The Pareto principle, states, that for many events roughly 80% of the effects come from 20% of the causes. This “law of the vital few” is rampantly evident in business and economics, and especially on this forum. This is not to say that the forum is not an important and invaluable tool in the retail trading community. The problem is not with the forum, but with how people use the forum. Big Mike does an incredible job bringing in legitimate experts to perform very informative and professional webinars. Yet, I don’t see any evidence of the fruits of his labors manifested in the posts on the forum. Easily, 80% of the “banter” disseminated by posters on futures.io (formerly BMT) is either mis-information, or of no utilitarian value, and serves no purpose other than to perpetuate the “retail mentality” that pervades this forum. At times it reminds me of the welfare system only with indicators replacing food stamps.
Of course, everybody on this forum is a retail trader, one might answer. That does not mean, however, that you have to think, act, and trade like one. The markets are complex, and the competition is sophisticated, so don’t think you can compete against the smartest minds using the best technology with a little trend line, a moving average, and textbook cliche. Don’t bring a knife to a gunfight, and expect to come out alive. Please pardon the hypocrisy and the use of the cliche, but most aspiring traders want a strict rule based system, that has a high degree of profitability, little to no risk, minimal capitalization, and no knowledge of the markets required. They want rules they can count upon to make money, now and forever. Wrong approach - retail way to think.
The problem with an overly simplistic trading plan that simply trades one market with one or 2 set-ups, is when volatility dries up in your market, you don’t have others to turn to. When your one or two set-ups stop working, you are back to square one, frantically searching to find others that will work. Because there is not a top-down or bottom-up perspective on markets, there is not a framework or an understanding on how to think about markets. Retail traders are always waiting for some indicator to tell them when to trade and what to do, instead of knowing what they are going to do if the market breaks, and what they are going to do if the market rallies.
They are more interested in being right the market, than in making money, forever placing the emphasis on trading percentage instead of optimal trade management. Or if the are talking about making money, it’s on how they are going to spend it, when they make it big. There is a very salient reason why most retail traders fail; the retail mentality’s approach, attitude, and methodology, is so prohibitive it almost guarantees a low probability of success.
One of my colleagues on the “Spec List” once wrote “It’s possible to train people to perform to a certain level in chess, but if this training does not promote self- education and a philosophical attitude, then the trainees will be little more than performing seals.” Professional traders are looking at the same markets and accessing the same information as retail traders, but they interpret the information differently and implement their ideas in unique ways.
Conversely, the herd mentality is alive and well in the retail world as traders flock to whatever indicator gets the most hits, and whatever mechanical system requires the least amount of edification and practice to “master”, while essentially remaining clueless about the markets, price action, correlations, trade management, etc. The end result is everybody looks at the same things and trades the same way, and we all know what happens when everybody is the same way in the market.. ort...ort.
Last edited by tigertrader; January 29th, 2012 at 08:07 AM.
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Harry, my friend. Your indies are forever exempt from my criticism. They are like an oasis of utility in the otherwise desolate landscape of the mundane and secular. Quite frankly, I'd be lost without them. And yes, they are quite pretty, too!
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Why are you concerned about such a thing? I can't think of the last time in years that I have ever needed something other than a chart with price on it to tell me if it is trending or choppy. And what does it matter. I am smart enough these days (experience) to not keep changing directions --- long, long, short, long, short, short, long --- and get killed in "chop". Once you stop changing directions so much, and you trade only at key price zones, then I can assure you that "avoiding chop" is really not even on your mind anymore.
I believe your stops are likely too small, you are trading too small of a chart, and you are just trading noise. A lot of people make this mistake. If you can't trade bigger charts, then it is because you are trading too big (size) and you need to stop trading full sized futures and look at micro's or spot forex, or 100 share ETF's, etc.
In short, the answer to your question is simply -- you are not asking the right question.
Just my opinion...
Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.
Need help? 1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first. 2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses. 3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make. 4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance. 5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers. 6) Help using the forum? Watch this video to learn general tips on using the site.
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Not all indicators are created equal; some are very useful ( if used properly), many are worthless. Basing your strategy solely on indicators is a fools errand. It's analogous to rote memorization of material vs. comprehension of material. It is eventually going to catch up to you, and you will be totally unprepared.
Last edited by tigertrader; January 28th, 2012 at 09:54 PM.
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Tough pill to swallow, but I think you've got me pegged. I am a newb trader and with just a few months of market study and will continue until I find proficiency. Thanks for knocking me around a bit.
Much of what I have read on the markets states that the simpler the plan/strategy the better and to follow the rules of that strategy. I have read Murphy's Technical Analysis, Carter's Book, Douglas....What can I study to get a grasp on price action?
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This may sound harsh but it is not intended to be harsh. Think of learning price action and trading business this way. It takes at least 4 years for an engineering degree, ten years to become a doctor, and that is just to begin the new profession. Experience and time will help to actually put to work what you learned in school. Trading is the same, you become proficient after many years of study and hundreds or even thousands hours of watching price action.
So, read everything and learn the basic concepts of supply and demand, market structure, and really understand how and why a market behaves the way it does and you are on your way to an indicator free price action trading approach. The short answer is informed screen time.
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Thanks for these good points TigerTrader. I have yet to find an 'cliche indicator' that works "as advertised" so I'm inclined to agree with you here.
However, some indicator to filter potential price action setups will probably still be needed. Can you mention some of the more "good", useful and "professional" indicators TigerTrader? Don't get me wrong, I'm not asking for a magic or profitable indicator, but an example from what experienced traders consider a good and professional indicator would be helpful. Would this be a complex mathematical indicator, or a rudimentary indicator based on a complex idea, or is it more the interpretation of a custom indicator that would make it "professional"? Or is it an basic standard indicator that gets "professional" through the discretionary decisions of the experienced trader?
That would make it concrete how we as beginners can escape the 'retail mentality'. Who can give an example of professionalism with retail trading?
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