i trade (mostly) index futures, specifically the dow.
the dow is a proxy for supply and demand among institutions, it is less frenetic than the ES (and has a better spread) and it is price weighted, not cap weighted (i hate cap weighted indexes...) but i digress
when I am trading the dow, i realize that over 90% of the volume is represented by less than 8% of the trades. iow, a small # of traders trading large blocks largely MOVE the market
iow, part of edge that can be developed is FADE the retail trader, and piggyback on board the institutional trader.
futures are zero sum (unlike stocks) . every single dollar marked to market in my account COMES FROM somebody else's loss (unlike stocks). the net for positions is thus zero
realizing this makes me humble. i just have to be Better than other traders. how? by exploiting my edge: patiently waiting for setups with high positive expectancy, and only executing trades then.
MOST traders trade impulsively, emotionally, and without discipline.
most traders use lagging indicators.
i don't
i don't use any "indicators" in the conventional sense.
institutions HAVE to position in the markets. that's how they make money. and knowing how they operate (and when) can offer edge.
i have also been very successful at poker, another zero sum game. why? because i am better than other players. same as trading. it's really that simple. but the cards (unlike the market are RANDOM). the poker PLAYERS are not random. that is what makes them beatable. it's a dynamic system. but it is beatable
the market is not random. nor is it normally distributed. academic morons like golfer don't even understand that.
to understand the markets, it is much better to study psychology, and chaos/complexity theory, and game theory (which is all about managing risk and making intelligent bets/strategies on future outcome), then the discredited absurdities that come when one ASSUMEs things about normal curves and gaussian distributions.
complexity/choas theory can (and do) explain how a market can crash 20% in one day FAR FAR more often than a normal distribution of prices would predict this would happen.
why? because the market is full of irrational, self-interested, herd following, emotional lemmings.
they are many things, but they are not random
i have run a trade mentoring business, and i have found that Phd's and the like are the types of people that are usually too arrogant to be good traders. the market is always right. PhD's think THEY are always right. it's an ego thing
"The fact is this: The markets are a lot more random than most traders want to think it is. It is also a lot less random than most academics want to think. "
absolutely. part of edge, and being consistently profitable is recognizing those (relatively) rare opportunities where there is a statistical edge in what will happen next. some days i might sit there patiently watching for 4 hours before i enter a trade, and that trade might last less than a minute. so what? e
most traders do not have the kind of discipline and emotional makeup. that's good. they provide liquidity
most traders (i would say less than 5% in my experience) enter trading with a solid business plan, an understanding of game theory and concepts like Kelly Criterion, risk of ruin, and the fact that given sufficient "n" the unlikely is almost certain to happen to you. you can double down and triple down on losers 20X in a row and make money, and then have the one trdae that wipes you out.
that's why you have to have the discipline to only play positive EV strategies and to be patient, disciplined, not overleveraged, not undercapitalized etc.
trading has very little barriers to entry. a couple of grand, a computer, and an internet connection and any putz (even wall st. golfer) can trade against the best in the business. compare this to (say) golf. you can't just walk up and play against tiger woods for 10k a hole, or enter any major pro event.
trading is thus VERY simple. all you have to do is press a button!!!
that is what can make it SO profitable for a good trader, because the vast majority of retail traders are pressing buttons without understanding risk/reward, discipline, market structure, etc. and their stop runs, margin calls, etc. fuel some very nice (and predictable moves)
the dow is a proxy for supply and demand among institutions, it is less frenetic than the ES (and has a better spread) and it is price weighted, not cap weighted (i hate cap weighted indexes...) but i digress
when I am trading the dow, i realize that over 90% of the volume is represented by less than 8% of the trades. iow, a small # of traders trading large blocks largely MOVE the market
iow, part of edge that can be developed is FADE the retail trader, and piggyback on board the institutional trader.
futures are zero sum (unlike stocks) . every single dollar marked to market in my account COMES FROM somebody else's loss (unlike stocks). the net for positions is thus zero
realizing this makes me humble. i just have to be Better than other traders. how? by exploiting my edge: patiently waiting for setups with high positive expectancy, and only executing trades then.
MOST traders trade impulsively, emotionally, and without discipline.
most traders use lagging indicators.
i don't
i don't use any "indicators" in the conventional sense.
institutions HAVE to position in the markets. that's how they make money. and knowing how they operate (and when) can offer edge.
i have also been very successful at poker, another zero sum game. why? because i am better than other players. same as trading. it's really that simple. but the cards (unlike the market are RANDOM). the poker PLAYERS are not random. that is what makes them beatable. it's a dynamic system. but it is beatable
the market is not random. nor is it normally distributed. academic morons like golfer don't even understand that.
to understand the markets, it is much better to study psychology, and chaos/complexity theory, and game theory (which is all about managing risk and making intelligent bets/strategies on future outcome), then the discredited absurdities that come when one ASSUMEs things about normal curves and gaussian distributions.
complexity/choas theory can (and do) explain how a market can crash 20% in one day FAR FAR more often than a normal distribution of prices would predict this would happen.
why? because the market is full of irrational, self-interested, herd following, emotional lemmings.
they are many things, but they are not random
i have run a trade mentoring business, and i have found that Phd's and the like are the types of people that are usually too arrogant to be good traders. the market is always right. PhD's think THEY are always right. it's an ego thing
"The fact is this: The markets are a lot more random than most traders want to think it is. It is also a lot less random than most academics want to think. "
absolutely. part of edge, and being consistently profitable is recognizing those (relatively) rare opportunities where there is a statistical edge in what will happen next. some days i might sit there patiently watching for 4 hours before i enter a trade, and that trade might last less than a minute. so what? e
most traders do not have the kind of discipline and emotional makeup. that's good. they provide liquidity
most traders (i would say less than 5% in my experience) enter trading with a solid business plan, an understanding of game theory and concepts like Kelly Criterion, risk of ruin, and the fact that given sufficient "n" the unlikely is almost certain to happen to you. you can double down and triple down on losers 20X in a row and make money, and then have the one trdae that wipes you out.
that's why you have to have the discipline to only play positive EV strategies and to be patient, disciplined, not overleveraged, not undercapitalized etc.
trading has very little barriers to entry. a couple of grand, a computer, and an internet connection and any putz (even wall st. golfer) can trade against the best in the business. compare this to (say) golf. you can't just walk up and play against tiger woods for 10k a hole, or enter any major pro event.
trading is thus VERY simple. all you have to do is press a button!!!
that is what can make it SO profitable for a good trader, because the vast majority of retail traders are pressing buttons without understanding risk/reward, discipline, market structure, etc. and their stop runs, margin calls, etc. fuel some very nice (and predictable moves)
