Three Sources of Edge

[wrbtrader]

I congratulate those that can trade profitable by accurately predict the market (up, down or sideway). I just say it is impossible from the practical point especially in the long term at least from my knowledge gained from institutional or as a private traders.

I never see (I may be wrong) any retail trader can make their millions from 5K account, especially those try to look for easy path such as pattern, indicator, signals, PA or any brokers/bucket shop promote methods/training.

I did make good living from trading/investment (thanks for the good years when I was in the right place to learn the right skills and earned the starting capital from the good bonus).There are proper way to make money from this business, but I (and no one) will ever share this in public forum.

It took me awhile to learn that to be a profitable trader...you don't need to accurately predict the market. You just need to apply good risk management, good position size management, being in the right markets at the right time to be a profitable trader.

Unlike you, that's what I learned from institutional traders.

I agree, I never met any retail trader that turned 5k into millions (you made that plural) in today's markets nor in markets from yester-years like the 1990s dot.com days. In contrast, I do see traders with 5k making 20k in today's markets. Once again, they aren't accurately predicting the markets. They just have a strong understanding about why they actually are profitable and they simply rinse and repeat.

I was in Montréal recently and hanging out with a friend (former institutional trader) at his home as he traded. 6 trades...4 losers and 2 winners but 8k in profits for the day. That was an unusual big profitable day for him but not the more losing trades than winning trades. He's not a 5k small account trader and usually has about 100k trading account depending upon how much profits he has moved out of his account that particular month. Yet, he has consistently stated he has a 48% win ratio over that past several years...obviously he's someone that does poorly in trading because he's not able to accurately predict the market on that one particular trading day and on most trading days even though he makes about 15k per month.

Think about that carefully...not able to accurately predict the markets but still consistently profitable. Seems like an oxymoron, a contradiction, uncomfortable reality. Seems to conflict with everything we as retail traders know about trading.

It just seem odd that the pros or former pros have learned risk management from their jobs because its demanded (instilled) in them as a critical component of their job while most retail traders seem only interested in such after a few blow ups.

That also makes me wonder about the goal of trading....

I always thought the goal was to be a profitable trader or should it be to be able to accurately predict the markets. I'm starting to think there's a big difference between those goals when I see traders like my buddy in Montréal that has excellent risk management on his losers, holds his profitable traders to their targets and knows when to decrease his position size and when to increase his position size most of the time but not every time...

Maybe we have a misunderstanding of what is an edge ???

 

[Redneck]

t just seem odd that the pros or former pros have learned risk management from their jobs because its demanded (instilled) in them as a critical component of their job while most retail traders seem only interested in such after a few blow ups.

Yet if the independent trader only stopped and thought about how much of their non-trading life involves risk mitigation.., should not be such a hard task to carry it over to trading

Insurance / locks / fire alarms / passwords / brushing teeth / eating healthy / vitamins / seat belts / exercise / sunscreen -> on.., and on..., and on

Full disclosure: I had to blow up a couple of times to get it - so I'm not sitting here thinking/ or trying to come across as I'm somehow better

Quite the contrary - trying to save someone the bullshit... headache.., heartburn..., needlessness of it

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I always thought the goal was to be a profitable trader

It the only goal

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or should it be to be able to accurately predict the markets

Can't be done over time - uncertainty ensures it

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I'm starting to think there's a big difference between those goals

They are indeed worlds apart



RN

 

[Visaria]

Predicting the markets isn't so important....

I’ve learned many things from him [George Soros], but perhaps the most significant is that it’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.

- Stanley Druckenmiller

 

[Mestengo Hidalgo]

I would edit these.

1) Liquidity or order flow (market maker). Important to make this distinction as you need to have priority to capture bid/offer spreads. Arbitrage also falls in this category as it's a function of being able to capture bid/offer spreads. You usually can't get an arb by lifting offers or hitting bids.

2) Costs: Not just commissions or borrowing rates but also technology since technology is a means to lower costs.

3) inside information or information flow: So this can be the illegal variety but it can also be just knowledge of customer flow. For example who is trading what and at what size. You don't necessarily need to be a market maker but just have access to this info.

These are the three edges. Psychology and all that crap is not an edge. In fact it's more likely a negative edge in that it's usually believed by delusional people.

Your response is standard for those with a less cognitive world view

 

[Maverick74]

Your response is standard for those with a less cognitive world view

I tried using Google's "gibberish" translator and it still could not translate your post.

 

[Guile]

Your response is standard for those with a less cognitive world view