Why is it so hard to beat the market?
- Thread starter stocktrader3429
- Start date
If you're trading futures on an individual level, you can pretty much throw percentage returns out the window, they are meaningless. They should never figure into your strategy as a goal, a target, a measure of success etc.
There are those with strategies that require large accounts of opm in order to make the 20% that they can live off of, perhaps cash out big after a few good/lucky years and retire to an island somewhere, but thats a totally different game in a different world that cannot be played with personal capital.
Those of us crazy enough to try to figure it all out on our own have a separate yardstick. To put it crudely, imo a successful individual futures trader is one who can take a 5-figure account to 7 in about 2 years as a baseline, before capital appreciation reverts to income as a matter of size. Percentage returns are meaningless. The point being, the real "goal" for an individual trader is the ability to remain completely self-sufficient at that certain level only the markets can provide, all the way into retirement -- and why stop there. That is the real "perk" of independent trading, imo.
There are those with strategies that require large accounts of opm in order to make the 20% that they can live off of, perhaps cash out big after a few good/lucky years and retire to an island somewhere, but thats a totally different game in a different world that cannot be played with personal capital.
Those of us crazy enough to try to figure it all out on our own have a separate yardstick. To put it crudely, imo a successful individual futures trader is one who can take a 5-figure account to 7 in about 2 years as a baseline, before capital appreciation reverts to income as a matter of size. Percentage returns are meaningless. The point being, the real "goal" for an individual trader is the ability to remain completely self-sufficient at that certain level only the markets can provide, all the way into retirement -- and why stop there. That is the real "perk" of independent trading, imo.
But wouldn't this be an accurate measure of skill/success?
http://www.elitetrader.com/vb/showthread.php?s=&threadid=83327
http://www.elitetrader.com/vb/showthread.php?s=&threadid=83327
There are traders who make a good living Day Trading. There are some, who through superior skill, have become wealthy.
Here are some of the obstacles that make this hard:
Finding Positive Expectations. Variance. Being able to bet enough when a worthwhile edge presents itself. Emotional issues.
The traders methodology must be strong enough to overcome the Bid/Ask Spread and commissions. This is not always easy!
Obviously, there are some situations (such as some out-of-the-money options) where no methodology will overcome these costs.
Here are some of the obstacles that make this hard:
Finding Positive Expectations. Variance. Being able to bet enough when a worthwhile edge presents itself. Emotional issues.
The traders methodology must be strong enough to overcome the Bid/Ask Spread and commissions. This is not always easy!
Obviously, there are some situations (such as some out-of-the-money options) where no methodology will overcome these costs.
I believe in Karma therefore I will post some of my techniques to help out those in need. In return, I expect 2007 to treat me well 
I make my living doing very simple things in daytrading. No fancy tricks no fancy indicators. I'm not wealthy but I provide my family with a modest way of life from the income I obtain.
Indicators I use:
Geometric above all, looking for support and resistance.
For technicals: RSI, MA 50 and Fibonacci Retracements. Sometimes Bollinger Bands to measure volatility.
NOTHING ELSE.
Here are a few simple methods.
I look for strong stocks in strong sectors where the RSI has gone down significantly. If the stock is approaching good support, this is a clear signal and I load up a big position with a stop under the support line. The reward must be at least twice as much as the risk and I do make good use of trailing stops.
I never average down but Ive been known to scale in the position if the signal is not that clear at first.
I never ever change a stop unless the trade is going in my favor.
I use the VIX and VXN as contrarian indicators to the QQQQ.
Mostly trade Nasdaq stocks and I make good use of the VIX and VXN, TICK as well. Dont care for TRIN.
My accuracy rate is around 59%, not a big deal. However, my winners returns far outweight the losses (tight stops) so Im able to make a living. When a stock goes in my favor I usually let it run as far as I can unless I see reversal signals popping up in all indicators. Breakouts or breakdowns (if Im shorting) are a beautiful thing they can take care of many small losses.
Key here is to avoid BIG losses no matter what. Big losses wipe you out, big losses kill your big winners, big losses are what makes newbies fail fast. There are no shortcuts without big risks. Even in daytrading you must work hard for your money. Patience, lots and lots of patience.
It's better to stay on the sidelines than take trades out of impulse and lose money, even if its small losses. No clear signals no plays, remember that.
Im not well educated, only got a high school diploma, dropped out of college during the 3rd year. Not a genius just very disciplined and I dedicate a lot of time to my job.
Plan a trade ahead of entry to avoid emotions. This is a must, your mind will play tricks on you.
One more thing, volume is your best friend. Volume is the expert, volume tells your how meaningfull or meaningless a move is.
All I can think of for now.
It's mostly the discipline and money management above all.
I'm much better daytrading than swing trading, too many games played by analysts.
Dont trade the first 20 minutes, dont touch the pre-market or afterhours, at least not often. You need clear signals and an overall market atmosphere understanding to daytrade. How the hell can you determine this when the market just opened ? You might, but for me, its pure gambling.
Lunch hour provides no clear signals, skip it. Last hour is godly and the only thing that matters is the closing price.
Yes a little experience sure helps determine the best entries but it all comes in time.
However, since Ive proven myself consistency I am switching to futures to test my skills.
Why ? Because of leverage. Of course, 1 contract (at most, yes less would be paper). We'll see how I do.
Happy new year traders!
I make my living doing very simple things in daytrading. No fancy tricks no fancy indicators. I'm not wealthy but I provide my family with a modest way of life from the income I obtain.
Indicators I use:
Geometric above all, looking for support and resistance.
For technicals: RSI, MA 50 and Fibonacci Retracements. Sometimes Bollinger Bands to measure volatility.
NOTHING ELSE.
Here are a few simple methods.
I look for strong stocks in strong sectors where the RSI has gone down significantly. If the stock is approaching good support, this is a clear signal and I load up a big position with a stop under the support line. The reward must be at least twice as much as the risk and I do make good use of trailing stops.
I never average down but Ive been known to scale in the position if the signal is not that clear at first.
I never ever change a stop unless the trade is going in my favor.
I use the VIX and VXN as contrarian indicators to the QQQQ.
Mostly trade Nasdaq stocks and I make good use of the VIX and VXN, TICK as well. Dont care for TRIN.
My accuracy rate is around 59%, not a big deal. However, my winners returns far outweight the losses (tight stops) so Im able to make a living. When a stock goes in my favor I usually let it run as far as I can unless I see reversal signals popping up in all indicators. Breakouts or breakdowns (if Im shorting) are a beautiful thing they can take care of many small losses.
Key here is to avoid BIG losses no matter what. Big losses wipe you out, big losses kill your big winners, big losses are what makes newbies fail fast. There are no shortcuts without big risks. Even in daytrading you must work hard for your money. Patience, lots and lots of patience.
It's better to stay on the sidelines than take trades out of impulse and lose money, even if its small losses. No clear signals no plays, remember that.
Im not well educated, only got a high school diploma, dropped out of college during the 3rd year. Not a genius just very disciplined and I dedicate a lot of time to my job.
Plan a trade ahead of entry to avoid emotions. This is a must, your mind will play tricks on you.
One more thing, volume is your best friend. Volume is the expert, volume tells your how meaningfull or meaningless a move is.
All I can think of for now.
It's mostly the discipline and money management above all.
I'm much better daytrading than swing trading, too many games played by analysts.
Dont trade the first 20 minutes, dont touch the pre-market or afterhours, at least not often. You need clear signals and an overall market atmosphere understanding to daytrade. How the hell can you determine this when the market just opened ? You might, but for me, its pure gambling.
Lunch hour provides no clear signals, skip it. Last hour is godly and the only thing that matters is the closing price.
Yes a little experience sure helps determine the best entries but it all comes in time.
However, since Ive proven myself consistency I am switching to futures to test my skills.
Why ? Because of leverage. Of course, 1 contract (at most, yes less would be paper). We'll see how I do.
Happy new year traders!
i gotta agree about the trader who made the comments about futures trading (intraday especially) and percentage returns
in my INVESTMENT accounts, i pay attention to returns vs. the S&P and sharpe ratio, etc.
but in the futures account, sometimes the #'s are so obscene that it is kind of meaningless and also self-limiting to think in terms of percentage returns. it almost sets you up for failure
one trader explained it to me, and i agree wholeheartedly
do NOT concentrate on the money (i am referring to futures scalping). concentrate on the setups. if you concentrate on the money, you will try to impose your will on the trades in order to make them work, to meet your goals and you will necessarily fail.
just concentrate on the setups. make logical entries, do not chase, do not get emotional and never widen your stop - EVER.
assuming your setups work (which mine do), they will work out and you will make money. the money takes care of itself. but concentrating on it can force you to take premature profits, or not take profits when your setup tell s you to. it will cause you to move your stop out because JUST THIS ONE TRADE HAS TO BREAK EVEN AND I WILL QUIT FOR THE DAY I PROMISE and other loser mentalities will kick in
risk management is so obscenely important in trading futures intraday.
in my INVESTMENT accounts, i pay attention to returns vs. the S&P and sharpe ratio, etc.
but in the futures account, sometimes the #'s are so obscene that it is kind of meaningless and also self-limiting to think in terms of percentage returns. it almost sets you up for failure
one trader explained it to me, and i agree wholeheartedly
do NOT concentrate on the money (i am referring to futures scalping). concentrate on the setups. if you concentrate on the money, you will try to impose your will on the trades in order to make them work, to meet your goals and you will necessarily fail.
just concentrate on the setups. make logical entries, do not chase, do not get emotional and never widen your stop - EVER.
assuming your setups work (which mine do), they will work out and you will make money. the money takes care of itself. but concentrating on it can force you to take premature profits, or not take profits when your setup tell s you to. it will cause you to move your stop out because JUST THIS ONE TRADE HAS TO BREAK EVEN AND I WILL QUIT FOR THE DAY I PROMISE
and other loser mentalities will kick inrisk management is so obscenely important in trading futures intraday.
Just a comment to NEET.
Not trading the first 20 minutes is a fatal flaw that has been taught to retail traders for years...and is simply wrong. Trading the NYSE opening only strategy is such a primary and fundamental way to make money (simply) that very few take part in. A big percentage of all the Bright traders money is made the first 20 minutes.
I agree about TICK and not TRIN.
Still prefer NYSE because of openings and MOC's. Things are changing however. We use a lot of Naz stocks in pairs.
I, too, believe in Karma (not for trading, but in general), and that's one reason that I do my best to share things here as well.
Happy New Year everyone...make some money in 2007!!
Don
Not trading the first 20 minutes is a fatal flaw that has been taught to retail traders for years...and is simply wrong. Trading the NYSE opening only strategy is such a primary and fundamental way to make money (simply) that very few take part in. A big percentage of all the Bright traders money is made the first 20 minutes.
I agree about TICK and not TRIN.
Still prefer NYSE because of openings and MOC's. Things are changing however. We use a lot of Naz stocks in pairs.
I, too, believe in Karma (not for trading, but in general), and that's one reason that I do my best to share things here as well.
Happy New Year everyone...make some money in 2007!!
Don