A future business

Anyone interested in discussing the following further with me?

I’m a strong believer that the premier traders of the future will be the ‘Researcher Traders’, those who devote as much time to research as actual trading. Research can take many forms, but I would class it as the exploration into all forms of trade application, concentrating on your method and the implementation of that method, within the changing markets of today and tomorrow.

But you have to start with a solid method. And a solid method must first deal with the fundamental understanding of how markets work and trade, and also how the market participants view this price action. Whether you use technicals to trade or some other method, I’d argue that without this full understanding of how markets work you’re generally fighting an up-hill battle. A good example of this would be to look at the price action that is the foundation of any technical indicator. One may be an expert on the indicator but might not have taken the time or effort to fully understand the underlying price action behind it. Therefore in my opinion, the true value of the indicator is diluted. In the recent thread on ‘Simplicity’ Girlpower seems to be getting good results by firstly understanding the market and then using technicals as a by-product to her trading process, not the other way around. Doing it the other way around is the trap that most people fall into, myself included when I first became interested in trading.

One must surely be able to argue that with the advent of the pc-trader/system trader, the actual market price for many has become an almost secondary concern to the indictors which are ultimately derived from it. Is it possible to build any good business without firm foundations? Unlikely.

If you could take a poll of the traders on this board that are trading professionally (whether for themselves or companies), and who have been making solid returns for a number of years, I’d say that they would all have two common traits. Firstly this understanding of how markets trade and function and secondly – they have learnt to view the markets not just in their eyes, but also in the eyes of the general market participants. It’s not really important initially whether they’re long or short but whether the market is long/short, and then capitalising on this fact with their individual trading methods. This again is something very subtle and very very easy to miss. A good analogy of this would be if you were betting on Miss World. You may think that Miss X is the most beautiful creature that you’ve ever seen, and is sure to win. But before you place you money on her, perhaps it’s better to consider how the audience or judges are viewing the girls? In light of this analysis perhaps a safer bet may be on a different girl.

Research into market and trading application will play an even bigger roll in the future as the world and the global trading stage gets smaller and smaller. More information, more markets, more news, more ideas, more profits? (And before somebody posts a smart remark, yes more losses as well) Potentially legendary profits await those who plan for the future. Markets may well change and come and go, but the market participants views and psychology are unlikely to change that much.

As mentioned before, research into actual trading and methods is just one aspect that should be rigorously undertaken. An example of other good research areas would be to look at the world and how money can be made off events. A good place to start would be China and the effect that a bust out in that country would have on the financial world. If you listen to the media, then as they put it, all you’d have to do is place your bets on that country, and get rich within 5-20 years. Personally I doubt it will be that simple. What happens if China becomes a global Enron? Who really understands what’s going there? You want to trust what big business, the investment bankers, the National People’s Congress, or the majority of the media tell you? I’d place some good money on the fact that the Govt is using the citizens money in some form (most likely via their bank deposits) to prop up the state banks/industries. Day traders go on about the ‘feel’ of the market, and that’s crucial to their success. But what about getting the longer term ‘feel’ on the global markets? Imagine the advantage that you’d have over your competitors, even if you never wanted to trade on markets outside your own region. One day, even half a day can make all the difference in this game and therefore solid and logical research will likely hold the key to unlocking some of these legendary profits. I’d much rather trade from my view, via my research on the underlying events than some CNBC anchor or other commentator.

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Does this general research that I’m referring to mean that you’d have to spend ½ your day on the net or reading to be able to piece the jigsaw? Of course not. Incidentally, deciphering information is actually very hard because you have to learn to do it with a totally objectivity, concentrating on not believing what you want, and writing off other areas that don’t agree with you at that time. Trying not to get swayed by this person or that opinion is similar in many ways to reading and understanding the market action. Work like this doesn’t have to be hard, you’ve just got to be logical and be there following events over time, ready to piece them together. Some people might argue that it’s better to sit back and let the news find you, but again you have to train yourself to receive it because the news and information will come in many forms and guises, not all of it through the normal channels.

Charts will often do the talking for you, and again it goes back to having the understanding of how markets work and function. I know it’s always easy after the fact but look at some of the FX charts in the weeks and months preceding the Asian crisis of 1998. I wasn’t viewing trading like I am now so I wasn’t paying attention either, but chances are the first you heard of the crisis was when it hit the financial pages. But as ever, the real money was made in the weeks and months before this time. This is what I mean by getting the longer term feel for the markets by watching the charts and having some sort of idea about how things work. Good professionals often practice what’s called ‘scenario planning’ and they talk about this in ‘Liar’s Poker’. Basically imagining a load of ‘what-ifs’ on a myriad of possible events both large and small. If one of your ideas does plan out then you’ll likely to be fully prepared to take full advantage of it.

Now to my main point. I want to create a small organisation that can accomplish what I’ve been writing about. In my view the main roadblock to this would be that within any group of traders or analysts, the styles of trading or analysing would likely be very different. But what if the group could be taught a method or a market language so that they all look at the foundations of trading from the same view point. But then each adds their own input and style. Similar to everyone speaking English but with different accents. Different people would have different jobs but serving the group as a whole. To me the benefit of this could be outstanding, especially if you look at it from the discipline angle.

I have the tools to try and accomplish this goal.

I’m not selling anything, no systems software or any of that crap, and I only have time to talk with people who are generally interested in what I’ve said and want to accomplish. Think about the future, and what can be created by a super professional organisation that has confidence in their abilities, methods, risk control and view of events .

T

canov11@dbzmail.com

 

I'm impressed by the 1/2 symbol in the middle of your post, Troy. How did you do it? Is it a character on your keyboard?

 

Aaron

I wrote the message in Word and then copy/paste.

I don't know if my Word is set up differently to yours but all I do is enter 1/2 and then press return, the program then converts that to the sign that you see.

If you use Word and it doesn't do it on your copy, then you're going to have to play around with the program to find out how it does it. Sorry but I can't help you on this one.

 

Read "The Predictors". The Prediction Company is still hiring, but you have to be top of your field.....

 

Ah, neat! Yeah, works for me too.

 

Sounds like you are looking for one or more of the following;


Traders(successful, with track record)
Programers
Money(to put it all together)

Which one is it?

If you had all of the above already you would no longer be looking.

If you had or were the first one on the list you would no longer be looking as well.

 

here are 2 more ways to do it.

hold down ALT, type 0189 (using the numbers on the right of your keyboard), release ALT.

if you don't want to remember all these characters, you can go to start/programs/accessories/system tools/character map.

then you just double click the character you want, copy, then paste.

½ § œ Ξ ς ▼

 

dottom,

what an awesome book !! i highly rec. it to those who have not read it, particularly if they are into "system" trades.

best,

suRf

 

I enjoyed the book, especially the parts where these maverick scientists start making newbie trading mistakes even though they've been researching and testing for years!

I also enjoyed it because it gives all of those traders out there interested in complex systems a glimpse that "it works", you simply have to identify your own particular scope. The Prediction Company is still in business and is still hiring if that means anything to you.

What is really intriguing is with today's technology you could replicate exactly what The Prediction Company was doing 10 years ago in a fraction of the time and cost. Of course you don't have the precise formulas and models they are working with, but the ability to use NN's, GA's, and the speed at which models can replicate, validate, and test themselves is way ahead of anything these guys built 10 years ago (and can be automated vs. manually feeding they were doing back then), not to mention the raw processing capacity of your average desktops compared to the Sparc machines they were using. And what about all the pains they went throw to get real-time tick data? (Remember when it snowed they had to climb on the roof to clear off snow from the satellite dish!). We take that for granted today.

What scares me a little is if I'm just a retail trader with some decent NN's model that I trade... i just wonder what the quants at the large hedge funds are doing? Have advances in technology and online brokers level the playing field between retail traders and institutional? Or do the institutional players have just bigger, badder weapons to play the game? Interesting topic...