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Do educated traders make it harder to make a profit
Hi,
Just a beginner and boy am I happy to have found Big Mikes.
Anyway, as traders get more educated/sophisticated are profits harder to come by? Since trading is a 0 sum game (for every winner there is a loser) doesn't this imply that if everyone *gets better/smarter/more competent* profits will be harder to come by.
As a corollary question: Lets say everyone trading the ES becomes an expert using Price Action (ala Al Brooks). Would this invalidate this approach on the ES?
Markets are continually evolving. A static solution does not work. If you are a discretionary trader, then you make small changes over time, some of them are subtle and you may not even notice it. If you are an algorithmic trader you try to program in the flexibility or variability into your strategy so it can dynamically adapt to changing conditions.
I like that term 'discretionary trader' - I think that's what i am - don't favour fundamental over technical, indicator over own eyes, economic calendar over learning from previous false breakouts, I take in what information is worth distilling, give everything more or less equal weight and then, maybe ... gulp ... place a trade ...
The early bird may catch the worm, but the second mouse gets the cheese.
However, I do place a premium on learning from previous mistakes - yours and mine (well, we have both paid dearly for them, might as well get bang for buck!).
There are people that do this for years and earn no money for sure. But knowing more about what you're doing and striving for improvement if say always gives you an edge over people that thinks its easy and think they can consistently make money just because they win in am uninformed gamble.
I've learnt that in the beginning people call it trading but really they're gambling. And in that scenario the house will always win. Later on people learn to run trading like a mechanical business and that's when things change. I'm always learning every day I'd suggest it's the same for the others here that have been in the markets much longer than me too.
imo, retail trading is really so small now it's like being minnows in a sea of giant killer whales and sharks and the big whales. 70% of the markets is now driven by HTF or algo trading and big money. It's not zero-sum of retailer vs. retailer if it ever was. it's more like trying to latch on to the rythym of the big whales (big money moves) while not picked off by the killer sharks (HTF frontrunning and quick algos).
being good in price action only works sometimes. it's managing the money and not losing all the gains when the price action "breaks down" due to the manipulation when often the price action is messy. I had heard many retail algos stopped working in the last 5 years not coincidentally when HTF increasingly proceeded with it's invasion. So top "bots" at Zulutrade and other places only last a month or so before they become saturated and ineffective quick.
In my opinion, the market is very predictable not saying that I can predict the market, but after seeing things multiple times you'll see similarities, variations, and behaviors at certain levels. I think if you're able to learn price, how things work, and learn to understand your emotions anybody can be successful at this. Trading in my opinion is about 20 percent technical analysis and 80 percent emotions. The market is ever evolving learning yourself and remaining flexible and managing risk is what's going to put you over the top. Learning and educating yourself doesn't maker it harder it just helps put the odds in your favor, and you will never stop learning. You just need to learn to trade with the market. Focus on high probability setups and don't over complicate things. If everyone learned to trade Al Brooks methods, that would increase probabilities. For instance with TA if you had price coming into an equal move you would know there is a high probability of people exiting, or taking part of their position off, expect a small pullback or stall before continuing.
I believe that recent reports suggest that HFT has declined since peaking in 2009 and is around 50% now.
I recently updated my business plan (some refer to it as a trading plan) and it made me realize how different my trading is today vs. several years ago. I did not make an effort to change or do things different but over time have made many small changes. I plan to add a section to my business to track this a little better in the future.
Your'e right I heard that too. Unfortunately I think the report was just reporting an event saturation in the number of HFT firms , new, startup, or otherwise competing with each other. The ones that are left have taken over and caused a lot of the illiquid behavior of many of the markets we see today. It's not just HFT, it's also general algo driven markets as well. "Tradeworks", the small HFT featured in CNBC where the guy "cooperated" with the CFTC and talked to the reporters seems like small fry compared to the big money which refuses to talk to the news about their HFT/algo operations, and most importantly the scale of it. Like there was news just last fall about some firm setting up collocated office servers near Washington DC. public offices for the big public report "numbers" news such as employment, manufacturing etc. and that news went by in a blip of a short segment for a day, then "forgotten". (they apparently couldn't hide their physical construction and setup)
Same here, I've had to change my trading style yet again, when my old setups stopped working well enough. The 6E has also changed. It feels very illquid and has become much harder to trade. It doesn't move much except with sudden algo spurts and then most of it is fakeouts and bad PA behavior. Anyone else notice that?
A little more about BPA. I had read through Al's original book and attempted trading his method with limited success. It's very very hard to do it like Al does from what I've gathered. Almost no-one has reported being successful even on his own bpa forum site. The few that do claim they use it "a different way". But slogging through 7 hours on the 5 min ES, all that work just to sometimes make 2 to 4 ES points total? (that's only 8 ticks) after the losers? and commissions? In the book Al says it takes 90% accuracy in order to scalp the ES successful in a session. So 9 out of 10 trades. So hard to achieve that. And the material from Al's site leaves a lot to be desired in terms of trade management examples of entries. For example in his book, he could have pointed out trade entries and stops marked in a bunch of sample session charts, even if he doesn't do so himself in his trading room which I had attended for a total of three months. In general the bpa patterns do seem to play out as expected for the most part - when the price action is clean, but it's awfully ugly looking in today's climate. Plus there's the "always in long" vs. "always in short" discretion caveat which invalidates a lot of the setups in the book which is only mentioned at first in the live trading room and not in the original book! So in general, imo, most who attempt BPA trading will do so in their own way and style , so it won't be exact trading by the masses who use BPA in trading.
No, because the biggest market movers are not retail traders, it is institutional traders like Goldman Sachs, etc. Most of those are trading at a level that we will not reach. (High Frequency, Automated, or sheer skill). (If you listen to what Al's talks about most it is understanding what the market movers are doing and trying to be on their side when the market moves.)
Also you need to be honest trading is a minus sum game. I may take your $10 but we both paid the broker and house to be in the game.
