Trading bubble

[Drock409]

avid consumer ...great post....ur totaly right
its like playing poker at a table..where everyone has 10 bux..and one guy has 1,000,000......
all he has to do is pick his spots somewhat right...and he'll bully the table..and wth taht 1,000,000 he has a computer PHD mind...game over..done even try to bully him


load the boat..in terms of prop shops...we had a decline in 03 and 04 but have seen a slow pick up in 05 at my specific branch (slow..not great)
most of the dead weight is gone..so guys here now make money.
most money is in the mornings but short term position trading 15min - hours (no more pure scalping after 10 30) is getin better
also some guys makin money in pre-market ..but its risky
we are stressing to guys to learn to trade longer term after morning push...look for good setups and baskets...so far its not kilin us...but we know we will need to make that transition in the future to take it to next level. if oiil stays in 60's..it will help that sector remain in play for a while

hydro..u are totally right about the informercials, etc
trendfund, 123, fxcm, etc....if these guys were that good..they would make WAY more money just programming their picks then selling some red/ green software......plus eveyone on ET would be using it if it was that good ....im sure some guys here have tested it .....

I know that if you trade with FXCM you basically trading vs their house and if you make enough money they will ask you to close down your acct (similar to most FX firms ...unregulated bookies)
Read trader monthly ..97% of FX traders lose money...and its a zero sum game...so guess what......thats why so many new FX shops poppin up..basically free money and consumers dont need to put in 25k like at our firm....500 bux and u start gamling ..i mean trading

who knows...maybe it does get better ..i hear bout new softwares will consolidate multiple bank quotes so you no longer trading vs 1 bank..but many (kinda like a level 2)


I think the problem is with a minimal amount to be made in bonds and a lot of people "missing the boat" in real estate..many turn to stocks as a "quick fix"...I overheard a guy in Chicago Tradexpo go to the tradestation booth and when the guy asked him what stocks do you trade he said only stocks below $5

Now...this guy may be a genius...but in all the years i traded those are the LAST stocks i look at when trying to develop some kind of system...obviously he's lookin for that home run..when most traders know its game of singles and doubles.


anyways...like any "bubble" the weak fall off the wagon..the strong buckle down for the "fall" that comes

99-2001-Stock market rip ..lot of newbies get in...lots of leverage...bubble burst WAY after everyone thought it would


2004-5 Real Estate...the highly leveraged "newbies" on interest onlys buyin 6-7 pre cons (currenly making great money if they can sell)

usually its the newbies that will get hurt
the cash rich veterans wil be waitin to pick up on the bid (kinda like 2002 equities markets)..they are usually the ones selling to these newbies as we speak

just my thoughts


d

 

[SWScapital]

Equity Hedge fund bubble is more like it. Volatility compression due to fast money taking smaller moves. This too shall pass....there is only so much Alpha to go around before the mkt gets efficient on your ass What we need is a good o`l fashioned fat tail move to wipe the slate clean.

I started focussing on high ATR stocks(>1.5 over 3 months) only in the last year and a half just to compensate for the lack of range in most others. If you have the BP to play these usually high priced stocks go for it. Better than churning around for pennies.

 

[Casey30]

I couldn't disagree more with this whole thread, doom and gloom all over your faces. It is almost like you are all self-defeatists. If you enter the arena with that attitude everyday no wonder your returns are dwindling. I don't think any athlete, sports team, salesperson, or trader or anyone one else who competes on a daily basis could be succesful with the negative attitudes/ideas expressed in this thread.

Yes, things were better 5 years ago. Volatility was tremendous. However, trading is all about adapting and if you can't do that then you might as well do something else. Traders in my group are profitable and looking to make more money as time goes on as we develop and utilize new strategies. We are not program traders, purely descretionary. We trade all day long from 9:30 till 4:00 and take a ten minute break to go get lunch so that we can eat it in front of our screens at our desk just in case something interesting is happening.

Any time you take away from trading is a potential missed opportunity or a missed learning experience. That is what we focus on and that has proven to be the right attitude for us to improve our overall performance. Sure there are many periods were it is necessary to reduce your trading, but if you take 80% of the day off, I guarentee you are or will miss major opportunites in the equities markets.

I take one vacation a year off in August(the presumed slow period) and I love trading and I don't want to miss a second of it. Sure, a couple years from now I may take two or three weeks off in August but one week is enough for now. Last year I even brought a laptop on my vaction and an extra monitor just in case my partners noticed anything major happening in the markets. I won't be doing that this year as I am trying to slow down gradually. I have been trading equities 5 years as of August.

Nobody said this job was going to be easy, but it is a job and being that it is very competitve, you have to work at it to be successful.

Just my 2 cents.

 

[prt_systems]

Quote from Casey30:

.....
Yes, things were better 5 years ago. Volatility was tremendous. However, trading is all about adapting and if you can't do that then you might as well do something else. Traders in my group are profitable and looking to make more money as time goes on as we develop and utilize new strategies. We are not program traders, purely descretionary. We trade all day long from 9:30 till 4:00 and take a ten minute break to go get lunch so that we can eat it in front of our screens at our desk just in case something interesting is happening.

Any time you take away from trading is a potential missed opportunity or a missed learning experience. That is what we focus on and that has proven to be the right attitude for us to improve our overall performance. Sure there are many periods were it is necessary to reduce your trading, but if you take 80% of the day off, I guarentee you are or will miss major opportunites in the equities markets.

I take one vacation a year off in August(the presumed slow period)

..... A good summary of what I do - although i started about three years ago. I do some semi-automated and some completely automated work ..... but my focus us still equities. I think there are still good opportunities around.... .

 

[PuffyGums]

Quote from SWScapital:

Equity Hedge fund bubble is more like it. Volatility compression due to fast money taking smaller moves. This too shall pass....there is only so much Alpha to go around before the mkt gets efficient on your ass What we need is a good o`l fashioned fat tail move to wipe the slate clean.

I started focussing on high ATR stocks(>1.5 over 3 months) only in the last year and a half just to compensate for the lack of range in most others. If you have the BP to play these usually high priced stocks go for it. Better than churning around for pennies.

If enough of people start thinking like you, then you may have the power to take the market to a new level. Then these high frequ hedge funds traders will be caught offsides. When they scramble to get out, they will add the fuel to amplify the inital move y your crew caused.

Reminds me of those predator/prey math formulas you sometimes see. Sometimes the people who trade the tiny moves predominate while at other times, its the momentum players who take the markets to a new handle.

 

[murray t turtle]

Quote from Hydroblunt:

I've been thinking about this for a while.

Between all the "I wanna be a trader" threads on ET and the non stop commercials & infomercials about 123 day trading, is there a "trader bubble". The hedge fund mania, the ES retail traders that can start with little capital, and just all these new trader platforms and services, I'm just amazed to see so many more traders come into this market which is losing range, volatility & volume as the days go by. It's not like the market is roaring so why such interest? Investor money both dumb & smart is not active.

Some other things I have thought about. Investors, as a group, rarely short, traders short almost all the time. Investors don't use heavy margin, traders have pretty much in the range of 4:1 to 10:1. I'm not really sure what to make of this but it could set up for some interesting scenarios.

Would love to read some interesting comments.

=============
Hydroblunt;
Agree generally traders use more leverage than investors;
and this is a strange market in the sense that 2 of the best historical downtrend sectors , semisector & airlines are acting abnormal and going up .

Usually dont go short lately in those 2 sectors when ;
they are moving abnormal;
even though long term trends are still down.

Plenty of stocks going up like SPY, homebuilders;
& up on increasing volume.

Like the long side in a bull market ,because even in a weak sector like forest/paper products,;
yes you see a few downtrends like when Carl Ichan backs off TIN,
but then TIN splits stock & rising tide lifts even weak boats.

As Bright Trading company says ''hope this helps.

 

[Hydroblunt]

Quote from Casey30:

I couldn't disagree more with this whole thread, doom and gloom all over your faces. It is almost like you are all self-defeatists. If you enter the arena with that attitude everyday no wonder your returns are dwindling. I don't think any athlete, sports team, salesperson, or trader or anyone one else who competes on a daily basis could be succesful with the negative attitudes/ideas expressed in this thread.

And I don't understand why you take it in this direction and assume nothing but negative about my performance.
My personal choice to cut down trading time has resulted in my income per hour from trading to go up dramatically. At the same time I can put more time into my side job & ventures and make great income overall. Yes I would like to be able to put in full trading days but for now I have found the risk/reward to change dramatically for the worst after 12. I lose interest once it goes into the afternoon churn, sometimes I have a reason to stay because Im following a few of my stocks but most of the time I dont. It's summer, it's slow and noone says you have to trade every day, all day. I maximize my trading where I find the risk/reward to best and I minimize when it is worst (which unfortunately happens to be most of the day). When it changes, I will adjust the distribution of my time. For example, for these last two weeks of July I expect to trade full days but I'm not going in bullheaded thinking that I HAVE to trade my a$$ off. Any time missed could be a possible opportunity but it could also be a possible loss. It's risk/reward, everyone has their own approaches to it.

There are reasons why some traders simply take off the summer periods. You and your crew disagree, that's fine, maybe they don't have other uses for their time.

The thread is more concerned about the strange influx of more traders, programs & hedge funds into a market that is getting tougher. I would think that it would be the opposite and traders would slowly be dropping out, less newbies interested in trading, the commercials & informecials slowly dropping off. I think that this is could be party due to the Bush economy as the regular folk simply do not have enough opportunities in the regular 9-5 job world and say to themselves "let's trade". Vendors & brokers seem to be milking this through offering system, books & programs for trading. The prop firm industry is also big on this game of hiring newbies, then pushing volume & commissions.

It's just some ideas that I have. Like SWSCapital & Puffy Gums mentioned, the overwhelming number of hedgies playing the contracting range game might all get caught. Now along with the heavy use of leverage (and also derivatives), that should be interesting.

 

[dividend]

Quote from Avid_Consumer:

we have to remember that substantial capital flows eagerly to the best players on the field. i think shops like jim simons and his 15,000 dimensional corr matrices, linux clusters, or whatever he's got 150 phd's working on are highly responsible for the vol issues. you're not fighting johnny ET and his 5k. you're fighting SAC, rentec, et al who dominate intraday market share and gain it at an exponential rate

if you've got more edge than the 1000 guys below you with 20k each, but less than the 1 guy above you with 6B working constantly in every liquid market on earth... it doesn't really matter what those 20k guys underneath are doing. it's more like an 'edge per $ of cap' that we're all fighting .. the concentration of capital around talent. it's not necessarily good enough to be smarter than your retail peers. you have to be smarter (more nimble, whatever) per dollar to walk with a slice of pie

and it's increasingly competetive. but that makes it fun, right

point being, the most talented players are the vast majority of 'the market' even though the 20 typical retailers to your left and right might make it appear otherwise

i disagree with this.

there has ALWAYS been large players in every single market... ET seems to think these large players are gods... lol... but no this time is no different than 100 years ago. it was possible then and its possible now.

 

[aPismoClam]

Quote from Hydroblunt:

Hmm, the reckless gambler mentality with zero concern for future consequences? Interesting. Once online poker starts giving margin, then it's really on.

Got a laugh out of that, Hydro. Tradesports, anyone?

***

just more observations...I remember Tom Vu real estate courses (rocation, rocation, rocation)... and the penny stock craze...and IPO whores, and Black Monday (October 19, 1987), and the S&L meltdown, and real estate busts in Mass and Texas, and the "rust belt," and the Junk Bond King goes to jail, and we think dow 4000 is "too high," and AOL and the internet craze, and IPO whores and chat rooms, then we're looking at Dow 10,000, and Enron, (preceded by Learnout and Hauspie for anyone who recalls), Tyco, and of course Worldcom etc. and market meltdown... and it's all starting to sound the same.

watch your charts, watch your sentiment, keep your powder dry...it will come around.

it's a very different world now, but some things never change.

 

[Casey30]

Quote from Hydroblunt:

And I don't understand why you take it in this direction and assume nothing but negative about my performance....

There are reasons why some traders simply take off the summer periods. You and your crew disagree, that's fine, maybe they don't have other uses for their time.

Well I didn't mean to single you out, my post was a general comment in regards to this thread and what seems like the overall sentiment of ET'ers.

As for other uses of time, and that we may not have other things to do. Right....I think everyone can name a hundred other things that they want to do besides work, or things that need to be taken care of that are important, but seriously if trading is lucrative you prioritize it to the top of your list, just as if it is not lucrative to you, it is likely to be demoted on your to-do list. Don't assume that people who trade more then you have nothing to do outside of trading.

Oh, and who cares what you make PER HOUR of trading. What really matters is how much you make total at the end of the month and the end of the year. I have never heard anyone come up with such a great way to massage their numbers as this PER HOUR accounting. But hey, whatever makes you feel better.