Trading is a very difficult form of career choice. I think it would not be too difficult to get some stats on how many traders fail as a percent of traders that tryout, get fully trained and are let loose with cash at successful Prop shops like SMB Capital or Propex Derivatives. Just email them and ask...
Those traders are well supported, well trained and mentored and have the best of infrastructure. So for retail traders to succeed requires an immense amount of dedication, passion, perseverance and discipline. Most are looking for a quick fix and won't give it the years of screen time that it requires. They'll give up in frustration, likely at the point where their analysis is very good, but their emotions prevent them from executing their plan consistently which in turn destroys any mathematical edge that good risk management can give you.
I came into this two years ago with a boat load of capital, EOD trading experience, determination, passion for the markets and the knowledge that this will be the most difficult thing i have ever tried.
I am breakeven consistently now and the only thing stopping me from being consistently profitable is myself. I review every trade and i can say that very few are a result of my homework process. Some of the best trades are the hardest to take. Some of the worst trades (buying breakouts) are the easiest. I have excellent sim records to back up my methods and give me the confidence to pull the trigger. I have over 4400 hours of screen time, including replay. I have a playbook full of plays. I have some of the best tools that a retail trader can hope for. All i need is to believe in myself and execute my plan every time, all the time, fully accepting the risk in every instance before i pull the trigger.
I am so close to being CP that i can feel it, everyday is a breakthrough now. I'm dealing with all the frustration much better than before. I know i can do this.
Throughout my whole experience i have had to survive the frustrations of data, software, connectivity, and countless instances of interruptions.
I'm still trading though, because i am determined to succeed whilst preserving my capital, my ammo for another day. Yesterday was a classic example. After two losing trades on the DAX, i had to muster up the discipline to call it quits because i had missed the best trades of the day, trades at my predetermined levels, some of them to the tick. In the past i would try and get back my losses with a twisted frame of mind. You can't do this, you need to give yourself the best shot with a clear, sharp mind.
The only reason traders fail is they can't survive long enough to overcome themselves. Its not the ever changing market, its not the software or the data.
After you master the analysis, this is simply a game of surviving yourself.
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Just saw this thread and here are my 2 cents, which may not be worth that much even:
1) Do algos affect retail traders (by triggering stops, etc.)? Yes, of course. Do a large number of HFT algos specifically target retail? I do not think so. Why? Because of one logical reason--you can take advantage of retail behavior without doing HFT at all. A mechanical, 100% computer driven trading system can run retail stops; but it can be run from a home computer with a slow internet connection. And with no computerized system at all, retail can be exploited. The game is just that slow by comparison. It does not need all that HFT requires because it's not really high frequency. So why would I invest in all the HFT infrastructure, and then run programs which could be run by a slow, fat guy clicking a mouse? So IMO, retail traders are affected by HFT, in that their stops may get hit in the crossfire for example, but I do not think it is accurate to believe that they are directly the target of HFT, in most cases.
2) For some reason Al Brooks has been mentioned in this thread many times, and as a "genius in his field." Not a knock on Al at all, but all I know about Al as far as trading goes is that he sells trading books. He may very well be a genius and may make tons of cash every year, and if his books help your bottom line, then this is a very good thing. But please, trust yourself and think for yourself, and never take anyone's word for anything without doing your own research.
3) Are markets rigged? In a word, yes, but it depends on how you define "rigged," doesn't it? If the hitters of one baseball team are pitched to every half inning with juiced baseballs, while the other team has to hit regular balls when they are up to bat, then yes, this game is rigged. But if they are all hitting the same balls, then it's not, even if it's changed over time, is it? Has the trading game changed? Absolutely. And do some people get away with illegal trading activity? Yes. And do you as a retail trader have access to the same quality of information that large traders can get? No. So in many senses, the playing field is not level. But, you know all this, and you are on the field. You can play the game that's being played on the field, or you can leave the field. Since you know the game is rigged, and since you continue playing, shouldn't you then take responsibility for your success or failure, having been informed of all of this?
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It's not hard to gain an edge in trading, the hard part is the execution factor of having patience and then executing. Getting an edge is the easy part while actually making money through hours of waiting and not blowing your gains by over trading is the hard part. I think about trading like playing pool and I know this isn't the best analogy but I play a lot of pool so it works for me. I've played pool for probably 4-5 years off and on averaging about 5 games a week. I'm good but I'm not great. I still have problems hitting certain shots, especially long shots, because I haven't practiced them exclusively and the reason I'm not great is because I don't practice specific shots outside of playing for fun. I'm at a plateau that I know I won't improve much unless I rigorously focus on practicing a specific shot over and over until I master it. Even after I master the shot I'll still have to put in the same level of focus each and every time I go for it. This is why you see some people who are really good at pool halls and you come to find that they have a pool table they've been practicing on at home ever since they were a kid. If I continue just playing for fun I'd probably get better at an extremely slow pace and be admired maybe in another 20 years. I find this similar to trading because trading requires the same type of focus on each and every trade signal taken or not or else the edge is literally worthless.
Last edited by Itchymoku; October 17th, 2013 at 04:26 AM.
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Thanks for that. How does this shed light on the question you posed in post #1: "...which will make day traders extinct first, US gov taxes or high-frequency trading institutions?" What are you suggesting other than affirming what is already known, that GS is a "premier trading institution". In my humble opinion, take what GS suggests in their press releases and do the precise opposite. If they say banks are not doing well, it's time to BUY! If their market outlook is overwhelmingly optimistic, it's time to SELL! This is an oversimplification, I know, but you get the point.
Last edited by bluecrow; October 17th, 2013 at 03:03 PM.
Over the many posts the original question evolved from"...which will make day traders extinct first, US gov taxes or high-frequency trading institutions?" to a discussion on how difficult day trading is currently and has been for proprietary firms, institutions, and retail traders. The fact that Goldman Sachs missed out on revenue estimates by 20% due to difficulties with bond trading was my point. This is related to comments other posters made which suggested that profitable day trading is even very difficult for the proprietary firms and institutions, who have many advantages over retail traders.
I am a rookie but I do not agree with all of his premises. Swing trading seems like it would not work as well as day trading in a bear market. It also has different risks from day trading, time decay and implied volatility in options and unforeseen news which can make the stock gap down far below any protective stop's price prior to the open. The new issue of dark pool trading and pre-premarket manipulation would also be difficult to deal with when the goal is to get a steady source of income to live off of.
Besides the fact that we are not in a bear market for several years now, you do not have to swing from the long side, if you are indeed concerned with downside volatility.
Probably the best way to deal with that, though, is to not trade single stocks, but opt for indexes instead--on even the worst day, except for the really far out part of the tail, you will not see a downside move of more than 5% on an index, whereas a stock can move much, much more in a day.
Since time decay favors option sellers, perhaps you do not want to be an option buyer, generally speaking... And why not trade in options which have a lower IV?
In other words, nothing you have said here is particularly a problem--as you said, the risks of swing trading are simply different, not greater, than day trading.
Certainly dark pools are growing and can have adverse effects on exchange liquidity, among other things. But how does this really affect you, personally? And what do you mean, specifically, with respect to premarket manipulation? This certainly isn't new.
If you want a steady source of income, there are far better ways to get it than with trading. Opportunities do not present themselves symmetrically, in frequency or in proportion. To have a steady income trading almost certainly means that the real meat is being left on the bone, doesn't it?
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