Tell me why I can't grow my account to $1M in 12 years

[jeffbader]

For successful day traders who trade styles very similar to yours, I'd suggest the following "realistic"/"typical"/"median" characteristics:

Yes! If I'm considering trading as a career, then the information you've provided here is what I'd expect to gather after sort of "job shadowing" successful traders. Thank you very much for this.

In contrast, these traders were extremely passionate about trading, lived and breathed it, and were willing to put everything they had into becoming better traders.

I think that what I meant by "means to end" was that I view all money as just a tool and a means to an end. Succeeding in the market is not an end in itself, just like having stock piles of money in an account is not an end in itself. My real end goal is financial freedom to afford generosity with both my time and money. The "means to end" statement does not, in itself, communicate how desperate I am to do whatever it takes to achieve that end.

Bottom line, I completely agree with your statement. I don't see how it will be possible for me to survive this learning curve (losing money for six months, breaking even for who knows how long, clawing my way back to a net account gain of zero and eventually becoming profitable) without tremendous passion and determination to do whatever it takes to learn and grow.

 

[S-Trader]

Yes! If I'm considering trading as a career, then the information you've provided here is what I'd expect to gather after sort of "job shadowing" successful traders. Thank you very much for this.

I think that what I meant by "means to end" was that I view all money as just a tool and a means to an end. Succeeding in the market is not an end in itself, just like having stock piles of money in an account is not an end in itself. My real end goal is financial freedom to afford generosity with both my time and money. The "means to end" statement does not, in itself, communicate how desperate I am to do whatever it takes to achieve that end.

Bottom line, I completely agree with your statement. I don't see how it will be possible for me to survive this learning curve (losing money for six months, breaking even for who knows how long, clawing my way back to a net account gain of zero and eventually becoming profitable) without tremendous passion and determination to do whatever it takes to learn and grow.

One of the keys I seem to have noticed is that the majority of successful traders at some point found a structured educational program (or at least, a well-defined, documented approach), and also had some degree of mentoring from successful traders. Those who didn't, and/or developed their own methods "from scratch," tended to take longer, and were simply able to survive the learning curve both time-wise and financially. (And my guess is that an even higher percentage of them never became successful.)

Of course, the question then becomes: "how do you find the right educational program or approach?" From what I've seen, it's mostly trial & error, recommendations (which will be all over the place unless maybe the person making the recommendation knows something about you, your personality, financial situation, etc.), etc. My personal belief is that there are infinite potentially successful approaches to trading, and a lot of the stuff out peddled out there actually can "work" -- it has a great deal more to do with finding something that's a good fit for you, and also how much you're willing to change yourself to match that approach.

So in that sense, there also seems to be a fair amount of luck involved. The few I've seen who were successful very early on -- say after 2 years -- may have just happened to stumble upon the right approach for them early on. (And they still also put in a ton of time & effort into their own development prior to and going forward.) They seem be the the "outliers of the outliers" (i.e., out of the few who manage to succeed at all). Even for those who found success later on -- to some degree, there still may have been an element of luck involved in eventually finding the right approach for them out of the thousands out there.

I believe you can also increase your odds and speed up the process by actively trying/studying different approaches and doing a lot of constant introspection, really getting to know yourself... vs. focusing more on "how much $$ this trader makes using this approach," or "how this approach only requires you to trade 1/2 hr a day," etc. Of course, most of would want to make the most amount of $$ in the shortest amount of time with the least amount of risk, lol! But what is a realistic "best fit" for your personality and personal circumstances? Maybe not something that requires you to stretch excessively in too many areas.

It's too bad no one (that I know of) has developed some sort of "trading approach aptitude" test... where based on your personal scores in various categories, there may be a probability-based "best approach(es)" for you -- e.g., based on your scores, you're likely to find most success scalping, or trading options, etc. But maybe you can get some of that by talking to experienced, successful traders. Best wishes for your success!

(P.S. And thanks for clarifying re: "means to an end." I get it.)

 

[CharlesS]

application of the scientific method

To flesh that out a little more: when an algo you're working on fails, assume it's due to a gap in your model of the market, a gap in your knowledge, or an error on your part, do NOT assume that the cause is random, do NOT assume it is due to chance.

This puts you into problem-solving mode, rather than fatalistic give-up mode.

By taking this approach, I almost always eventually find a reason why an idea or trade does not work out. It's almost always my own fault, either due to an operational error, or due to forgetting one of my rules. It sometimes makes me realize that I need to combine two ideas that I did not previously see as related. With my software dev background, which includes a lot of formal Root Cause Analysis of software defects, I experience trading problems and losses as compile or run-time errors which need to be diagnosed and fixed, which cannot be ignored.

And any software developer knows it can be very difficult, time-consuming, and painful to resolve a compile or run-time error, esp in a large undocumented legacy system produced by thousands of anonymous, often long-dead developers over decades -- why should it be surprising that trading problems are difficult to resolve ? Odd that experienced programmers and data analysts expect markets not to be like legacy systems. Perhaps a lot of programmers and data analysts turned traders have not worked in large legacy systems, have worked only in smaller/simpler new high-level web apps where there is a huge amount of critical infrastructure that that they never encounter, never have to understand ?

Of course diagnosis can be very hard when your knowledge base is limited -- there's no replacement for diligent experience. But the key here is that the more you understand about markets by applying the scientific method, the less random they become.

 

[ironchef]

From someone 5yrs+ into this endeavor, bruised, smarter, much-improved, and very confident of success:

=> Assimilate as much edu as possible, but don't apply it verbatim -- make it your own

Backtest everything and funnel new knowledge into your own insights and combinations of ideas. Remember everything you learn, and think about how different ideas/insights might recombine. Try to identify basic elements and mechanisms of price behavior. Among other things, you may be surprised to see how much difference a single tick can make. Maintain written documentation to keep track of all this.

I have a software and database analysis/programming background, and this is exactly what I do there. This assimilation is really just an application of the scientific method that so many traders already use in their professional lives. Odd that new traders with this background so often forget the scientific method when first approaching trading, and instead take the published strategies on faith.

In 100+ sources I've reviewed, there's a couple of basic and rarely mentioned ideas that have become core to my approach, after much elaboration. My hunch is that the educators who have dropped these ideas, typically undeveloped in their presentations, almost as asides, are aware of the potential application but choose not to talk about it -- like a physics teacher who doesn't mention a key derivation on the premise that the better students will figure it out, and that those are the ones who merit success in the competition. The "take it on faithers" will get weeded out.

Pay attention to everything that is said -- you may find a potential diamond in the rough, and it may be the application of your own diligently acquired knowledge that transforms a nice stone into that diamond.

I have a question for you:

In your opinion is daily stock price movement random? If not, how do you filter out the noise to find the "signal"?

Thank you.

 

[CharlesS]

ironchef, the more I see, analyze, and attempt to diagnose, the less random it appears to me.

When the market moves differently than I anticipate, it is almost always because I did not see a support/resistance level at a higher time frame, or a less obvious one at the local time frame, or because I failed to see some other aspect of a market model I have been gradually, painfully, ecstatically developing.

In the model I've arrived at, every bar has some kind of meaning, at the least related to the overall context -- to deem that a bar is noise is in my view presumptive. Whether a bar is tradable has to do with context.

The decision not to trade a bar does not mean that the bar is untradeable, nor does it mean that it is noise.

 

[ironchef]

ironchef, the more I see, analyze, and attempt to diagnose, the less random it appears to me.

When the market moves differently than I anticipate, it is almost always because I did not see a support/resistance level at a higher time frame, or a less obvious one at the local time frame, or because I failed to see some other aspect of a market model I have been gradually, painfully, ecstatically developing.

In the model I've arrived at, every bar has some kind of meaning, at the least related to the overall context -- to deem that a bar is noise is in my view presumptive. Whether a bar is tradable has to do with context.

The decision not to trade a bar does not mean that the bar is untradeable, nor does it mean that it is noise.

Thank you for your thoughtful reply. I just don't know how to take advantage of the situation you described.

When I analyzed day to day stock price movement, they seemed more random than not (but did have "fat tails").

 

[S-Trader]

I have a question for you:

In your opinion is daily stock price movement random? If not, how do you filter out the noise to find the "signal"?

Thank you.

Have you considered only trading stocks that are "one-off"/"in play"? For example, stocks that are gapping, trending strongly, unusually high momentum, etc. They tend to have much clearer signals than random stocks that are just moving with the market, no catalyst, have ho-hum daily charts.

 

[CharlesS]

Thank you for your thoughtful reply.

I suggest that the question of whether the market is random may not be relevant to trading:

Consider a luxury helicopter commuter who makes daily shuttles to Manhattan -- every morning s/he moves 50 miles in one direction and ends the day moving the same distance in the opposite direction. No net change. Random? Yet somehow the commercial pilot and the commuter company make livelihoods from this "random" movement, which also enables the commuter to do so.

Of course maybe the commuting context is not actually random -- at the outset there are 2 fixed end points which are relatively stable and touched at about the same times every day. But perhaps the market is like that too, if you can find where/when to look ?

 

[speedo]

"Those who say it can't be done should not interrupt those doing it."

Old Chinese Proverb

 

[speedo]

My apologies, I should have explained that I already understand this. My point in the example was to illustrate that even conservative estimates of what is possible yields returns that would appear to some as unrealistic. My request is for empirical results of a day trader that could serve as a metric for my own performance. I have so far been unable to find anyone willing to help.



Shouldn't a good day trader be profitable regardless of the overall market conditions? In theory, the only thing that could take me out would be a losing streak of an entire month straight of losing trades. I'd have to be some kind of stubborn to not pause and re-evaluate even after a week-straight losing streak.



There it is. Ok. Are you really claiming that there are no successful day traders? This is not a rhetorical question.



No thank you. At this time, I do not need to sacrifice anything but a few spare hours each morning while everyone's asleep in order to vet this thing. I consider the money in my account already lost to the endeavor.

See doz, this is the pickle: you don't have anything to prove to anyone. And here I am asking for it. I understand if you either don't have the time or the data readily available. I'd also be hard pressed to indulge some noob, some random guy out of a thousand losers asking for my personal info. I am investing my time to prove this out. The money I'm risking is important to me, but if I were to lose it all, then I would know for sure that I gave it my best and failed. So I am taking it seriously, because I don't want to look back after failure and think "well I didn't really take it seriously that time."

Who doesn't do research when choosing a major to study, career to choose, job to take, business to start, business to invest in, house to buy, etc?

Your platitudes aren't helpful. I will continue to hope that someone is willing to help me. I mean no disrespect and I wish continued success for you.

Yes, a day trader learns to trade in any environment. However, there are period when trading is difficult...constricted ranges lacking directional impulse but from contraction comes expansion. Patience and discipline need to be in your tool kit. Knowing when not to enter a position is a trading decision and often a good one. Oh and pay little if any attention to those who sound like stock brokers and not traders.