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Primary source of income: how many have made it?
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Primary source of income: how many have made it?

  #371 (permalink)
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bluemele View Post
I hear the phrase 'positive expectancy' thrown around very very often. The challenge with a 'system' that creates positive expectancy is in a context of time. Over time, I have not seen an instrument trade the same way.

So when you create a system with positive expectancy, then how do you decided when the time is to adjust? Most traders figure that out when they go broke (hindsight).

Even if you have been trading for 10 years, the same system, it could all give up tomorrow for the next 10 years and then what?

I guess my point is, I think that is why discretionary trading without rigid rules is the best way to maintain true profitability over time. If PE systems were all you needed, there would be a lot more billionaires floating around....

Mind you, I said approach -- not system.

That would include discretionary trading, which, in essence, is just relying on one's ability to filter and process information as a "system"...

It is also a myth that systematic/automatic traders don't continually adjust and adapt to the changing dynamics of the market. In fact, many models are dynamic in themselves..

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  #372 (permalink)
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zer0 View Post
There are some concepts so fundamental to markets that they really do not change. Of course, I will be called for BS on that statement, as I am not willing to share details. However, there are. Such things are so elemental they are existential to the markets you trade them on. There are other challenges to deal with of course: costs, liquidity, skilled execution, etc. All of which makes success a bit less than simple. I will insist, however, that the idea itself is very basic, and it does not change. It really cannot change for markets to be, well, markets.

Now am I certain we trade the same way...

It has always fascinated me how many fail to distance them enough to able to come to this realization. I think it's because it's too logical and simple, and most people don't seem to appreciate that...

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  #373 (permalink)
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Lornz View Post
Mind you, I said approach -- not system.

That would include discretionary trading, which, in essence, is just relying on one's ability to filter and process information as a "system"...

It is also a myth that systematic/automatic traders don't continually adjust and adapt to the changing dynamics of the market. In fact, many models are dynamic in themselves..

Like the comment "one's ability to filter and process information as a "system" here lies the 5% who have the talent to make a go of trading,, while the rest keep using the system/models the "pros" use, not realizing its the ability to filter the tools information is the key to make profit..

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  #374 (permalink)
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gg80108 View Post
Like the comment "one's ability to filter and process information as a "system" here lies the 5% who have the talent to make a go of trading,, while the rest keep using the system/models the "pros" use, not realizing its the ability to filter the tools information is the key to make profit..

Exactly.... The key point is one we all just made. Constant changes.

But, whether the context of time is 5 seconds, 5 minutes, 5 days, or 5 years, we are ever evolving our 'PE' systems. Like @monpere and others have mentioned as well, we are evolving even the most mechanical methods which in my opinion turns them into discretionary systems. I guess all a matter of context in time when referring to a definition to me.

I think when people who haven't traded very long and they read some of these posts it is over-simplified.

@Lornz, I didn't mean to challenge you but more to clarify or disagree without clarification.

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  #375 (permalink)
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I often suggest cleaning the slate and starting again with cold, hard logic. Few seem to notice, I imagine that even less try. The problem stems from the inherent, apparently innate need to find solutions for unclearly defined problems. Reduction --> Deduction --> Goal!!!!


Lornz View Post
Now am I certain we trade the same way...

It has always fascinated me how many fail to distance them enough to able to come to this realization. I think it's because it's too logical and simple, and most people don't seem to appreciate that...


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  #376 (permalink)
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Iím at $1000 n I wan $1100, $1100, bid on $1100, Iím at $1000 would you go $1100, $1100

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  #377 (permalink)
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Me personally i use quite a few trading methods i have plains for day trading swing trading and more longer term now do i make over 100k a year trading in this moment yes did i always make those numbers certainly not i started trading around 2005 also keep in mind im only 27 years of age so i started young my first year i lost my butt big time i all most gave up but i continued to learn and still learning to this day. Everyone's approach to trading is different and can be very hard to explain when asked the question how do you make money and how come you are successful? its not easy to answer because everyone thinks differently and approaches tasks differently. and that is what makes a market if everyone thought the same trading would near impossible to trade. In terms of how i live my life or did live it int he past when i first started i had a normal job like most society and changed my wants into needs meaning instead of blowing my money on drinking going out buying the latest fashions aside from bills all of my extra money went into trading accounts. and to this day i still live a simple life i have a one bedroom apt two used vehicles except now the only difference is alot of the profits i make are reinvested in my IRA account. so i guess all in all to ME trading is not just a trying to get rich sceme is a life style i really believe that.

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  #378 (permalink)
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Firehawkaz27 View Post
Me personally i use quite a few trading methods i have plains for day trading swing trading and more longer term now do i make over 100k a year trading in this moment yes did i always make those numbers certainly not i started trading around 2005 also keep in mind im only 27 years of age so i started young my first year i lost my butt big time i all most gave up but i continued to learn and still learning to this day. Everyone's approach to trading is different and can be very hard to explain when asked the question how do you make money and how come you are successful? its not easy to answer because everyone thinks differently and approaches tasks differently. and that is what makes a market if everyone thought the same trading would near impossible to trade. In terms of how i live my life or did live it int he past when i first started i had a normal job like most society and changed my wants into needs meaning instead of blowing my money on drinking going out buying the latest fashions aside from bills all of my extra money went into trading accounts. and to this day i still live a simple life i have a one bedroom apt two used vehicles except now the only difference is alot of the profits i make are reinvested in my IRA account. so i guess all in all to ME trading is not just a trying to get rich sceme is a life style i really believe that.

Does your day job give u acess to the internet/market where u can study it?

Sent from my HTC Desire using Tapatalk

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  #379 (permalink)
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Firehawkaz27 View Post
to this day i still live a simple life i have a one bedroom apt two used vehicles except now the only difference is alot of the profits i make are reinvested in my IRA account. so i guess all in all to ME trading is not just a trying to get rich sceme is a life style i really believe that.

Your approach is terrific, but you will probably encounter pitfalls along the way. Forewarned is forearmed. I'm 54 and I've spent my entire adult life in the commodity markets, all but the first six years as an independent trader at the CBOT. I've seen a lot of truly great traders blow up their fortunes outside of the pits, and I've made some of these mistakes myself. The biggest pitfalls:

1) Marriage. It's a wonderful institution, but it's important your spouse understand the variable nature of your income, and the necessity to maintain big reserves. Otherwise she may think if you make 100k you can spend most of that, and/or borrow against future income.

2) Complacency. You are confident in your abilities, and you (not you specifically, any successful trader) think this will go on forever. You are comfortable at your current level of income, so you fail to increase your size. Then something fundamental about the competitive situation changes, and you lose your ability to make money in the markets. You haven't put enough away to last you a lifetime, so now you have to get a job. In my opinion you should aspire to trade as big as you safely can, but build up to it very gradually, so you have adequate capital to deal with the added risk and so you can adapt psychologically to the larger equity swings.

3) Great success. This leads to all sorts of terrible financial and personal decisions.

a) You have a multi million dollar year, so now it's time to start building the trophy house. I know a guy who literally put $10 million into a three bedroom home. Bowling alley, theater room, pool, bought the 3 lots surrounding him at $600k each and put just enough junk on them that they can't be resold. He had to sell it for under $6 million (in a hot market). For some reason, building the trophy house seems to be the kiss of death. My advice is to do it only when your investment income, not your trading income, can totally support your cost of living, and to pay cash for everything, no mortgage.

b) You buy a great car, flash your wealth, and attract a really hot golddigger who cleans you out three years later. That one happened to one of my best friends, and to many others.

c) You make huge investments in things you don't understand that well. Tom Baldwin, one of the greatest ever, largely wiped himself out with a dot com company. A close friend of mine merged his prop group with two others, and then they forced him out at a big loss.

4) Failure to recognize change, either in yourself or the markets. Your profitability goes down but you do not adjust your style or your risk profile until it is too late.

From your post, I'd say you are not currently at risk for most of these except #2, complacency. Maybe you should be investing more in your business and less in your IRA (unless you are trading through your IRA, which I think is a good idea, especially if it's a Roth). But circumstances change, and they change you. Keep the values you've written about, and you should do well.

"You don't need a weatherman to know which way the wind blows..."
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  #380 (permalink)
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IRA isn't bad, because you can just pay your 10% penalty if you need to dig in. If he continues down this path and it is 10 years of compounding without tax, that will far exceed the 10% penalty issue.

Good advice though and I have to find out, did you ever make it to Boulder??

@jstnbrg

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