Posted by Mark on December 1, 2014 at 07:01 | Last modified: May 1, 2015 09:11
In the last post, I presented an excerpt from Louis Horkan Jr. seen on the About.com website a couple years ago. Today I will comment on that based on my personal experience.
Unlike Horkan Jr., I am not a day trader. What I do is better described as position trading. I prefer to check the markets once per day.
Having said that, I trade full-time for a living and I treat my work as I would any other business. I track my hours. I work a regular schedule. I work mainly from my home office as opposed to “anywhere [there is] an Internet connection.” No coffee shops unless I’m meeting another trader(s) after market hours to discuss strategy. No beaches (although I’m not in Florida or California). No trading at gyms.
Also pertaining to business is wardrobe. I work at home but I do not lounge around in shorts and flip flops. In the warmer months, I am usually barefoot! In the cooler months: sweats. I’ve heard a theory that when working routinely from home, a way to prevent losing personal “edge” is to dress the part of a professional. I think button-down shirts, slacks, and even a tie can psychologically benefit some people. In my case, I do not currently have a need to do so but I keep it in mind.
I agree that many people attempt trading as a business without an adequate understanding of capitalization, in particular. I strongly believe a full-time trader needs savings on which to live until profits are consistent enough to bear the burden of ongoing living expenses. When trading profits are required to pay the bills, pressure to perform can be substantial. This stress is enough to crack someone with inadequate experience who still has much to learn about the craft.
I will give some concluding thoughts in my next post.
Categories: Wisdom | | Permalink
Posted by Mark on November 25, 2014 at 06:52 | Last modified: May 1, 2015 08:26
A couple years ago, I read an article by Louis Horkan Jr. on daytrading at About.com. I found the article interesting enough to cut and paste it as a blog idea, which I will present today.
He wrote:
> The allure of day trading is powerful to most people. Who isn’t drawn
> to the notion of trading stocks, crude oil or the Euro and making good
> money, setting your own schedule and working from anywhere you can
> establish an Internet connection, be it the beach, the gym, Starbucks
> or trading from home while lounging in shorts and flip flops?
>
> Sound almost too good to be true? That’s because it is too good to be
> true and the romantic or cool notions that people harbor about trading
> for a living are far afield of reality. While that sounds pessimistic,
> it is a harsh reality that must be dealt with up front.
>
> Truth is that for the vast majority of people, trading for a living
> (day trading) and dealing with trading risk makes absolutely no
> sense – they have no business doing so. It’s not about being smart
> enough or having nerves of steel to stare down some imaginary
> opponent or any of the other preconceived ideas that abound.
>
> No, the reality is that most people wouldn’t enjoy trading, nor
> would they ever start doing so daily if they understood what it was
> really all about. Yet most people who do decide to trade simply
> jump in before ever learning what is entailed or what it takes
> for success – let alone knowing whether they’d actually want to do
> this type of work.
>
> Such an approach is doomed to failure from the very start – much
> akin to starting a business you know nothing about, with a high
> degree of likelihood you’ll hate the actual work once you’re
> knee-deep in the endeavor. Most people would run from such a
> situation when put in that perspective.
Some further thoughts in my next post.
Categories: Wisdom | | Permalink
Posted by Mark on September 26, 2013 at 06:11 | Last modified: January 24, 2014 08:42
Today I will wrap up my analysis of some apparently sage advice recently offered by an option trader.
Continuing from part 6:
“On this trade, I think it’s important to really understand how [the market] works so you can see the graph and see how these candles affect the trade.”
How the market works? A strong bullish (bearish) candle means positive (negative) PnL for a long (short) trade–is that what he means? This tells me absolutely nothing new. “Master of the obvious” comes to mind.
“You’ll see patterns among the stocks.”
Will those patterns be evident at the hard right edge of the chart where all live trading occurs or only in retrospect? Patterns are always evident in retrospect but not a single person has ever taken a dollar from the markets by trading this way [backtesting]. Making this claim implies the patterns are available at the hard right edge but it would require an extensive research effort to validate that claim. From what I have seen in the markets thus far, I wouldn’t believe it for a second.
In this blog series we studied a clip of stock market wisdom that sounded natural, good, and useful. All it took was some old-fashioned thinking in order to realize what initially seemed bright and shiny was more akin to coal in a holiday stocking.
In the world of trading, there are a lot of teachers and business people willing to tell you how to make consistent profits. Before you pay anything for such “sage advice,” though, I strongly encourage you to get a free sample and subject it to the rigors of critical thinking. This can provide a sneak peek into whether any of it has any merit at all.
Categories: optionScam.com, Wisdom | | Permalink
Posted by Mark on September 23, 2013 at 07:53 | Last modified: January 24, 2014 08:42
In this series, I am challenging some “sage advice” offered by an option trader. I left off with words about a nonexistent Holy Grail.
The trader continued:
“…because I know how the market is moving around when I’m getting my trades on and I know when to just… hold off… doing my adjustment for 5, 10, or 15 minutes to see—you know, typically it’ll reverse here so I’ll wait and see and maybe get a better price.”
This is similar to what he said about “decent entries.” Getting a better price implies saving money on a buy or making more money on a sell. If he can do that on most trades then he can make boatloads of money, which gives this innocent phrase heavy persuasive power.
This quote also implies profitable trading, which once again boosts persuasion in a backward, illogical manner. If his trades fare poorly then he’s probably not going to think anything is a “better” or good price and he’s not going to think any of the entries are “decent.” If his trades fare poorly then he would not encourage trading just one market regularly, either. Yet, none of “getting a better or good price,” “decent entries,” or “trading one market regularly” in and of itself makes for a consistently profitable trading strategy. Why include them as trading advice for those looking to succeed in this endeavor?
Put another way, is this guy trading successfully because of his “sage advice” or is his sage advice relevant only because he’s had a flurry of winning trades? We can’t tell and surely nobody asks because on the surface, his advice sounds solid.
Categories: optionScam.com, Wisdom | | Permalink
Posted by Mark on September 20, 2013 at 09:49 | Last modified: January 24, 2014 08:42
In this series, I am breaking down a snippet of supposed “trader wisdom.”
In picking up where I left off in part 4, the trader continues:
“I sit here in front of the screens all the time watching the 5-minute bars on all the futures…”
He’s got multiple screens going, 5-minute charts, futures… like WOW! He certainly sounds to know what he’s talking about. The newer I am to trading and/or the less experienced I am with taking losses, the more apt I will be to believe him.
Heck, he might even be this trading G-d who I randomly found via Google search:
There are his multiple screens to watch all those intraday futures charts so he must be making millions of dollars.
“…and I’ve gotten very comfortable now with my trades because I kinda know… I get decent entry points…”
The Holy Grail has a very slippery slope and can be described in many ways. One piece of trader wisdom I do believe is that the Holy Grail does not exist. Logic therefore dictates that anything describing the Holy Grail does not exist either. Making millions of dollars easily and quickly through trading: Holy Grail and nonexistent. What about getting “decent entry points?” If the entry point is decent because it is followed by a successful trade then yes, this could be the Holy Grail. By claiming decent entry points the trader implies that on average his trades are profitable. Consistent, positive returns are what any trader seeks in order to be successful, after all.
I will continue to scrutinize said “trader wisdom” in the next post.
Categories: optionScam.com, Wisdom | | Permalink
Posted by Mark on September 17, 2013 at 14:04 | Last modified: January 24, 2014 08:42
Having lain the foundation for critical thinking, I will now begin to analyze the trader “wisdom” as presented in part 1.
The trader begins:
“I think one of the most important things X teaches is trading the same market over and over and over again.”
This suggests I should not trade multiple markets sporadically. I find this interesting because I have often debated whether I should have a watch list approach to trading where I limit myself to a specific group of markets to be analyzed and traded all the time or whether I should use a scanning approach to trade any markets that meet a specified set of criteria. People line both sides of the aisle on this issue. There is no right answer.
“You get to the point where you don’t need any indicators. You really understand how the market breathes.”
That sounds encouraging! This also sounds very meaningful and even, dare I say, intimate. Good persuasive technique.
“You get really comfortable [and really start to think] ‘okay, I know what I’m doing today.’ It’s not that you can predict the future with it but you get comfortable with how [the market] reacts.”
The unspoken premise here is if I consistently make money trading it. Surely if I am losing then I will not feel comfortable or very knowledgeable. If my losses are great enough then I won’t think I know a damn thing and I might even decide to throw in the towel altogether! In other words, by phrasing the advice in this way, he suggests you will make money consistently because that is the only way his statement will be true. This is good persuasive technique as well.
Are you getting the gist of where I’m going with all this? I will continue with my next post.
Categories: optionScam.com, Wisdom | | Permalink
Posted by Mark on September 12, 2013 at 07:22 | Last modified: January 24, 2014 08:41
In my last post I began to lay some foundation for critical thinking. This is useful to evaluate others’ claims in the financial industry or otherwise.
Television has dramatized countless times over the decades how you often cannot believe what people say. Summed together, CSI: Crime Scene Investigation, CSI: Miami, and CSI: New York have entertained audiences to over 740 television episodes and not a single episode has failed to feature a suspect who did not lie. The same may be said for patients of Gregory House in 177 episodes of House, M.D. Pretty Little Liars features continuous deceit as does [probably] any and every soap opera ever to appear on TV. If people in general can’t be trusted then claims about success (read: marketing) certainly cannot be accepted without intense scrutiny.
This is valid reason why you probably should not heed others’ advice in financial matters. “Others’ advice” may include premium investment advisories, investment/trading education packages or “mentorships,” and for-profit trading rooms (if you are paying then they are profiting). The ultimate arbiter is the PnL and regardless of how well they organize a presentation, you can never verify its true authenticity. Visiting face-to-face with the person and holding in your hand monthly brokerage statements with account numbers displayed tempts true belief but in the financial industry this never, ever happens. More often, you talk to people over the phone, e-mail via the Internet, and see or hear alleged performance numbers. Never do you personally witness a signed tax return complete with SSN.
This simple observation about human nature gives me tremendous latitude to say things that sound very logical on the surface. If I present these words with confidence and appear to have a following of others then I may even have great persuasive power. An apparent following may include positive reviews on Amazon.com, virtual participants appearing to be attending my webinars, students I claim to be enrolled in my education program, or my face frequenting financial media such as theStreet.com articles or CNBC segments. When you believe me then you will pay me because you hope I can make you rich.
In too many cases, all you will end up doing is allowing me to live criminally.
Categories: optionScam.com, Wisdom | | Permalink
Posted by Mark on September 9, 2013 at 07:40 | Last modified: January 24, 2014 08:41
A few days ago, I heard a trader addressing a group. By the tone of his voice and the superficial meaning of his words, this was certainly sage advice. Today I will begin to lay the framework of critical thinking that should always be employed to evaluate what people say in financial circles [or anywhere else, perhaps].
The ultimate arbiter on all things right or wrong about financial markets is the profit/loss (PnL). I can say whatever I want about this stock or that market, this pattern or that valuation, this metric or that performance statistic. If I make money for myself or for others then I will stay in the game. If I lose money then I will eventually go bust and you will hear me no more.
Unfortunately for those listening, you can never know what my true PnL is. I can tell you that I’ve made hundreds of millions of dollars in stocks. Will you believe me? In an industry sometimes suspected of snake oil, chicanery, and egregious fraud driven by human greed, should you believe me?
If there’s any possible way that I might profit now or later from your belief then you probably should not believe me.
Mull that over for a couple days and I will continue to develop this thesis in my next post.
Categories: optionScam.com, Wisdom | | Permalink
Posted by Mark on September 6, 2013 at 02:47 | Last modified: January 24, 2014 08:41
The last couple of posts elucidated my general belief that the financial industry is a comprehensive scam. I mentioned chipping away at a foundation suggesting that once the evidence accumulates, the totality of deception will be overwhelming beyond any reasonable doubt.
Today I heard something that had the veneer of trading wisdom. You know, the old adages that seemingly light the way to the Holy Grail… common mistakes that I am always guilty of making when I lose significant money…
Here is what I heard:
“I think one of the most important things X teaches is trading the same market over and over and over again. You get to the point where you don’t need any indicators. You really understand how the market breathes. You get really comfortable [and really start to think] ‘okay, I know what I’m doing today.’ It’s not that you can predict the future with it but you get comfortable with how [the market] reacts. I sit here in front of the screens all the time watching the 5-minute bars on all the futures and I’ve gotten very comfortable with my trades because I kinda know… I get decent entry points because I know how the market is moving around when I’m getting my trades on and I know when to just… hold off… doing my adjustment for 5, 10, or 15 minutes to see—you know, typically it’ll reverse here so I’ll wait and see and maybe get a better price. On this trade, I think it’s important to really understand how [the market] works so you can see the graph and see how these candles affect the trade. You’ll see patterns among the stocks.”
Does that sound like good, reasonable advice coming from a professional trader? Words to live by?
I’ll begin my analysis in the next post.
Categories: optionScam.com, Wisdom | | Permalink
Posted by Mark on May 17, 2012 at 06:35 | Last modified: May 17, 2012 06:35
“After the recent major losses at quantitative hedge funds, many people have started to wonder if quantitative trading is viable in the long term. Though the talk of the demise of quantitative strategies appears to be premature at this point, it is still an important question from the perspective of an independent trader. Once you have automated everything and your equity is growing exponentially, can you just sit back, relax, and enjoy your wealth? Unfortunately, experience tells us that strategies do lose their potency over time as more traders catch on to them. It takes ongoing research to supply you with new strategies.
There are always upheavals and major regime changes that may occur once every decade but will nevertheless cause sudden deaths to certain strategies. As with any commercial endeavor, a period of rapid growth will inevitably be followed by the steady if unspectacular returns of a mature business. As long as financial markets demand instant liquidity, however, there will always be a profitable niche for quantitative trading.”
–From Quantitative Trading (2009) by Ernest Chan
Categories: System Development, Wisdom | | Permalink