Blash 

Ron

With all due respect, your response sounds like a non-answer with the implication that retail trading is a pipe dream. My premise is that a Holy Grail is a something whether it be a system, strategy or methodology that has an actually decent edge beyond chance that works for a retail trader. I'm talking edge and you're talking mentality. Do they go hand in hand? Yes to a degree, but if you have the best mentality in the world and you're trading a system that will fail in a retail account 99.9% of the time, then it's pointless discussing psychology. Last I checked, Mark Douglas's work--I've only dabbled in his introductory stuff--is primarily focused on trading mechanically with a probabilistic outlook and working on fortifying a trader's mentality. As in, once you've defined your edge simply trade it without regard to the outcome. That is very different from, for example, having a system that if traded properly can produce 50% ROI over a year with a minimal chance of exploding.

trepidation 

With all due respect, your response sounds like a non-answer with the implication that retail trading is a pipe dream. My premise is that a Holy Grail is a something whether it be a system, strategy or methodology that has an actually decent edge beyond chance that works for a retail trader. I'm talking edge and you're talking mentality. Do they go hand in hand? Yes to a degree, but if you have the best mentality in the world and you're trading a system that will fail in a retail account 99.9% of the time, then it's pointless discussing psychology. Last I checked, Mark Douglas's work--I've only dabbled in his introductory stuff--is primarily focused on trading mechanically with a probabilistic outlook and working on fortifying a trader's mentality. As in, once you've defined your edge simply trade it without regard to the outcome. That is very different from, for example, having a system that if traded properly can produce 50% ROI over a year with a minimal chance of exploding.

We are at different points of the traders evolutionary arc.

Retail trading is doable... absolutely. You need an edge (usually more than one), of course...like any business.... But what you need more than your edge are intangibles. Stuff related to life in general, which of course includes trading because it is part of life, if one so chooses.

Patience to wait for the edge to materialize. Perseverance to carry on, staying the course however long it takes. Wisdom/discernment understanding market context related to edge.

Truthfulness with yourself. Is this really your edge or just almost out of time and you need/want trades. If you don't trade today.... Are you a trader? Traders trade, right?

Decisiveness and moderation will net more profits consistently than greed and haste.

Process. Having a process where the intangibles are trained into you will be your Holy Grail.

The edge is the easy part. (Relatively speaking)

Ron





Sent from my iPhone using futures.io

Blash 

We are at different points of the traders evolutionary arc. Retail trading is doable... absolutely. You need an edge (usually more than one), of course...like any business.... But what you need more than your edge are intangibles. Stuff related to life in general, which of course includes trading because it is part of life, if one so chooses. Patience to wait for the edge to materialize. Perseverance to carry on, staying the course however long it takes. Wisdom/discernment understanding market context related to edge. Truthfulness with yourself. Is this really your edge or just almost out of time and you need/want trades. If you don't trade today.... Are you a trader? Traders trade, right? Decisiveness and moderation will net more profits consistently than greed and haste. Process. Having a process where the intangibles are trained into you will be your Holy Grail. The edge is the easy part. (Relatively speaking) Ron Sent from my iPhone using futures.io

Terrific post @Blash, I think many of us are constantly feeling this self-imposed pressure to place winning trades every moment we're in the market and its just becoming more and more apparent to me that at the particular stage I'm at, selectivity, patience, and discipline are proving more beneficial.

I know it will sound like boring rhetoric with no substance to some but it really has made a critical difference in my trading performance. It just doesn't feel like I'm a trader yet because I spend so much time not in any trade. But the results are what they are and I just feel like this has been an important realization and step along the path. Everyone has a different style but for mine I think I just need more time and experience to really "get it" and start building more profits, I know I cannot run before I walk or crawl.

Sorry if I derailed us at all, but I just really liked your post, Blash!

Blash 

The edge is the easy part. (Relatively speaking) futures.io

Haha, we don't see eye to eye here. I admit I take discretionary trades when I shouldn't and that is bad for my expectancy. However, a good edge is the hardest thing in the world to find because you need to find a balance between number of setups, probabilities, and risk to reward. If that weren't the case mechanical systems or algo trading that is emotionless would be completely destroying human traders. They are at best slightly better than a skilled retail trader.

Just as a novice swordsman with a holy blade cannot cut, a master swordsman with no blade cannot cut either.

I’ll throw in my two cents. I’ve developed a few trading models that are likely to outperform the broad market in both absolute and risk-adjusted return. I trade these models and I share them with my family. I would not sell these models because 1) I don’t want to lose my edge and 2) I don’t want to make money from marketing to struggling traders, I want to make money from trading.

Now as far as daytrading goes, I have failed 100’s of times to write an intraday black box algo that is profitable. The only alternative then becomes discretionary trading. When I reach a point of consistent profitability I will certainly share my methodology for free because I think it is less likely for a discretionary trader to lose their edge due to ‘overcrowding.’

-Zimmer

mtzimmer1 

I’ll throw in my two cents. I’ve developed a few trading models that are likely to outperform the broad market in both absolute and risk-adjusted return. I trade these models and I share them with my family. I would not sell these models because 1) I don’t want to lose my edge and 2) I don’t want to make money from marketing to struggling traders, I want to make money from trading. Now as far as daytrading goes, I have failed 100’s of times to write an intraday black box algo that is profitable. The only alternative then becomes discretionary trading. When I reach a point of consistent profitability I will certainly share my methodology for free because I think it is less likely for a discretionary trader to lose their edge due to ‘overcrowding.’ -Zimmer

The idea that trading edges are always a big secret never to be disclosed is imo not the reality. Professional traders are just ok to share basic idea's about edges. Lot of them are exploiting known edges like selling insurance, taking on risk others don't like. There is no Holy Grail in the market, the market is too efficient, every edge comes with it own risk profile. A trading operation is to trade and combine multiple of those edges to shape your equity curve that fits your risk profile.

Sent using the NexusFi mobile app

I agree that there is no holy grail. But the combination of edges I currently trade is likely as close as I’ll ever get. I don’t want to incur any additional risk of degrading performance by sharing these models. One of my favorite quantitative traders, Oddmund Grotte, shared many ideas on his blog but did not share his most profitable edges while he was exploiting them. He is far more intelligent than I and if he was concerned with losing his edge due to “overcrowding” then I think I should be cautious as well. I am exploiting ‘unknown’ edges that, as far as I can tell, no one is posting about online. I’m not selling premium I am timing the market and allocating to asset classes using stats-based market-timing models.

rlstreet 

The idea that trading edges are always a big secret never to be disclosed is imo not the reality. Professional traders are just ok to share basic idea's about edges. Lot of them are exploiting known edges like selling insurance, taking on risk others don't like. There is no Holy Grail in the market, the market is too efficient, every edge comes with it own risk profile. A trading operation is to trade and combine multiple of those edges to shape your equity curve that fits your risk profile.

I think this is probably correct, as a description of how the professionals generally operate. (Actually, not being one, I can't be sure of this, but it is consistent with what I have gathered, anyway. )

We run into the most odd and fanciful ideas about how professionals trade, and in particular, about how trading algos trade. While some of these ideas probably are sometimes right, I think that for the most part, the big professional operations exploit edges that are well-known, just not usually available -- for instance, high frequency trading firms utilize very high speed operations and hardware -- where things like, "How long does it take light to traverse this distance" are a factor -- to take advantage of very small, temporary market opportunities.

We have at least one high frequency trader here (I won't drag him in by tagging him) who, I would judge from some of this posts now and then, would smile at our assumptions about what his firm and its competitors do.

An example from the old days would be the pit traders, back when all trades got matched up manually by guys hollering out their bids and offers and making odd hand gestures, or whatever they did.

These guys simply had an obvious edge due to their unique position in the market. Since everything had to go through them or one of the others on the floor, they had a simple way to get in front of outside orders. When the pits died, a lot of them didn't make the transition to "screen trading," where they didn't have any built-in advantage.

By the way, I do think it is possible to have an edge and to exploit it, and I have seen this play out in many different ways in trading journals here for a long, long time. It just isn't going to be all that easy, for the simple reason that your competition is out there trying to do the same, and you just may not be better at it.... Of course, you might, but it's not that likely. I don't think it's a mystery why, as we are often told, most traders fail. (The numbers are often given in the 90% range, although I imagine they are just being repeated without much actual data. But I also think they are very high, possibly higher.)

The reality is always that competition makes success in any market difficult.

Bob.

------------------

Edit: with all that said, the high frequency firms have very talented math guys working up market models to give them a way to find the opportunities they seek, and they aren't making any of that known.

Must be a reason.

mtzimmer1 

I agree that there is no holy grail. But the combination of edges I currently trade is likely as close as I’ll ever get. I don’t want to incur any additional risk of degrading performance by sharing these models. One of my favorite quantitative traders, Oddmund Grotte, shared many ideas on his blog but did not share his most profitable edges while he was exploiting them. He is far more intelligent than I and if he was concerned with losing his edge due to “overcrowding” then I think I should be cautious as well. I am exploiting ‘unknown’ edges that, as far as I can tell, no one is posting about online. I’m not selling premium I am timing the market and allocating to asset classes using stats-based market-timing models.

Yep it is logical to hide very special alpha to the public But let's be honest and not kidding ourselves that we have this kind of alpha. Most capitilized companies are searching for this. Most alpha we trade as retailers, is known stuff, maybe traded in a little different way. And some are successful in harvesting this alpha other for many reasons not

Sent using the NexusFi mobile app

mtzimmer1 

I’ll throw in my two cents. I’ve developed a few trading models that are likely to outperform the broad market in both absolute and risk-adjusted return. I trade these models and I share them with my family. I would not sell these models because 1) I don’t want to lose my edge and 2) I don’t want to make money from marketing to struggling traders, I want to make money from trading. Now as far as daytrading goes, I have failed 100’s of times to write an intraday black box algo that is profitable. The only alternative then becomes discretionary trading. When I reach a point of consistent profitability I will certainly share my methodology for free because I think it is less likely for a discretionary trader to lose their edge due to ‘overcrowding.’ -Zimmer

mtzimmer1 

I agree that there is no holy grail. But the combination of edges I currently trade is likely as close as I’ll ever get. I don’t want to incur any additional risk of degrading performance by sharing these models. One of my favorite quantitative traders, Oddmund Grotte, shared many ideas on his blog but did not share his most profitable edges while he was exploiting them. He is far more intelligent than I and if he was concerned with losing his edge due to “overcrowding” then I think I should be cautious as well. I am exploiting ‘unknown’ edges that, as far as I can tell, no one is posting about online. I’m not selling premium I am timing the market and allocating to asset classes using stats-based market-timing models.

I think these are very important points, along with the post by @rlstreet above.

I don't think that the high-speed algo traders, for instance, are necessarily trading like we do (and they aren't), but I also think that they have things that they keep close to the vest, and they want to keep it that way.

There's also the simple factor of how reproducible an "edge" is.

For instance, if I had a good automated strategy, there is no way on earth that I would share the code, or even give a very detailed description of it. Why? Well, because if they had the code or something that would make writing it fairly easy, any one in the world could be in there at the same time as I was, making the same trade that I was. Even if it didn't affect my returns -- and, given the staggeringly huge size of the markets, it probably would not, unless it became very popular -- I just wouldn't want to hand out a free lunch after it had taken me time and effort and risk and loss to get it. I am not generally inclined to be selfish, but in this case my attitude is simply, "Find your own, bub."



Now, as to purely discretionary trading, the way that different traders will implement, or try to implement, a strategy, and the extent to which various individual psychological and other judgmental factors will come into play, makes it pretty well impossible for anyone else to be making the same trades at the same time. For that matter, anyone is going to make their own changes to the method anyway as they apply it, even if not entirely consciously, and I think that there is not a real danger of free-riding. You have to work to master discretionary trading.

So I would be more open there, and even want to be helpful. The situations are dissimilar enough to make the appropriate response different also.

Bob.