The Do-it-yourself Trader
I, like many of you when I first started out exploring the possibility of futures trading and forex markets searched far and wide for a great system. However, with the internet churning along at an incredible rate and the proliferation of free, easy access information I quickly formed the opinion that there was enough information on the net to really get me started in futures and I could just teach myself!
After all I had conquered options trading so why would I have any trouble adding futures trading to my list of achievements.wrong!!
Firstly, Im not sure why I arrived at my initial decision to Do-It-Myself. Sure DIY improvement shows and stores were popping up everywhere; however DIY trading was a massive step.could it have been a little over-confidence!
I had spend a lot of money properly educating myself on how to trade options and had a coach and mentor but for the futures and forex markets I believed I could cover that!
In the first month I did reasonably well with a good solid start and was enjoying the intraday action. However, overconfidence quickly got the better of me and the next 2 months were a massive reality check. Not to mention the personal comments I was getting from my wife after sharing my initial success, the losses started to chip away at my confidence and self belief because it was every day.a whole new animal than trading options were I was able to plan my move like a slow chess game. I definitely enjoyed the time to sit and strategize. A luxury not afforded to you in the intraday arena.
So three months in and down plenty on my starting test accountas I decided to go with real money and it was time for a review of my futures trading:
Mistakes:
1.Searched on the net and downloaded an number of free trading e-books;
2.Purchased a cheat system utilizing multiple timeframes and indicators which were complex, and difficult to read in real-time.
3.No coaching or mentoring and no accountability;
4.Traded during news and through lunch as well poor discipline;
5.Spend 4-6 hours a day watching the market for opportunities waste of time;
6.Told my wife about my initial success and then she had an emotional attachment to every days trading as she rode the emotional ups and downs with me.that was a very big mistake!
7.Changing my plan 2-3 times with in the 2 months;
8.Not backtesting the system properly gave me very little confidence when I had a losing streak;
9.Starting with Real capital;
10.No daily circuit breaker;
11.Overleveraging;
12.No positing sizing strategy.
As you can clearly see my foray into the futures trading was unplanned, undisciplined, uniformed, under prepared and amateurish to say the least. Reality Check!!
Unfortunately many, if not most people starting their trading career start this way and are easy prey for Professional Traders. Everyone has to start somewhere but why waste your time as a DIY trading when the option is to approach the venture as a true professional because they are the only ones making money.
We need to make one thing perfectly clear. Online retail traders, you and I will not be taking money off professional traders. To put this into perspective for you I have included an article for Larry Levins insight into Goldman Sachs which is a interesting look at the performance of Institutional Traders.
Stock market probabilities differ somewhat. Insight improves the odds. Lots of insight improves the odds greatlyover a long-term timeframe. But over the short-term, insight provides a very limited and unreliable benefit. The markets can stay irrational, John Maynard Keynes famously observed, for much longer than you can stay solvent.
That said, successful stock market traders tend to win about 55% to 60% of the time. This win percentage is not so different from that of successful sports bettors. Again, these probabilities make sense. If you possess relevant insights into the markets you are trading be they S&P 500 futures or professional football games you can improve your odds of successa little. Chance and pure, dumb luck still play a prominent roleunless you happen to be a trader at Goldman Sachs. For reasons that neither logic nor probabilities can explain, Goldmans trading desk wins more than 90% of the timeor at least it did during 2009.
The inexplicably successful Wall Street firm lost money on only 19 trading days last year, which means it made money on 244 days out of 263. And Goldman did not simply makesome money, it made lots of money. The firm booked a daily profit of more than $100 million on 131 trading days thats almost ten times the number of $100 million days it booked in 2004.
Even during the rough and tumble days of 2008, Goldman still managed to amass an implausible record of success by booking a daily trading profit 63% of the time and racking up $100 million profits on 90 trading days. A cynical observer could easily deduce that: 1) the level playing field on which Goldman purports to operate is as crooked as can be and that; 2) Goldmans miraculous trading success in 2009 may have something to do with the disappearance and/or emasculation of former competitors like Bear Stearns, Lehman Bros. and Merrill Lynch.
Traders are supposed to live by their wits, making judicious bets on the market, observes financial commentator, Sean Paul Kelley. Good traders who dont have inside information tend to win about 55% of the time and lose money 45% of the time, the difference being their profit resulting from their trading acumen.
Goldman Sachs doesnt work this way, says Kelley. They have bright people no doubt, and somewhere on the trading floor these people on occasion make good and bad judgment calls. From what it looks like, however, their traders are benefiting from two advantages: information not available to the market, and muscle. These two things give the firm an edge that almost guarantees substantial trading profits quarter after quarter.
The information part comes from a variety of sources, Kelley continues. Weve seen the scandal over High Frequency Trading, where Goldman and other firms have computers positioned at the New York Stock Exchange, getting information on trades a millisecond before they are posted publicly. Goldman sees where the market is going second by second, positions itself for very short term profits, and in effect extracts a tax on trading by individual investors and mutual funds. Goldman Sachs is the biggest player in this business For credit products, mortgage securities, and equity derivatives, Goldman Sachs extracts similar information from its clients interested in buying or selling these products
None of these information sources or uses are illegal at this point, Kelley concludes, but this is hardly the profile of your typical day-trader pitting his wits against the fickleness of the market; this is the profile of a hedge fund with critical information and size advantages, using them to maximize profit.
As Kelley correctly observes, none of Goldmans known trading practices are illegal. On the other hand, legal trading practices have never before generated such a sustained record of improbable success. So just maybe, Goldmans brilliant trading record emerges from something other than gee-whiz computer programs and the brilliant instincts of trading jocks.
Remember, Goldman generates its trading results from the activities of hundreds of traders, operating in dozens of different financial markets. And yet, somehow, the collective activities of this gun-slinging diaspora produce a daily profit 93% of the time. Thats either very impressive or very illegal.
(Source: Larry Levins : Trading Advantage)
If you would like more information on the Global Market Trader Pro-Trader Mentoring Course please email [email protected]
Have a great day.
Cheers
Shane Fry
GMT Pro-Trader Team.
After all I had conquered options trading so why would I have any trouble adding futures trading to my list of achievements.wrong!!
Firstly, Im not sure why I arrived at my initial decision to Do-It-Myself. Sure DIY improvement shows and stores were popping up everywhere; however DIY trading was a massive step.could it have been a little over-confidence!
I had spend a lot of money properly educating myself on how to trade options and had a coach and mentor but for the futures and forex markets I believed I could cover that!
In the first month I did reasonably well with a good solid start and was enjoying the intraday action. However, overconfidence quickly got the better of me and the next 2 months were a massive reality check. Not to mention the personal comments I was getting from my wife after sharing my initial success, the losses started to chip away at my confidence and self belief because it was every day.a whole new animal than trading options were I was able to plan my move like a slow chess game. I definitely enjoyed the time to sit and strategize. A luxury not afforded to you in the intraday arena.
So three months in and down plenty on my starting test accountas I decided to go with real money and it was time for a review of my futures trading:
Mistakes:
1.Searched on the net and downloaded an number of free trading e-books;
2.Purchased a cheat system utilizing multiple timeframes and indicators which were complex, and difficult to read in real-time.
3.No coaching or mentoring and no accountability;
4.Traded during news and through lunch as well poor discipline;
5.Spend 4-6 hours a day watching the market for opportunities waste of time;
6.Told my wife about my initial success and then she had an emotional attachment to every days trading as she rode the emotional ups and downs with me.that was a very big mistake!
7.Changing my plan 2-3 times with in the 2 months;
8.Not backtesting the system properly gave me very little confidence when I had a losing streak;
9.Starting with Real capital;
10.No daily circuit breaker;
11.Overleveraging;
12.No positing sizing strategy.
As you can clearly see my foray into the futures trading was unplanned, undisciplined, uniformed, under prepared and amateurish to say the least. Reality Check!!
Unfortunately many, if not most people starting their trading career start this way and are easy prey for Professional Traders. Everyone has to start somewhere but why waste your time as a DIY trading when the option is to approach the venture as a true professional because they are the only ones making money.
We need to make one thing perfectly clear. Online retail traders, you and I will not be taking money off professional traders. To put this into perspective for you I have included an article for Larry Levins insight into Goldman Sachs which is a interesting look at the performance of Institutional Traders.
Stock market probabilities differ somewhat. Insight improves the odds. Lots of insight improves the odds greatlyover a long-term timeframe. But over the short-term, insight provides a very limited and unreliable benefit. The markets can stay irrational, John Maynard Keynes famously observed, for much longer than you can stay solvent.
That said, successful stock market traders tend to win about 55% to 60% of the time. This win percentage is not so different from that of successful sports bettors. Again, these probabilities make sense. If you possess relevant insights into the markets you are trading be they S&P 500 futures or professional football games you can improve your odds of successa little. Chance and pure, dumb luck still play a prominent roleunless you happen to be a trader at Goldman Sachs. For reasons that neither logic nor probabilities can explain, Goldmans trading desk wins more than 90% of the timeor at least it did during 2009.
The inexplicably successful Wall Street firm lost money on only 19 trading days last year, which means it made money on 244 days out of 263. And Goldman did not simply makesome money, it made lots of money. The firm booked a daily profit of more than $100 million on 131 trading days thats almost ten times the number of $100 million days it booked in 2004.
Even during the rough and tumble days of 2008, Goldman still managed to amass an implausible record of success by booking a daily trading profit 63% of the time and racking up $100 million profits on 90 trading days. A cynical observer could easily deduce that: 1) the level playing field on which Goldman purports to operate is as crooked as can be and that; 2) Goldmans miraculous trading success in 2009 may have something to do with the disappearance and/or emasculation of former competitors like Bear Stearns, Lehman Bros. and Merrill Lynch.
Traders are supposed to live by their wits, making judicious bets on the market, observes financial commentator, Sean Paul Kelley. Good traders who dont have inside information tend to win about 55% of the time and lose money 45% of the time, the difference being their profit resulting from their trading acumen.
Goldman Sachs doesnt work this way, says Kelley. They have bright people no doubt, and somewhere on the trading floor these people on occasion make good and bad judgment calls. From what it looks like, however, their traders are benefiting from two advantages: information not available to the market, and muscle. These two things give the firm an edge that almost guarantees substantial trading profits quarter after quarter.
The information part comes from a variety of sources, Kelley continues. Weve seen the scandal over High Frequency Trading, where Goldman and other firms have computers positioned at the New York Stock Exchange, getting information on trades a millisecond before they are posted publicly. Goldman sees where the market is going second by second, positions itself for very short term profits, and in effect extracts a tax on trading by individual investors and mutual funds. Goldman Sachs is the biggest player in this business For credit products, mortgage securities, and equity derivatives, Goldman Sachs extracts similar information from its clients interested in buying or selling these products
None of these information sources or uses are illegal at this point, Kelley concludes, but this is hardly the profile of your typical day-trader pitting his wits against the fickleness of the market; this is the profile of a hedge fund with critical information and size advantages, using them to maximize profit.
As Kelley correctly observes, none of Goldmans known trading practices are illegal. On the other hand, legal trading practices have never before generated such a sustained record of improbable success. So just maybe, Goldmans brilliant trading record emerges from something other than gee-whiz computer programs and the brilliant instincts of trading jocks.
Remember, Goldman generates its trading results from the activities of hundreds of traders, operating in dozens of different financial markets. And yet, somehow, the collective activities of this gun-slinging diaspora produce a daily profit 93% of the time. Thats either very impressive or very illegal.
(Source: Larry Levins : Trading Advantage)
If you would like more information on the Global Market Trader Pro-Trader Mentoring Course please email [email protected]
Have a great day.
Cheers
Shane Fry
GMT Pro-Trader Team.
Source...