When to call it quits as a trader

J

jbtrader23

My trading odyssey started back in 1998. Wade Cook of all people got me interested in trading options. JDSU, ARBA, National Discount brokers, real networks, you remember the stocks. Trading was interesting, fun and profitable. I had a solid strategy, I had an edge, things were looking good. Like many other traders, I dreamed about the "fantasy trader" life. Like the characters Michael Douglas played in Wall Street and a Perfect Murder. The top dog with the beautiful office, the art on the wall, a few bloomberg monitors in the back.

By 2000 and 2001, things slowed down, I spent many many hours on fridays and saturdays at barnes and noble, reading books on trading, trying to make sense of it all. I knew you could make money (Market Wizards books especially helped me believe that), but that "edge" that I once had in the wild bull market days didn't look like such a great edge now.

Fast forward to 2003, I continue to hone my strategies, but the market is doing things I didn't expect it to do. I thought the market would fall at least below 9000 heading into what is usually the worst time of the year (sept, oct). Instead the market rebounds.

Recently, its hit me that ,"the jig is up". If you keep doing what you've been doing, you'll keep getting what you've been getting.

If you are trading and not getting the results you want, there is a huge world of opportunity out there away from your trading screen. It's taken me a while to figure that out. I know people making solid money as hot dog cart vendors, vending machine owners, dry cleaner delivery service owners, import/export, web design, etc. There are alot of ways to make money.

In other businesses, you have a heck of alot more control over what happens compared to trading the market.

One of the things holding me back was the amount of time I've invested in trading. A hell of alot of time. I enjoyed alot of it, I like reading about market history, I know how to protect my money now (don't follow the crowd, etc), but in my mind I was telling myself, "I can't quite, I've invested too much into this". Again, you've got to let that go if you think you can do better else where.

I'm going to start some businesses, and focus much less on trading. Not give up completely, but finding better opportunities. If trading has become boring, tedious, or just plain unprofitable for you, open you eyes up to opportunities out there. They are everywhere.
 
Seems to me you're doing the right thing. Right now, the way I see it, the trading scene just has too many wanna-be 20 year olds with $5K and many others who've been around the block a few times but are fighting each other for nickle and dime scraps. Not a pretty picture. The number of marginal participants has to be reduced. Then the cycle can start again. How much longer?
I have no idea, but it may be a long time unfortunately.

Good luck in your new endeavors!
 
Quote from IndexTrader:

Seems to me you're doing the right thing. Right now, the way I see it, the trading scene just has too many wanna-be 20 year olds with $5K and many others who've been around the block a few times but are fighting each other for nickle and dime scraps. Not a pretty picture. The number of marginal participants has to be reduced. Then the cycle can start again. How much longer?
I have no idea, but it may be a long time unfortunately.

Good luck in your new endeavors!
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It always been like that, the new arrivals feed the veterans until only the strongest survive and a new cycle of newcomers has entered the scene.

TM Trader
 
Not at all newbies are necessarily favored by the market when there is a bubble (and it is shown by academics also that Bubble are mostly positive and can't be negative that is to say a crash can never last very long they explain that by lack of arbitrage opportunities) see:


http://www.elitetrader.com/vb/showthread.php?s=&threadid=22114&highlight=population+rate
"Market's Buble, interest rate and population's rate growth studies by economists"

They are the fishes that are eaten by the sharks. But tell these fishes that they will be eaten for most of them they wouldn't believe it : human psychology has been studied also on that : people tend to think that they are more intelligent than the average others. Also when they succeed they never ask themselves if it was by chance - in fact it the same for "successful" firms as said by Quality Management Guru Deming - , they always think that they found an edge when it is just what I have talked about in statistics : Levy's law persistency of chance - discovered only recently in mathematical history around the 1950s so that you can't have never learned it even at high school except statistical schools. This persistency allow the majority of participants to be winners during an enough long time period so that since there is the myth that there can only be few winners they think they have an edge whereas they can can have none - since the law above gives an illusion of edge. At term an other statistic law that is the Central Limit Theorem will also paly its role finally the above participants who thought they have an edge for most of them will become majoritarily losers. Of course some of them can still escape by chance and think they still have an edge.

The only way to know if you have really the edge is to have a system that is designed to get an edge. If not it is doubtfull.

Quote from IndexTrader:

The number of marginal participants has to be reduced. Then the cycle can start again. How much longer?
I have no idea, but it may be a long time unfortunately.

Good luck in your new endeavors!
More...
 
harry
interesting stuff. it is a pretty often claimed concept, that just by chance "some have to make it". i totally agree with the basic concept, yet when it comes to trading i am not sure if a valid concept is not blindly applied to a subject where it does not fit.

the key of my argument is the bank advantage. trading does not happen at zero cost. and high frequency day trading accrues a lot of trading cost in a given period. you see the argument.

it is often claimed that a normal distribution has tails at the far right side and these simply happen. once you are in such tail you think you are the hero. i personally think that the distribution of trading results is quite fat-tailed. you have many quick and total loosers and you have constant big winners. and the existence of the a aboveRandomLeftTail enables the fat right tail. furthermore i think that a stable track record of severral years is very very unlikely to occur. and that the number of operations doing such thing is far to few to claim the chance argument is valid.

i must admit that i haven't read the book by Taleb ... so it might be that these arguments are already proved to be rubbish.


peace
 
...you are so full of it. If you MUST try to impress people with your psuedo-scientific and innumerate BS, at least get your historical facts straight. Strictly speaking Levy's law pertains to the motion of particles subject to random influences. The relevance here escapes me. You cannot simultaneously argue that the market is random and that you have a deterministic system for predicting it (I refer to your many near-identical posts).

The same applies to your casually tossing in reference to the central limit theorem, as if it were even remotely relevant to the issue. The market isn't random. There clearly are secular trends. People clearly nonrandomly get rich. I make money on average every month. As long as there is secularly driven volatility and you have the good sense to cut losses and let winners run, there is non-random opportunity to take money from idiots. As for you, MAN, go look up "sycophant" in your English to X-language dictionary.
 
"Strictly speaking Levy's law pertains to the motion of particles subject to random influences. " Can you tell me where the strictness is ? The so called random influences have been known well before Lewy discovred this law, so saying that it is "just" subject to random influences" is like saying that he has discovered nothing new :D.

The relevances escapes you ? That's normal you must not remember that when one studies something there is a system that must be considered. You talk about the market system whereas the system I consider is the newbies traders who for most of them are considered as noisy traders by academics and veteran traders.

As for if the market is not random or not, refer to the academics, they don't use anymore the term random which is too much fuzzy they use the term efficiency and martingale process if you don't know what they refer to I won't help you more since you seem to have some complex of inferiority or superiority I don't know exactly :). Just a clue to make you feel about efficiency's idea:
'A trader according to the Chicago legend, "made 8 million in eight years and lost 80 million in eight minutes" '- I borrowed this to Nassim Taleb.

That's why some traders quit the market even when they are still successful : they are reasonable and lucid may be.

Quote from hypostomus:

...you are so full of it. If you MUST try to impress people with your psuedo-scientific and innumerate BS, at least get your historical facts straight. Strictly speaking Levy's law pertains to the motion of particles subject to random influences. The relevance here escapes me. You cannot simultaneously argue that the market is random and that you have a deterministic system for predicting it (I refer to your many near-identical posts).

The same applies to your casually tossing in reference to the central limit theorem, as if it were even remotely relevant to the issue. The market isn't random. There clearly are secular trends. People clearly nonrandomly get rich. I make money on average every month. As long as there is secularly driven volatility and you have the good sense to cut losses and let winners run, there is non-random opportunity to take money from idiots. As for you, MAN, go look up "sycophant" in your English to X-language dictionary.
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