In FX land, it's all EUR/AUD all the time. It's had a huge run so you might be a little late to the party there. Same goes with AUD/JPY. Two spectacular moves.
The ACD Method
- Thread starter sbrowne126
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In FX land, it's all EUR/AUD all the time. It's had a huge run so you might be a little late to the party there. Same goes with AUD/JPY. Two spectacular moves.
I would say 99% of intra-day traders were net losers and 90% of overnight traders were net losers. So the longer term traders performed much better.
Interesting. Very few people are in a position to observe the raw P&L of a large group of traders. I always wanted to ask the same question to an accountant that specializes in preparing tax returns for traders, but I never had an opportunity. Mav, appreciate your insights, as always.
More importantly then simply seeing the raw numbers is actually seeing "how" they lose their money. You see the same patterns repeat over and over again regardless of their age, education background, experience, etc. It's very eye opening. Brett Steenbarger wrote a lot about it in some of his books and blogs being the trading coach at Kingstree, one of the top prop firms in Chicago at the time.
The usual...over trading, revenge trading, trading too big, not getting out of losers. Very few traders had patience. Or should I say, they were incredibly patient with their losers. LOL. The warning sign was always when guys would cross over and try something new because they were struggling. Since we were an option firm, almost always we would see guys just say "fuck it" and start selling premium anywhere. The pain of losing would become too much. That was always the warning sign. Or if a guy normally traded 300 share positions and suddenly he has on 2k to 3k shares every day. Which would be fine if he was making money and increasing his size accordingly, but usually the increase in size came with a a decrease in equity in their account. You also see how losing affects their psyche. Once the downward spiral starts all decision making is affected. Ultimately risk management would have to take over and do what the trader was refusing to do, which is get out. Next step would be to cut off their user id. Final step, the U-5.
Countless books have been written about this stuff and yet the patterns never change.
Longer term guys were more tricky because everything takes longer to develop. If a guy usually holds positions for weeks on end, it's hard to tell if he is sitting on losers because it's part of his long term plan or because he refuses to get out of bad trades. Also with longer term guys they usually blow up a lot slower believe it or not because they sit so long in stuff. What helps them is they the obviously are not drowning in commish and they are more often then not, not over trading. But you have to watch them as well because they can lull you into complacency. Suddenly they have a monster position on and their equity is dropping like a rock. With longer term guys it's usually that "one" position that does them in vs daytraders where it's a constant daily bleed.
I will say this and I've said this for years on this forum and will continue to say it, a lot of this business is about luck whether people want to acknowledge that or not. And it's very hard to have luck work for as you as a daytrader since your upside is limited by time. When longer term traders get lucky, they really get lucky. All it takes is one event, one pop, one move that drops a small fortune in their lap for no other reason then just being involved in a trade over time. Nassim Taleb talks about this as well, usually in the parlance of being long curvature or having optionality.
Intresting stuff thanks for sharing. I was doing some research on prop firms that allow you to hold overnight and the list was one or two names. Do you know any firms besides bright that allow overnights on equities, and what does the haircut look like. Also are you still doing spread trading how is that going for you?