Reality for an Individual Trader

[learner2007]

An investor will never be able to compete with the returns of a potentially good trader.

But if what you meant was a Trader, then yes...you can compete/beat the so-called pros.
The so-called pros are way overrated, in my opinion. They are not even traders, per se...but more of order processors.

'Decades of experience' doesn't necessarily equate to skill. alot of people are still basically dumbasses in this game. their heavily guarded secret returns will otherwise put them to shame if it ever came to light.

Infact, you have a huge advantage as a retail trader...because you are not limited by rules and regulations that their employers restrict in their strategies. and you're nimble, you're much less likely to move markets.

The suits of wall street likes to make the public believe they are pedigreed, superior geniuses...who will make money rain down on their investors and clients.

Exactly!! And if an independent trader can't make more in a day percentage wise than an institutional investor can make in a year, he just needs to study more.

 

[sle]

No, at the time MM's did not even exist here in Japan .

In that case I don't understand why they felt they could make more money being an independent trader. If there is one clear drawback to being a PA trader it's capital constraint. Last I check, we spend dollars and not percentage points - so if you are taking home 10% of your P&L and your capital is 200mm, it's very hard to make the same amount trading your PA.

 

[learner2007]

In that case I don't understand why they felt they could make more money being an independent trader. If there is one clear drawback to being a PA trader it's capital constraint. Last I check, we spend dollars and not percentage points - so if you are taking home 10% of your P&L and your capital is 200mm, it's very hard to make the same amount trading your PA.

Because they were not traders getting a cut of the profits they generated.

 

[Zzzz1]

I agree with all the points you have made. There are advantages to being nimble and being able to move in and out quickly. Sometimes, however, that can be a disadvantage, overtrading ring any bells? Despite all the advantages you list, you omit all the advantages pros have. Maybe if we combine both our posts we will end up with a balanced picture?

Because the beginner has a few big advantages that the hedge fund PM does not have. First, the beginner can go from 0 market exposure to 100% market exposure and back to 0 again in a few seconds without the market even noticing. A large money manager does not have that agility.

Second, the individual trader can take deeper drawdowns for longer periods of time that would cause all investors to flee a fund. If an individual investor is falling behind on a given year, he won't feel the pressure to play catch up to try to match a benchmark like a fund manager will feel.

Third, the individual investor can lean more heavily on his best ideas. My performance would be better way better if I only had a $10k account to manage. Why? Because I can go all-in 100% on my best ideas. With a larger account, I can't bet the farm on my best idea. I have to put money into my #2, #3...#70 best ideas. But if I'm just starting out, have a good job that pays $70k or more per year, but do not have much money saved up yet, sure, I'm fine putting the entire $10k in my brokerage account on one or two trades...my best ideas. A fund manager would get fired for doing that.

Fourth, if the previous best idea turns out not to be such a great idea, then I have the flexibility to wait until the position recovers. A fund manager does not have that ability. Hopefully, the idea was not completely terrible and maybe I only have to wait a month or two for the trade to turn profitable. The point is that the individual investor or trader has more flexibility to take risk than the fund manager. He or she might feel that two sectors are undervalued, all the rest are overvalued...I don't want equal exposure to the market, I want to get overweight in those two areas only because the other sectors are over-priced...screw the balanced portfolio. I don't recommend betting the farm on every trade, but sometimes the risk / reward makes sense. Especially if I have industry knowledge about a given sector or company that most people do not have...my day job could be working at a small tech or biotech company and knowing something that the rest of the market does not.

Fifth, somewhat related to previous, a retail investor can more comfortably stay in cash or lower risk assets for a longer period of time because he's not trying to match a benchmark or keep up with his peers. The aim becomes taking risk when it pays to do so and reduce exposure when it doesn't make sense.

Sixth, it's your money. No one cares more about your money than you...or at least a successful trader / investor feels that way.

In hindsight, these points relate more towards investors than day traders.

 

[Zzzz1]

google "elementized news feed"

How?

 

[Zzzz1]

Market makers existed for centuries, mate. They did exist in Japan for centuries, too. Pertaining to financial trading market makers in Japan existed forever in the OTC markets. They are called inter bank dealer, broker dealers, or simply market makers...inter bank dealers/broker dealers are intermediaries between market makers and market makers are intermediaries between client interest.

No, at the time MM's did not even exist here in Japan .

 

[Zzzz1]

they only got rid of cash equity execution traders. Those are monkeys that simply push buttons when the sales force instructs them to do so. It was an easy feat for algos. Market makers in the OTC markets are alive and kicking, though there is momentum building to have them replaced at some point as well. Google Tradeweb, for example. Bloomberg has a competing platform as well. A major trading platform for treasury securities.

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.

 

[Zzzz1]

That guy (@learner2007) does not quite understand the business. He claims he worked as professional before yet I highly doubt that. Of course anyone with ok trading skills is ALWAYS better off at a prop desk and equipped with a fixed percent take-home agreement than someone sitting at home. To start with, it is a free option. Fuxx up and you are let go but get to keep most if not all of your past salary and bonuses.

In that case I don't understand why they felt they could make more money being an independent trader. If there is one clear drawback to being a PA trader it's capital constraint. Last I check, we spend dollars and not percentage points - so if you are taking home 10% of your P&L and your capital is 200mm, it's very hard to make the same amount trading your PA.

 

[learner2007]

Market makers existed for centuries, mate. They did exist in Japan for centuries, too. Pertaining to financial trading market makers in Japan existed forever in the OTC markets. They are called inter bank dealer, broker dealers, or simply market makers...inter bank dealers/broker dealers are intermediaries between market makers and market makers are intermediaries between client interest.

The subject at hand was GS traders on TSE and OSE vs MM's.

 

[JSOP]

they only got rid of cash equity execution traders. Those are monkeys that simply push buttons when the sales force instructs them to do so. It was an easy feat for algos. Market makers in the OTC markets are alive and kicking, though there is momentum building to have them replaced at some point as well. Google Tradeweb, for example. Bloomberg has a competing platform as well. A major trading platform for treasury securities.

I heard the Goldman Sachs hiring process is the toughest in the world. They did all that just for hiring people to push buttons??!! That's a huge waste of money if you ask me. I thought they wanted the best of the best of the best, the cream of the cream of the crop??

I dunno. Goldman Sachs is something that I never understood.