Trading is like business, not math, physics, engineering or science

[TrAndy2022]

As long as you can be surprised and are making loss trades and having drawdowns, trading is more an art.

Also as long as you never know when your found edge is stop working, trading is more an art.

You can do forecasts to a certain degree of precision. But after that it becomes an art to be more precise. And the more precise you can be the more profits you can make.

 

[Sergio123]

However, there are only so many burger joints that can be profitably run in Mojave, Ca (or other restauraunts, for that matter). The one hobby store in town quickly shut down, even though the place is crawling with aerospace nerds that love model planes.

Small businesses are going to be tough to scale and be profitable against the megacorp platforms.

Most small businesses are just going to have their margins swept away by paying expenses to Amazon, Shopify, Google, Facebook, Uber eats, Walmart, Microsoft, Apple, etc. Or into Goog, Shop, Meta, Uber, Wmt, MSFT if you will.

Liquidity finds its way from the fed and people's paychecks to the banks to the megacorps.
That's how it works. That's the physics of the flow of liquidity.

 

[eleanorK80]

Interesting point about how physical laws are universally consistent, unlike the competitive and limited nature of business - it's a thought-provoking comparison!

 

[smallfil]

Any business uses mathematical formulas for starters and economic principles of supply and demand. If you are not using math or economics----you are merely guessing and a huge failure. Put that dunce cap on. You deserve it. Lastly, how do you know your trading method has an edge? You have to calculate your expectation whether positive expectation (has an edge) or negative expectation (no edge). All the casinos in the world have positive expectation and the gamblers negative expectation. Renaissance Technologies uses a purely mathematical model to trade the stockmarket and make huge gains. Again, that is math.

 

[volpri]

Trading reminds me of my hobby where I am attempting to design a fishing rig which drags your line offshore from the beach without using motors.
I've been working on it for years, not full time, but several hours a month usually, either designing or building or testing.
I've made probably more than a dozen prototypes which eventually all got scrapped.
The early models were all complicated.
But it amazes me how the simple ones (the current ones) were so elusive to imagine or design.
With trading imo, simplicity is difficult to achieve, but gives the best results.

Simple and simplistic are two different things. It is not a simplistic thing to arrive at a simple thing. It actually is quite complex. Evolution is a simplistic way of explaining the appearance and creation of complex humans. Creation is very complex. As is the universe. Even the world we cannot see with our natural eyes viruses…bacteria…etc is indeed quite complex. Pharmaceutical companied spend billions trying to figure it out and nail it down to a pill one gulps down with a glass of water.

I remember a story Dad and Mom tell when they were children but did not really know each other nor that one day they would be married. The story goes that they were both in a crowd of children who were watching a simple-minded boy on a roof top claiming he was going to fly. So all the kids were down below watching with great interest. The boy jumped of the roof flapping his wings Dad said. He promptly crashed into the ground. Years later Dad and Mom spoke of the same event and compared notes and realized they were there at the same event, when they were just small kids. Years later, Dad will be 91 this year and Mom will be 86. That event is still embedded in their minds.

Flying seems simple. Make some wings, jump off a roof, flap the wings and you fly! After all that is what birds do! The Wright brothers found flying to be quite complex. Today we board an apparatus to take us in the air from New York to Atlanta on something that looks simple. A long tube with wings, wheels and a propulsion system.

I once read that an airline pilot with a career of flying various modern models of airliners said that a modern airbus airliner has up to 400 computers. Micro computers and the main FMS (Flight Management System). It looks simple. We board a tube looking thing and we become airborne and soon arrive at a destination. But underneath that simple looking thing there is a world of complexity.

 

[Slope Trader]

Simple and simplistic are two different things. It is not a simplistic thing to arrive at a simple thing. It actually is quite complex. Evolution is a simplistic way of explaining the appearance and creation of complex humans. Creation is very complex. As is the universe. Even the world we cannot see with our natural eyes viruses…bacteria…etc is indeed quite complex. Pharmaceutical companied spend billions trying to figure it out and nail it down to a pill one gulps down with a glass of water.

I remember a story Dad and Mom tell when they were children but did not really know each other nor that one day they would be married. The story goes that they were both in a crowd of children who were watching a simple-minded boy on a roof top claiming he was going to fly. So all the kids were down below watching with great interest. The boy jumped of the roof flapping his wings Dad said. He promptly crashed into the ground. Years later Dad and Mom spoke of the same event and compared notes and realized they were there at the same event, when they were just small kids. Years later, Dad will be 91 this year and Mom will be 86. That event is still embedded in their minds.

Flying seems simple. Make some wings, jump off a roof, flap the wings and you fly! After all that is what birds do! The Wright brothers found flying to be quite complex. Today we board an apparatus to take us in the air from New York to Atlanta on something that looks simple. A long tube with wings, wheels and a propulsion system.

I once read that an airline pilot with a career of flying various modern models of airliners said that a modern airbus airliner has up to 400 computers. Micro computers and the main FMS (Flight Management System). It looks simple. We board a tube looking thing and we become airborne and soon arrive at a destination. But underneath that simple looking thing there is a world of complexity.

.

The cliche is true: good trading can be simple, but it's not easy.

BTW, when 6 years old I climbed halfway up a tree, opened an umbrella, and jumped out while holding it above my head. The umbrella immediately inverted, I hit the ground hard and sprained both ankles.

Damn that Mary Poppins

 

[themickey]

Trading again is like a hobby, an enjoyment, a journey, some get it, others don't.
But who am I or we to say others don't get it, it depends on your perspective.

I'm fortunate where I live, but where I live was no accident, I planned to live in this location.
Yesterday took my mountain bike, went for long bike ride to a remote difficult to access beach, the water cystal clear, I went for a swim, was heaven.

Back at the boat ramp a few km's back the carpark was full of cars and boat trailers.
People were out on the water, fishing, jet skiing, they too were having fun, but their fun was relatively more expensive than my fun, it was a different fun, their fun was most likely family fun, where my fun was loners fun.

So trading is like life, you cant put your finger on it, you get out of it what you want.

 

[TheDawn]

For one main reason: the physical world acts equally instantly and infinitely (within our human limits to measure) on objects with physical laws. F=MA (the acceleration formula) does not have a quantity limit, nor does F=GmM/r^2 (the law of gravity), at least on our human world. You can drop 1 apple or 1000 at a time, they all accelerate the same.

However, there are only so many burger joints that can be profitably run in Mojave, Ca (or other restauraunts, for that matter). The one hobby store in town quickly shut down, even though the place is crawling with aerospace nerds that love model planes.

Competition exists in business, but rarely do physical laws interact with each other or break down under huge quantities of actions.

As traders, are we chasing obsolete methods that worked before neural networks, machine learning and backtesting, behavior modeling and spoofing came into the arena? There is only so much room for the various services we provide to the market (liquidity, price discovery). But you can't open a K mart next to a Wal mart. It will die a quick death. Remember the turtles?

Everything is in how you do it. Opening Kmart right next to a Walmart doesn't necessarily mean a quick death and opening Kmart in a town with no Walmart doesn't necessarily mean guaranteed success. Trading is the same. Even if a method is "obsolete", you can still trade it as long as you trade it well. Trading is complicated but it's also amazingly simple, buy low sell high and that's it. As long as what you've bought is lower than when you sell it, you make money. This is why trading is so difficult and yet everybody can do it. You see people from all walks of life and all levels of education succeeding. I think what people should do when trading is focus on two things, discipline and discipline. Create a trading plan, test it and then stick to it. That's it.

 

[TheDawn]

Trading is a game. You are not producing anything or providing a service. If you are providing liquidity to others, unless you are a market maker capturing the spread, you are what is called in the academic literature a futile trader, which is a nice way of saying you're a loser.

To play the game well, you should be a liquidity taker not a liquidity provider. You take liquidity ahead of the majority who need it and will push price in your favor until you are no longer in the minority at which point you take profit. If you are really skilled, you take liquidity again ahead of the new majority as a reversal.

To reiterate, trading is a game. If you play it well, you can direct the money you extract from the market to productive uses such as supporting a desired lifestyle for yourself and supporting others who need support. If you are business inclined, like I am, you can partner with others who are experts in their field and need capital to run a business that produces products and provides services. Some people buy real property and collect rents. Personally, I do not like being a landlord so I do not buy real property unless I can use it. To each his own.

You can provide liquidity and still win. Market doesn't always go in the direction right away after you took your position so why pay/take the higher/lower price?

 

[Wide Tailz]

I agree you need to calculate expectancy to know you've really got an edge, but it's more fun to just watch your account balance grow, again and again.

The algebra needed to do this is child's play compared to differential equations or my personal nightmare, laplace transforms (used for designing electromechanical dampers for dynamic systems, like robot surgical arms or missile defense mechanisms).

You can't calculate a superior boxing game but you can definitely have a speed and power advantage. Note how many champs either get figured out (and knocked out) after a few years, or simply become super-boring to watch, having optimized their risk management to the prevailing rulez.

I'm no expert, and now after years at this, I'm ready to salute the true Elite Traderz in here, who somehow see the future wave and pile in slightly before the bottom. Mr. Baron, well done. I was there when you bot bitcoin at $17 last year.