Trading is hard, very hard, damn hard
- Thread starter BPtrader
- Start date
This may sound crazy and, in fact, it may be crazy.
As I attempt to learn this very confusing and difficult process of trading so at the end of the day I have produced a net gain it seems to me that in subtle ways you have to continually decide if you want to be right or you want to make money.
The astonishing thing is -- here's the crazy part -- it is in practice (not theory) not as easy a question to answer multiple times per day as it would appear.
As I attempt to learn this very confusing and difficult process of trading so at the end of the day I have produced a net gain it seems to me that in subtle ways you have to continually decide if you want to be right or you want to make money.
The astonishing thing is -- here's the crazy part -- it is in practice (not theory) not as easy a question to answer multiple times per day as it would appear.
Ive been trading for 3 years sinse 2006, and here is what ive learned so far to summarize: (some of the details are fictional)
year 1. Joe Trader thinks to himself "How hard can this really be?...all you do is buy when price is low and sell it when price goes back up. I will use MA crossovers and make millions!". In the first year the trader is filled with confidence, and excitement.
Year 2 Joe Trader looks at his PnL for the first year, and it's not what he expected. He's down 20% in his account. What he thought was so easy, completely ignored critical details like money management and stops. Realizing that his career is much more involved than he initially thought. He heads to the book store, and the internet to learn more about this complex world. Little does this innocent trader know that he's about to introduce a new posion to his system. The guru. For just 3,497.00 Joe trader can learn the "secret to the market"...what other traders "Dont know"...taught by "professional traders". Sounds good he thinks, and signs up. Three months later Joe trader isnt much happier or profitable. The "system" that he learned was nothing more than a MA crossover system with a fancy name, and the "guru" that created the system was arrested for credit card fraud because he couldn't make money in the markets. The search for the Holy grail begins.
Eight months later Joe trader is down another 7%. He's had a few winners but his emotions and lack of a solid trading plan result in amature trading decisions. Joe trader learns of other indicators like MACD, RSI, and stochastics. "Cool" he thinks to himself, as the market tends to follow the ups and downs of these magic indicators. Joe Trader is like a kid in a candy store and adds all three indicators plus the two Ma's he first had.
In the last month of year two, Joe trader is down another 9%..to a total of -36% in two years. What he thought would make trading easier, has only added to his confusion, as price and the indicators gave false or choppy signals. Joe trader is starting to lose confidence in his ability to be a trader, and all his friends and family just say "I TOLD YOU SO". Joe trader is damn determined to make it, and sits down with a pen and paper, and begins to write down a rough copy of a trading plan addressing important issues such as entry, stops, adding to and scaling out, etc...
Year 3 Joe trader has made hundreds of mistakes, but is now starting to make money. While not every week, he's always studying, and refining his sysyem. He has a solid MM plan, and has givin up trading intraday. Joe knows that if he's not consistant in his approach, he wont have consistant results. Joe trades ends the year up 40%. His friends take notice and they want Joe to teach them how to trade because they're miserable in their jobs. Joe says he'll think about it
.
Year 6 Joe Trader is a happily successful trader managing over 450,000, making an average of 7.5% a month. Life is good.
year 1. Joe Trader thinks to himself "How hard can this really be?...all you do is buy when price is low and sell it when price goes back up. I will use MA crossovers and make millions!". In the first year the trader is filled with confidence, and excitement.
Year 2 Joe Trader looks at his PnL for the first year, and it's not what he expected. He's down 20% in his account. What he thought was so easy, completely ignored critical details like money management and stops. Realizing that his career is much more involved than he initially thought. He heads to the book store, and the internet to learn more about this complex world. Little does this innocent trader know that he's about to introduce a new posion to his system. The guru. For just 3,497.00 Joe trader can learn the "secret to the market"...what other traders "Dont know"...taught by "professional traders". Sounds good he thinks, and signs up. Three months later Joe trader isnt much happier or profitable. The "system" that he learned was nothing more than a MA crossover system with a fancy name, and the "guru" that created the system was arrested for credit card fraud because he couldn't make money in the markets. The search for the Holy grail begins.
Eight months later Joe trader is down another 7%. He's had a few winners but his emotions and lack of a solid trading plan result in amature trading decisions. Joe trader learns of other indicators like MACD, RSI, and stochastics. "Cool" he thinks to himself, as the market tends to follow the ups and downs of these magic indicators. Joe Trader is like a kid in a candy store and adds all three indicators plus the two Ma's he first had.
In the last month of year two, Joe trader is down another 9%..to a total of -36% in two years. What he thought would make trading easier, has only added to his confusion, as price and the indicators gave false or choppy signals. Joe trader is starting to lose confidence in his ability to be a trader, and all his friends and family just say "I TOLD YOU SO". Joe trader is damn determined to make it, and sits down with a pen and paper, and begins to write down a rough copy of a trading plan addressing important issues such as entry, stops, adding to and scaling out, etc...
Year 3 Joe trader has made hundreds of mistakes, but is now starting to make money. While not every week, he's always studying, and refining his sysyem. He has a solid MM plan, and has givin up trading intraday. Joe knows that if he's not consistant in his approach, he wont have consistant results. Joe trades ends the year up 40%. His friends take notice and they want Joe to teach them how to trade because they're miserable in their jobs. Joe says he'll think about it
.Year 6 Joe Trader is a happily successful trader managing over 450,000, making an average of 7.5% a month. Life is good.
Is trading even possible?
Are you just being fooled by randomness?
http://en.wikipedia.org/wiki/Fooled_by_Randomness
Some parts of that story were actually part of my trading experience, but no I dont manage 450k, but yes I do average 7.5% a month give or take.
Trading is hard because you're looking in the wrong places. If you were looking in the right place, all it would take is one year of work. Build an automated trading system, and make sure it works before using it with real money (through paper trading). There's no strain on your eyesight, on your finances, on your emotions and psychological balance. It's just perfect. But for example it took me 12 years of discretionary trading and 50 thousands dollars lost to find out which things work and which things do not work. Which reminds me of that Michelangelo quote:
Profitable trading is easy. Just "hew away" all the things that do not work, one at a time, as soon as you find out for sure that they don't work. It's easier to do this the hard way, and getting to the bottom of things each time, like I did. For example, do not trade stocks, but futures (or get leverage) - this way each time you lose you blow out your account. That teaches you a better lesson (even if you are only paper trading). And so on. Be extreme, don't be moderate. You really have to find out once and for all what works and what doesn't. Don't leave any room for doubts. And, if you don't want to lose any money in the process, you paper trade (best way to go, but advice which I didn't follow myself).
trading is easy and yet very hard. I would say some here have found a modicum of success and think they have made it or figured it out.
Trust me unless you have 15 years of CONSISTENT profits and faced 3 major bull and bear cycles, you still face disaster.
and disaster not being blowing up but not making enough to sustain living expenses.
this is the true harsh reality for many traders.
there are very very few old traders arnd.
Trust me unless you have 15 years of CONSISTENT profits and faced 3 major bull and bear cycles, you still face disaster.
and disaster not being blowing up but not making enough to sustain living expenses.
this is the true harsh reality for many traders.
there are very very few old traders arnd.
I hand it to you for being a discretionary trader WITH consistent profits for over 15 years (one in 1000s of traders), but automated trading works differently. I don't need 15 years of profits to know that if my systems made money this year, they will keep on making money later. If they're doing ok as it is, they will only be doing better with the improvements I will make over time (increasing their number, too). And I don't need to have been trading in the 1980s to make sure my system is prepared for something like what happened back then - I just need to backtest it.
And even if one system stops working because the markets change (which will cause its end if it exceeds its maximum historical drawdown), the more systems you have, the harder it is for all of them to fail at the same time. But, whereas as time goes by, you may not improve your emotional balance as a trader (family, stress may worsen it), the more time goes by, the more systems you will develop, and the better you will make them.
In summary, lots of uncertainties in the field of discretionary trading, and lots of confidence and certainties in the field of automated trading. Just one fact as an example. As a discretionary trader, I lost money for 12 straight years, and 144 straight months. As an automated trader, I made money ever since the start (while losing at the same time, as a discretionary trader). That's enough for me to say what's likely to work and what's likely to not work.
In a sense, I agree with you. Automated trading is easy. Discretionary trading is very hard, and, for most of us (me for example), impossible.
And even if one system stops working because the markets change (which will cause its end if it exceeds its maximum historical drawdown), the more systems you have, the harder it is for all of them to fail at the same time. But, whereas as time goes by, you may not improve your emotional balance as a trader (family, stress may worsen it), the more time goes by, the more systems you will develop, and the better you will make them.
In summary, lots of uncertainties in the field of discretionary trading, and lots of confidence and certainties in the field of automated trading. Just one fact as an example. As a discretionary trader, I lost money for 12 straight years, and 144 straight months. As an automated trader, I made money ever since the start (while losing at the same time, as a discretionary trader). That's enough for me to say what's likely to work and what's likely to not work.
In a sense, I agree with you. Automated trading is easy. Discretionary trading is very hard, and, for most of us (me for example), impossible.