How?
Reality for an Individual Trader
- Thread starter drader77
- Start date
How?
I used to live in an apartment building where a number of Goldman's traders lived. All of them were admittedly envious of me as an independent trader. When I asked them why, and why they didn't go out on there own where they could make more money, their response was that they could trade by Goldman's rules, but wouldn't know what to do if on their own, as institutions are playing an entirely different ballgame that centers on avoiding risk. That's understandable given the large amounts they trade. But it is also a handicap that we don't have.
So listen to those like lawrence-lugar in post #58. And you should not be discouraged by the words of Zzzz1 , and the like, who is obviously hiding behind a dealer's desk(=salesman) trying to belittle independents by claiming some sort of superiority because he has access to BB.
A significant economic gain can be your's if you are patient, study, and work hard.
I think you are confusing a market-maker in a large sell-side shop with a PM/trader at a buyside institution. A market maker has to be very good at managing risk, but he is sitting on a natural edge - order flow, technology, models, information flow. Most sell-side MMs fail as proprietary traders because they have never actually taken risk in a systematic form in their lives and rarely manage to break that mold. On the other hand, PMs/Traders at buy-side institutions do that every day and usually have a way to navigate the process of making money. In the end, the choice of trading for a fund vs trading PA boils down to one thing - capital. I have access to 3mm of daily VaR with a payout in low double digits - no matter how hard I try, I would not be able to beat the total take-home in my PA. At the same time, I know that in terms of sheer RoC opportunities, PA offers much more.
Actually, he himself is an independent trader and he is stating a hard to deny fact - most of independent traders will not go out and search for that PA-specific edge. Mostly they will buy-into something like TA or "sell options for profit" or whatever they stumble upon.
They have algos that read words extremely fast...is my understanding?
Is there a specific reason for you to select commodity futures, and not something else (e.g. stocks, ETFs)?
Don't let the pro's discourage you. Once they were a beginner as well. You will need to study a lot and to practice a lot. Practice makes perfect. But don't use money that you can't afford to lose: consider the money which you will lose to be "education fee". Consider in advance how much "education fee" you are willing to pay.
If you have a math background, the analysis that leans more heavily on math is quant and technical. But what I find is commodity futures tends to be either news-driven or events-driven depending on the commodity that the futures is based on. Commodities like crude and agricultural products are very news-driven with their price movements heavily dependent on the various reports that forecast their respective inventory levels in the future and currencies on the other hand are driven by the various economic numbers that get published on a frequent basis like NFP numbers, pertinent central bank rate decisions and meeting minutes, other economic numbers like Retail Sale and etc. Gold has relatively stable inventory since mining of them is relatively difficult but it's quite event-driven. Any major economic or political events would tend to have tremendous influence on its price.
During the time when there is no news, they tend to trade in ranges within a certain trend and this is where technical analysis would help. So if your background is math, then you might want to dive into technical analysis first, study some of its indicators, the math behind them to find out how do they truly work and how to use them correctly and etc. But remember they work when there is no news. Once there is market-moving, ALL technical analysis goes out of the door!
My 2 cents and hope they were of any help. Good luck!
I heard of that but HOW do they get that news faster and earlier than an individual trader who has subscribed to the same news feed? That's my question.
Well that's why Goldman Sach got rid of them and replaced them with machines. I mean if you are just blindly applying trades according to preset rules, machines can do that a whole lot better and a whole lot faster and cheaper. http://www.zerohedge.com/news/2017-02-13/goldman-had-600-cash-equity-traders-2000-it-now-has-2.
Hope those traders were the last remaining 2 and if they weren't, hope they are ok making it on their own. And this is the reason why I am SO GLAD that I am trading on my own because for ever single trade that I am putting in, I actually understand and know what I am doing. I have full control of all my trades and nobody is telling me what to do with some arbitrary rules that they can't even explain if asked.
Maybe it is not the same news feed.
https://www.bloomberg.com/enterprise/content-data/event-driven-feeds