The method I used to accumulate a small fortune as a swing trader back in the day.
- Thread starter Laissez Faire
- Start date
Quote from Laissez Faire:
Luck is definitely a big factor in this game and many confuse it with skill.
You could read Fooled by Randomness if you're interested in more on the topic.
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Did you consider yourself to be lucky or skillful while you were making money using this method in the past? How about now?
There has been much discussion on whether trading is luck or skill in past threads. IMO, successful traders will tend to say it is mostly skill (or it's cousin the "EDGE") and unsuccessful will tend to say it is luck. So I am curious as to your answer at that time and if it has changed as of today.
Their is an oversupply of lazy asses and a great shortage of hard effective workers in many many fields. Until that changes, one can always make a fortune with relative "ease".
The "useless" methods, in the wrong hands, will always be useless - past, present, future. Even when they are currently working for others...
In the right hands, combined with creativity, openmindedness, the willingness to observe, tweak, and test, and yes, luck, could be the key to breakthroughs and possibly huge gains.
How you view the world determines "usefulness".
Are you a learner or a blamer?
Other ideas to test to see if they'd be useful filters:
- number of shares outstanding - define small, mid, and large cap, and see how many of the winners fall into each bucket. Then see which bucket had the largest # of winners and the largest gains (individually and aggregate).
- Industries - rather than just coming up with a static ranking like IBD, treat each as a tradable "index" like SP/ES/NQ. Find the ones in an uptrend (either turning up, or the slope upward is accelerating), then look closer at the member stocks to see which ones are getting hot.
- It's fairly easy to test to see which stocks gapped up. The question, how do you determine what the probability of a stock [/list=1]
- gapping up, then going nowhere
- gapping up one day, then collapsing soon after
- gapping up one day, sinking back to close the gap (and possibly taking out the stops), only to take off for real (look at LL in the US)
- forms a pennant that takes days/weeks/months to resolve before gapping up and taking off for good (look at NFLX in the US), or
- gapping up and keeps going (look at TSLA in the US).[/list=a]
Once you know you're dealing with 3c-e, the questions become "how long" and "how far".
Regarding exits, for the most volatile, a possible "cue" is watching for a blow-off top in the days before quarterly earnings. It's anecdotal and worth testing, but I've seen hockey stick rises immediately before and collapses after the 3rd/4th/5th quarterly earnings after a stock starts running.
You can recognize these stocks due to the large number of daytrading "geniuses" calling the top and shorting it, only to be mercilessly squeezed.
TSLA is the current darling that fits this profile.
Well, at the time I knew little about trading and probability theory, but considering the thought I put into each entry and how my exits were not random, I thought I knew what I was doing at the time.
Still, while there were people who made a lot less than me and even lost, it was a strong bull market.
So in hindsight, I would say it's a combination of both luck and skill. I was not completely reckless and at the same time I were in the right place at the right time more than once.
When successful traders talk about skill, I think you need to consider the sample size of their trades and other metrics. For example, in the Market Wizards series, I'm quite sure there's at least one story about a guy who bet the farm on one single trade and made his fortune there.
Sure, he may have earned money later on as well, but what if that initial trade went against him?
What about all the other traders who lost everything and whom you never hear of?
Another Market Wizard made his money day trading, consistently winning through a period of years.
It could still be luck involved, but it's less probable that luck's the only factor. Most likely there's something more.
Can't say I believe you if you say you found it helpful, but you're very welcome.
You're one of the guys whose posts I actually enjoy and trust on this forum.
Best.
LF.