Why are System Traders Vilified by Discretionary Traders?

d08 said:
Guess all these years I've been paying for everything with air then, how odd that my cards work.

From what I've read, your friends are snobby OPM people making low returns. Us retail traders actually eat what we kill instead of charging fees for losses.
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If you truly started with modest capital and have been able to earn a middle class or greater lifestyle strictly from your trading profits--- then i commend you for a job well done. Its very rare---
 
marketsurfer said:
If you truly started with modest capital and have been able to earn a middle class or greater lifestyle strictly from your trading profits--- then i commend you for a job well done. Its very rare---
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With a loan backed by real estate although a very small one that has long been repaid, I don't know if that's OPM for you or not.
 
d08 said:
With a loan backed by real estate although a very small one that has long been repaid, I don't know if that's OPM for you or not.
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No, that's true DIY in my opinion. Congrats to you, you have done what few accomplish-- unless there's something u are not divulging. :) Like prop shop edge or leverage----
 
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d08 said:
With a loan backed by real estate although a very small one that has long been repaid, I don't know if that's OPM for you or not.
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It would be "harsh", I think, to call that OPM, really? (I got started in a similar way, but an unsecured loan from a family-member who trades for a living, in my case, after proving exhaustively and exhaustingly that I knew how to minimize risk.)
 
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May i ask the obvious question. Why are u risking your own $$ ( or relatives) capital when there are multiple alternatives? Seems like the hard way

Just wondering.
 
marketsurfer said:
Why are u risking your own $$ ( or relatives) capital when there are multiple alternatives? Seems like the hard way
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Yes, arguably. At the time it was very much the easy way for me (and all repaid now, anyway).
 
newwurldmn said:
In my experience, it's systematic traders that vilify discretionary traders. They tend to believe that successful discretionary are just lucky, even though the wealthiest traders on the planet are all discretionary.
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Apart from Jim Simons. And David Shaw. And Cliff Asness. I could go on...

Come late to this thread, but heres my 2 cents.

Do you believe the past will repeat in the future? Most trades seem to operate on this assumption. All technical traders do (by technical I mean anyone who analyses prices to decide what position to have on, no matter what method they use). Your narrative for this repeatability might be 'price action', or 'risk factors', or 'premium for supplying liquidity' - it doesn't matter.

Some believe that the best way of proceeding is to stare at the chart until they see something that indicates what will happen next. Others like myself believe you are better using a completely objective rule (one which could be automated, but which doesn't have to be). The latter group are systematic traders. I personally think that the more successful people in the former group will be those that stick more closely to a system, even if they can't articulate it well enough to turn it into computer code. Tied to this is the fact that successful traders tend to have good systems for position and risk management.

This leaves the discretionary traders in this group who don't follow any kind of system, explicit or implicit. They are less likely to be profitable.

What about when the future doesn't look like the past? There is a small group of people who can actually predict the future without needing the past to repeat. In my opinion such an ability won't come from staring at a chart. If you see a pattern you haven't seen before how would you know what will happen next? The ability to predict the future comes from macroeconomic analysis, fundamental analysis, lots of work, and a strong understanding of how the international economy and finance works. I'm thinking of people like Paulson and Soros. People who can look at a completely novel situation, like an asset bubble inflated by synthetically created debt, and work through the consequences of what is likely to happen next.

These people are very rare, but yes they will be far more profitable than any system (with the obvious exception of high frequency trading).

However 99.9% of people aren't cut out to do this (and even if you have the aptitude it's hard to do it without the resources you get from working in an institution). But everyone can run a trading system - at least in theory. Not everyone can design a trading system that will, with some luck, have a chance of making some money (and most systems you can buy are overfitted, trade too often and take too much risk). Not everyone has the discipline to stick to a system (which is why automation can be helpful, if done right).

In conclusion I think true discretionary trading skill is rare. Most people who think they have it do not. Most people would be better off trading with a system, and accepting they'll never make as much as the very best discretionary guys.

GAT
 
System traders don't like discretionary ones and vice versa? Some people don't like the very idea of trading at all, I've known one, a real asshole in nearly all respects too. I guess some of these discretionary traders don't like the idea that they have to trade. They would rather purely invest but trading is forced on them. Go to a startup funding site, quit bringing your discontent here, ok? Personally everybody's opinions are worth what I pay for them so on ET... uhhyeah... The ones that assert that systems are impossible are real idiots that have not been to Philosophy 101 classes so discounting everything they say is a no-brainer...

We haven't even broached the subject of people that don't like themselves!
 
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