Impossible to make a successful career trading

Starting a new thread at the recommendation of the moderator.

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Thank you for responding mmartinez and I think I am starting to understand what it is you're saying (correct me if I'm wrong) that everything resorts back to its norm.

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Norm isn't a good word. It's much more accurate to say that the "norm" changes unpredictably so that no one can ever stay on top of it. This is why financial people - and traders especially - keep getting caught unawares and lose all their money overnight.

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But aren't you omitting the "human equation"?

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Not sure what you mean by that, you'll have to elaborate.

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To illustrate this I would like to focus on the "80/20 rule" as applied to 20% of the people doing 80% of the work. The 20% seem to rise ahead of the others in which ever field they choose not based on random occurence, luck or coin toss, but rather their tenacity, will power, commitment, determination.

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Yes.

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Should we not apply this same rule regarding Traders? Yes the playing field of trading may differ from the normal job market but wouldn't the outcome be the same?

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Yes. The Traders fall into the 80% category. Here's why:

The people who are at the top are the so-called smart money. They aren't smart because they trade (which they don't). They're smart because they are at the source of the money, they created the rules that dictate the movement of capital, they are the financial world's brick and mortar, they are the ones with the capital.

A portion of that capital makes it way onto the Exchanges. By the time it does that, it's already been through the ringer, it's done, old, tired and useless. Its purpose was achieved before it hit the Exchange floor. At that point, the originators of that capital don't care what happens to it. From there on out, it's random noise as it is traded on a floating market.

Traders are not and cannot be the "smart money" because traders are looking at the end result - the floating market. Traders are blind to the impetus behind it. They cannot possibly know what the original purpose of that money was. They only see the end result: a stock, bond, or some sort of derivative.

Think of why a stock exists. It exists because a company's owners need to raise capital. So they sold a bunch of stuff (stock). They got their money up front. After that, they don't care what happens to the stock. Why, because they already got the money they needed.

In the world of finance, being a trader is the last place you want to be.

I guess you should phone Warren Buffet and all his investors and tell him to close out their accounts.


Here's a guy who has been "lucky" for over 20 years.

"I support myself day trading the eminis.. I’ve been making my living day trading for more than two decades. Most of it has been day trading futures online. "

http://tradestalker.com/online-futures-trading.htm

Warren Buffet buys companies. Trading is not the thrust of his business.

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Originally posted by bakrob99

I guess you should phone Warren Buffet and all his investors and tell him to close out their accounts.

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It's Warrens INVESTORS (who are trading on his knowledge) who have and are the winners.

Buying a single stock and holding it for several years is not trading. It's placing a bet on a single stock. And if you had done that just in the past couple of years with Berkshire, you would not be a winner. And we're back to square 1.

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Originally posted by bakrob99

It's Warrens INVESTORS (who are trading on his knowledge) who have and are the winners.

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Negative Progressive Trading Money Management.

If markets are random there is still a way with enough capital to make a living via day trading with good money management. Many ways to manage your trades. But first we need a common trigger that will always stay the same and spit out buy/sell/short/cover signals, so lets say we use the parabolic SAR's and since it only makes money when the market trends and the market only trends in the ES 30% out of the month, that means at best this system is only 30% correct and 70% wrong. One could in theory, all though this is not a good idea if you do not have the bank roll and stones...you could double on the losers and go back flat on the winners and every winner would cancel out the loser, every time. And one would make a profit from the market with even a 30% profitable system. But if I combine SAR's (trend tool) with my RSI (counter trend) which is the other 70% of the time but will get bad readings in the trending market. One could combine the 2 together and with basic understating of vix in the ranges of the ES of how the market will contract and then expand, you can trade the SAR on the expansion and the RSI on the contraction. Thus raising your success to at least 55-65% and then with the proper money mang. would thus "given enough" money would cancel all losers. And show a profit after every loser no matter how often a loser comes. That would be one way to beat the market and a hard one at that, but there are easier ways to do it and its done weekly.

And better yet all markets according to you (no sarcasm puns) would revert to mean 50/50 which given this system would factor out <<<<ALL>>>> losers with the next winner. So it doesn't matter if the market is random or not a trader using this will win.

I certainly looked at that in my attemtps to develop a trading system. The problem with a 55-65% win rate is that unexpected deviations in market wipe out your profit. The 5-15% profit easily becomes a drawdown when you start constantly getting stopped out when your trading method ceases to work. A side issue is that unless you cut your costs by getting a membership on the Exchange, the transaction fees can wipe out that profit margin. But this is never an issue if your trading method can "consistently" produce a profit margin, because you get around the fees by simply using more leverage.

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Originally posted by CharterJoe

Negative Progressive Trading Money Management.

If markets are random there is still a way with enough capital to make a living via day trading with good money management. Many ways to manage your trades. But first we need a common trigger that will always stay the same and spit out buy/sell/short/cover signals, so lets say we use the parabolic SAR's and since it only makes money when the market trends and the market only trends in the ES 30% out of the month, that means at best this system is only 30% correct and 70% wrong. One could in theory, all though this is not a good idea if you do not have the bank roll and stones...you could double on the losers and go back flat on the winners and every winner would cancel out the loser, every time. And one would make a profit from the market with even a 30% profitable system. But if I combine SAR's (trend tool) with my RSI (counter trend) which is the other 70% of the time but will get bad readings in the trending market. One could combine the 2 together and with basic understating of vix in the ranges of the ES of how the market will contract and then expand, you can trade the SAR on the expansion and the RSI on the contraction. Thus raising your success to at least 55-65% and then with the proper money mang. would thus "given enough" money would cancel all losers. And show a profit after every loser no matter how often a loser comes. That would be one way to beat the market and a hard one at that, but there are easier ways to do it and its done weekly.

And better yet all markets according to you (no sarcasm puns) would revert to mean 50/50 which given this system would factor out <<<<ALL>>>> losers with the next winner. So it doesn't matter if the market is random or not a trader using this will win.

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What I am saying is with the Negative Progressive Trading Money Management, you could make money in a system thats 47%-48% right. And when you get stopped out you simply trade dbl the amount. The problem of course is you would need a large amount of $$$. Lets say you have 250,000 and want to trade stocks (commissions with trade station are almost nothing 1 dollar per 100) 1,000,000 x day trading margin of 4 to 1 you would have 4 million $ to work with ( I know this is high but its an example of how one could make money). So lets take F and we will take a trade in them when first 15min of the day's range is broken, if it goes up then long and a stop of 10 cent and a profit of 10 cent. You start with 500 shares and double every time the market hands you a lose. This is a low return on the money but it will suffice for a living since every signal winner after a string of losers will pay for all loses and commissions and be a profit, so basically the system is only counting profits, the loses are whipped off the board

This won't work with a "large amount " of $$$, it will only work with an infinite amount of $$$. Doubling down only works if you have a bottomless pit of money. It fails if you have anything < infinity.
The easy way to see this is to run a coin toss simulation on the computer using your trading strategy below. No matter how much money you start out with, it will get wiped out.

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Originally posted by CharterJoe

What I am saying is with the Negative Progressive Trading Money Management, you could make money in a system thats 47%-48% right. And when you get stopped out you simply trade dbl the amount. The problem of course is you would need a large amount of $$$. Lets say you have 250,000 and want to trade stocks (commissions with trade station are almost nothing 1 dollar per 100) 1,000,000 x day trading margin of 4 to 1 you would have 4 million $ to work with ( I know this is high but its an example of how one could make money). So lets take F and we will take a trade in them when first 15min of the day's range is broken, if it goes up then long and a stop of 10 cent and a profit of 10 cent. You start with 500 shares and double every time the market hands you a lose. This is a low return on the money but it will suffice for a living since every signal winner after a string of losers will pay for all loses and commissions and be a profit, so basically the system is only counting profits, the loses are whipped off the board

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But it works with "IF" you have an unlimited amount of money which is the point to all my posts in this thread. Using the rules of logic that Jim pointed out it proves your premise that its "Impossible to make a successful career trading" as false. I was just proving it is possible, I am not in no ways endorsing this although I do it on occasion.

mmartinez said....

The easy way to see this is to run a coin toss simulation on the computer using your trading strategy below. No matter how much money you start out with, it will get wiped out.

Will not, prove it with your results. Given enough money this will work into infinity...You cannot just say things that are false with no "proof" I say it is profitable, prove me wrong. Lets me and you start with 2g's a piece and start with 1$ a flip and get a third party to flip and I am sure I will end up with all the money even though over time the toss will revert to mean 50/50 over enough tosses. If you are right then you will end up with a 100% gain on your money.....and document it here on this site for all to see?

The same argument can be made for starting a business. Just a any regular business, not a trading business. How many are started every year? How many fail in the 1st year, 2 years, 5 years?

I don't know the number but it is a very high percentage >75%.

Of the ones that continue doing business, how many are highly profitable. That's even less of a percentage.

So people that want to try and say you can't do it in trading and if you do its all luck.....well, that same exact statement applies to starting any business. I started and ran a successful business, looking back so many things came down to timing and luck. Ask any successful business person and I'm sure they will agree.

Just like poker. Skill only gets you so far and puts you in a position to get lucky. You still have to get lucky to win. But the more skill you have the more your odds of getting lucky increase are.

I have pondered this topic quite extensively. Pretty much after most losing days. After my head gets clear, I always come back to the same thought.......Isn't this the same as running a business. Every day can't be good or great. There are plenty of bad days. Running a business....somedays you lose valuable employee....how much does that cost??? some days you lose sales deals....how much does that cost??? Some days you lose customers....how much does that cost???

So just like anything else that is worth doing. It's hard and can't be a straight line up. There is always a competing force that acts as resistance.