannot deliver the expected returns he will return the money to the client instead of churning his capital for years. I'd like to have clients who know that I will make money even if they lose and they choose me nevertheless. And I will also educate them about the advantages of a passive low-cost investing strategy if they are not aware of it. May be I am too idealistic, but I think targeting the right client and building the business for the long-term is critical to the success in any venture.
Neutrino, just a thought in regards to your opinion on market efficiency and the futility of active trading.
Moving in and out of large - institutional - blocks of stock often incurs excessive slippage, even if the order is well worked. This is a much higher cost than the cost of paying the broker, explaining partially why so many funds massively under perform the indecies.
However, smaller scale players like me can watch you bigger institutional guys try to work your orders... and while you guys may be battling it out in what's really a craps shoot that's so efficient that the only way you will be beating the S&P is with luck, it's a fact that whenever someone tries to work an order large relative to the volume the stock does, slippage is going to happen. Part of the reason slippage happens is scumbags like me are talented at figuring out when and how you're working your order, and we can get in front of it and scalp you for $300 or $1000 or whatever. Doing that everyday, you may not make 7 figs (though that has been done), but making year in year out 6 figs - with returns totally uncorrelated to the S&P, and % ROI that KILL any larger fund - is totally possible.
What I'm saying is... it may be true that you can't really outsmart the market longer term, but as long as people try, guys like me can scalp them and consistently outperform.
Moving in and out of large - institutional - blocks of stock often incurs excessive slippage, even if the order is well worked. This is a much higher cost than the cost of paying the broker, explaining partially why so many funds massively under perform the indecies.
However, smaller scale players like me can watch you bigger institutional guys try to work your orders... and while you guys may be battling it out in what's really a craps shoot that's so efficient that the only way you will be beating the S&P is with luck, it's a fact that whenever someone tries to work an order large relative to the volume the stock does, slippage is going to happen. Part of the reason slippage happens is scumbags like me are talented at figuring out when and how you're working your order, and we can get in front of it and scalp you for $300 or $1000 or whatever. Doing that everyday, you may not make 7 figs (though that has been done), but making year in year out 6 figs - with returns totally uncorrelated to the S&P, and % ROI that KILL any larger fund - is totally possible.
What I'm saying is... it may be true that you can't really outsmart the market longer term, but as long as people try, guys like me can scalp them and consistently outperform.
2009 could be a year of surprises (God forbid!):
* new tricks by MMs
* more powerful dark pools
(you cannot scalp them!)
* new regulations
* even some changes in tax regulation
can make our life much more difficult, and our scalping less effective for the long run.
options can make more difference, IMHO
plus, some institutions load on some specific desirable stocks by selling puts (especially when volatility is very high), for example, step by step, not by big lots, but on the regular basis, etc.
* new tricks by MMs
* more powerful dark pools
(you cannot scalp them!)
* new regulations
* even some changes in tax regulation
can make our life much more difficult, and our scalping less effective for the long run.
options can make more difference, IMHO
plus, some institutions load on some specific desirable stocks by selling puts (especially when volatility is very high), for example, step by step, not by big lots, but on the regular basis, etc.
I disagree that you can't make money. I make money trading... Ill admit I have bad days but overall I can trade the mini ES consistently well.
That aside... I will indeed agree that there is no "edge" because we all see the same things and counter each other's moves constantly. That is after all, what makes a market. The fact that you might think its going down and I think its going up creates liquidity and movement.
The only real "edge" is experience. Someone here noted patterns and I completely agree with that. There are times it just "feels" right to go long or short because I notice these patterns or movements and just know its getting ready to make a big move. Heck, just today my indicators pointed short and I went against it with my gut feeling and next thing you knew I was making money.
Experience is the only real edge in my humble opinion.
That aside... I will indeed agree that there is no "edge" because we all see the same things and counter each other's moves constantly. That is after all, what makes a market. The fact that you might think its going down and I think its going up creates liquidity and movement.
The only real "edge" is experience. Someone here noted patterns and I completely agree with that. There are times it just "feels" right to go long or short because I notice these patterns or movements and just know its getting ready to make a big move. Heck, just today my indicators pointed short and I went against it with my gut feeling and next thing you knew I was making money.
Experience is the only real edge in my humble opinion.
for wannabe traders, the most simple patterns to grasp are, probably, flags (bullish & bearish). they are pretty easy to spot and measure the potential target, especially if used in combination with volume and pivots.
also, lines of support and resistance and channels inside other channels on different timeframes can make ppl more comfortable when they make their minds.
indicators distract sometimes and do disservice in really complex situations via "analysis-paralysis". plus, if there is no coninfluence between major indicators, there is an option to pass the current trade setup till next time, or just totally ignore indicators.
some newbies set too tight stops up, and, in the result, stopped out a lot. that's why psychologically, it's easier for them to start trading simple patterns, like flags and W-bottoms/M-tops where their stops could be potentially taken less often.
also, mini-Dow (YM) where 1point= just $5 could be more preferable choice to start with, and not ES.
YM is not just for novices. John Carter trades YM a lot, for example.
trading is mostly "ambushing", i.e. you sit and wait for the proper setup(s).
but new traders pretty often confuse being in the market with trading non-stop any tiny move in any direction, even if it's just a noize.
but even profis sometimes (it depends) can potentially lose money even with the most beautiful money management, in choppy chaotic moves of pre- and after- lunch hours...
of course, there are some guys who love trading chop (for example, of Woodies' type). i'm not one of them
IMHO
also, lines of support and resistance and channels inside other channels on different timeframes can make ppl more comfortable when they make their minds.
indicators distract sometimes and do disservice in really complex situations via "analysis-paralysis". plus, if there is no coninfluence between major indicators, there is an option to pass the current trade setup till next time, or just totally ignore indicators.
some newbies set too tight stops up, and, in the result, stopped out a lot. that's why psychologically, it's easier for them to start trading simple patterns, like flags and W-bottoms/M-tops where their stops could be potentially taken less often.
also, mini-Dow (YM) where 1point= just $5 could be more preferable choice to start with, and not ES.
YM is not just for novices. John Carter trades YM a lot, for example.
trading is mostly "ambushing", i.e. you sit and wait for the proper setup(s).
but new traders pretty often confuse being in the market with trading non-stop any tiny move in any direction, even if it's just a noize.
but even profis sometimes (it depends) can potentially lose money even with the most beautiful money management, in choppy chaotic moves of pre- and after- lunch hours...
of course, there are some guys who love trading chop (for example, of Woodies' type). i'm not one of them
IMHO
They are all inefficiencies that are easy to compete away though. The real edges are ones that depend on human nature and thus will last forever e.g. value investing, macro speculating, fading panic extremes. Their return/risk is inferior to clear inefficiencies over the short-term, but unlike them the superior returns do not degrade over time.