I wanted to start a thread here, partly to introduce myself to the group, and to submit a few thoughts and questions I have about trading. I've been lurking here a while, but almost never post. It seems like three things are necessary to make money trading in the markets. So many of the threads here are directly related in one way or another to one of these three points. 1. Find an method that gives you an edge. 2. Follow the method precisely, and have the faith to stick with it through drawdowns. 3. Size your bets so that there's little chance of going broke if you're wrong. My experience is in a related field (gambling) where steps 1-3 apply. But in my case, the edge can be mathematically determined with 100% certainty. Cards and dice, while random, follow the rules of the game and can be exploited. Unfortunately, it's not a ATM machine, as eventually you won't be allowed to play anymore. Hence, my interest in the markets, cause you can bet as much as you want, and can't be thrown out. I've mastered these steps in my own business, and I think #2-3 are directly transferable to trading in the markets. But I keep coming back to, how do I find an edge? Finding a method that I can believe in seems to be the problem. There are so many systems and so many methods pushed around that it is almost overwhelming. And short-term success doesn't necessarily mean the trader had an edge, they could have just been lucky. So how have the successful traders here found a method that works, and how do you know it when you see it? Traveler
Traveler, sorry this is off topic, but... you say that you know about gambling. tell me, can you really ever make money (in the long run) gambling?! with a negative expectancy, i don't see how you could. but then gamblers come along like you and Scientist (ET member) and talk like you can make money. i'm not saying you can't in the short run, but how can you in the long run?! just yesterday i called my friend and he said he was going to some casino. i was like, dude, why?! after knowing about the markets, i'd be almost ashamed to let myself gamble in a casino. MAYBE a very small amount just for fun and not expecting to win anything. i don't know much at all about card games/casino games, however, this is the only thing i can think of: pick something that has the least worst expectancy. start small on purpose so that you have enough money to bet larger and larger as you lose (as you probably will). quit as soon as you are ahead. for the record, i don't even know if what i just said would work. it just seems like maybe it would.
You're kidding right? Roulette --> negative expectancy Blackjack,Poker --> positive expectancy under the right circumstances. See Rounder. Terrific movie. Matt Damon
It wasn't my intent to make this a thread about gambling, but I can assure you there are methods to gain an edge playing at casinos. Not all the games are negative expectation, and the casinos make mistakes sometimes. Just ask Blair Hull. Or the Brights. Your method won't work. Unless you're only playing games that return 100% plus. But I'm glad you mentioned that strategy, as I think some traders essentially do that. They jump on a stock for some reason, with a trailing stop for risk management. Unless their method for timing the trades has an edge, they're doomed to just give back all the profits eventually. Plus transaction costs and taxes. So, to steer this back to trading, what was your process for finding a method that works, sticking with it, and not going broke trading it? Regards, Traveler
If you can't achieve an edge by learning Technical Analysis, Market Profiling or other methods. You can always try achieveing it through money managemnt. Looking at it from a gambling point of view (not that I would know much about gambling in any case). In the most symplistic way, lets say you are working with a volatile commodity and entering at radom Long or Short. Hypothetically you have a 50% to be right on the direction it is going. On a 1:2 or 1:3 ratio stop-loss/target with moving the stop-loss to b/e once it's going your way you should be good, this is of course hypothetically. There is much more to it, as you probably know. TMTrader
I used to work in a casino as a croupier (still work part-time aside from my trading) and I can asure you there's : NO WAY ANY CASINO IN THE WORLD WILL EXPLOIT A GAME IN WHICH A PLAYER HAS A LONG TERM EDGE. For example : People start playing red after 20 times black because they think (and are mathematicly correct) that in the long run, black and red will be an even chance. BUT : Every time the croupier spinns a ball, there's the same chance for black or red. (depends on the nr of zero's on the wheel) I know, your talking about black jack, most casino's have already started to work with shuffle machines which constant shuffle the cards used in each hand, starting after each hand. If there's any casino left in the world which exploits blackjack and don't uses a shuffle machine and uses ALL cards (or at least 5/6th of them) than there can be a small edge for the player but only if he/she exploits this right he/she can win in the long run. The casino's that work this way, are not the casino's I want to RISK money because the casino knows this edge, think about it.
while i was on a plane to vegas last december, i had a nice conversation with a professional gambler from taiwan. according to him if u were disciplined enough and with a good brain for mathematics u can do it for a living. kind of just like trading....