What and how to effort for profitable trading?
- Thread starter qwB
- Start date
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1]He's mostly right , but like you noted last line is backwards LOL.
2]Mainly in stock indexes/ETFs like SPY, somewhat easy to figure risk/longs/ 50%\60%+/ max drawdown or loss if panic sold LOL
3]Shorts or inverse ETFs risk is unlimited
Longs risk 60+/ %meaning 60% more or less; not that[+] Doji is a risk LOL
777] Perhaps put your money in ETFs;
record a huge amount of prices[10,000 hoUrs + all data]+ papercharts, may or may not want to trade those investments some.........................
Reading ET posts, I think most folks make money.
Hello ironchef,
Everything I learned about trading is from ET forum and clicking the charts everyday. And focusing on getting rich.
I rather read ET, then read a trading book.
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1. Assess your edge. Is it legit, can you quantify how big it is? Even if you have an edge, most traders over estimate how big an edge it really is.
2. Assess your discipline level. Can you maintain discipline over 300 trades to let you edge work out, knowing you could have 150 to 200 losing trades over that sample. Most people lose discipline after 3 losers in a row.
Trading is sadly feast and famine. Some periods when it is quite easy but longer periods when it is much harder.
eg. Over the last 2 of years, the best period for my style was Q2 2022. A combination of Ukraine war and Fed raising caused wild markets moves in that quarter. Before that it was covid in 2020. And before that 2018 when the Fed raised. But most of the time trading is a grind.
The period between 2010 and 2015 was probably the longest dry spell i witnessed over last 25 years. 2008 was the best year ever.
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How do I know my edge is not an edge, that I am been fooled by randomness?
What number of trades do I have to make to be sure I have an edge? If my result is "lumpy", how do I know it is market (mostly random?) and not my edge?
Even in a 50/50 coin toss, I can be positive and be fooled unless I make a statistically significant number of tosses and know the p, confidence level... And even then the result is still governed by probability.
Your trading result is "lumpy". If you are not consistently profitable every year, you sir could also be fooled by randomness?
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Good .
I noticed the very best traders may have the following ;
trading + AUM,
trading + investing,
trading + investing + farm, just to name 3.Certainly not a complete list LOL.
NOT farm or trading advice.
Sounds like op QWB is a thinking introvert like me/ and likes to think + plan a lot.
Hedge Fund manager Jim Cramer said ''BAC is going to $60 in a heartbeat ''unquote. LOL. That Never Happened .
Dave Ramsey rightly says= almost always more than 2 good or excellent choices.
Great quote by Jim Cramer ''are you a trader or investor??'' Jim said ''I don't even like the question''
trading + AUM = Professionals, using OPM, getting rich from charging annual 2% on AUM.%%
Good .
I noticed the very best traders may have the following ;
trading + AUM,
trading + investing,
trading + investing + farm, just to name 3.Certainly not a complete list LOL.
trading + investing = Family Offices, trying to preserve capital, got rich from other means
trading + investing + farm = Murray T Turtle investing, getting rich from farm.
trading only = Amateur retails like many of us here? We don't get rich, we are liquidity providers.
%%trading + AUM = Professionals, using OPM, getting rich from charging annual 2% on AUM.
trading + investing = Family Offices, trying to preserve capital, got rich from other means
trading + investing + farm = Murray T Turtle investing, getting rich from farm.
trading only = Amateur retails like many of us here? We don't get rich, we are liquidity providers.
Some of the metals dealers + cast iron forger$ do well also
But lets see, WSJ, Jan2 , article big banks forecast for S&P 500[SPY],
close price for year;
[JPM=$310.00]
[GS=$300.00]
[WFC = $291.00]
[BAC, RBC Capital=$290.00]
[Stifel=$280.00]
[MS=$275.00]
2019 SPY close price was $321.86. Better than my forecast , did not make one
Even MS forecast = close to average SPY return.......
Any trader with a Sharpe ratio less than 2.0 will have lumpy returns. Will not be profitable every year.
You need a Sharpe ratio of around 2.5 to be profitable almost every year, ideally 3.0. Maybe some elite discretionary day traders can maintain that for decades. But i will admit not having a sharpe ratio as high as that over the long run.
The only hedge fund in the world that can do that at scale is Rentec Medallion.
The closer your sharpe ratio is to 0.0 vs 3.0, the more random your returns will look like.
There is also the issue of fat tails, you can be happy grinding between -20% to 100% a year say between 2003 and 2007, then 2008 comes along and you make 1000%, would still describe those returns as lumpy? What are you supposed to do in 2008, stop trading after a few months and take the rest of year off..
The same sort of thing between 2016 and 2019, then covid comes along and returns go through the roof for a couple of years.
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