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 you 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.

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.

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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.

Don't forget that with HFT they spend extra for microseconds and if lucky add up to a couple milliseconds advantage buying FPGA chips with custom HFT friendly enhancements, microwave instead of fiber so it's direct line of sight saving a few turns, and then there is or course the obligatory colocation at CME, staff of amazing math guys, and with the best firms there will be teams writing custom code for their own execution.

That is not a game someone without deep pockets can play.

Retail has much better odds going as far away from scalping as possible. The more distance from scalping to swing trading the better the odds in my opinion, often resulting in far better R returns. But retail doesn't like a big stop, they've been brainwashed into thinking a few ticks is enough...

In my opinion of course...

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If you found the Holy Grail, would you share it with the world? By Holy Grail, all I mean is a system or methodology that can consistently yield profits in all market conditions however it does it and also make a good ROI.

Would you ask for compensation? I once bought a course and to this day I'm haunted by what this popular guru let accidently slip. He said that these days he was too busy teaching to actually trade. Think about that for a minute. He was living off of other people's hopes and dreams and in doing so was living their dreams.

So far there've been alot of people that have been trying to sell the dream of systems and strategies or even signals that make bank. These days I've seen an evolution in the landscape where people try to sell the idea that you can't get rich quick and instead they sell another dream via support groups or training. To me, both of these types of people are feeding off the dreams of other people. That isn't to say they don't produce value, but if they created an absurd amount of value they would be renown across the internet.

Just as this is two sides of a coin, so too is the question of the Holy Grail. On one side there's the idea of a self-fulfilling prophecy (candlestick patterns) and on the other there's this idea of alpha decay where the more people that know, the less effective your edge becomes (arbitraging). What are your thoughts?