Can completely discretionary traders every succeed?

Discussion in 'Psychology' started by kiwi_trader, Aug 8, 2005.

What is your trading style?

  1. I'm a purely discretionary trader

    78 vote(s)
    32.9%
  2. I have rules and apply a little intuition

    116 vote(s)
    48.9%
  3. I trade my rules 100%

    20 vote(s)
    8.4%
  4. I'm a systems trader

    23 vote(s)
    9.7%
  1. I think mysticism in its original intention is nothing bad... If correctly understood, it is like home-baked cookies. It is ridiculous because it's pointing out that reality is ridiculous. Its correct intention is trying to get our heads out of the box.

    However pseudo-science on the other hand is entirely different thing.
     
    #31     Aug 9, 2005
  2. personally i've never met a mechanical trader that makes his livingly solely from trading... i've met some discretionary traders that do, and i've associated with hundreds of full-time traders over the last 6 years.

    my guess is once you've watched and traded the market for many years you start learning how to make high probability guesses. It's like anything else in that experience makes you better.
     
    #32     Aug 10, 2005
  3. Hi Brett,

    I have a question about your observations. How do the discretionary traders established stop without any technical price point for reference? Do they just have absolute dollar stop? Or is it more of a feel thing again? Thanks.

    I ask because I found superior entry technique leading to superior uncle points made the job easier for me. Without reference points, I am just lost.

    Regards,
    William
     
    #33     Aug 10, 2005
  4. steenbab

    steenbab

    Great question. It really varies by trader. I'd say, as a whole, it's a function of the number of ticks they're willing to lose (Note: these are generally very short-term traders), but it's not a formal exit technique or formula. I would also say that the reference points for stops (when they are explicit) are not generally technical, at least in the usual sense of technical. A good trader might get out of a long trade, for example, because institutional traders have begun to sell the market or because a correlated market (bonds, oil, a key equity sector) has made a breakout in the wrong direction.

    Your point about the value of reference points strikes me as right on the money. I'm not sure it matters greatly whether the reference point is price based or derived from other market information. The key is knowing when a market is making a normal, expectable movement against your position and when your position is just plain wrong.
     
    #34     Aug 10, 2005
  5. Maverick1

    Maverick1

    Hi Brett

    Read your book, appreciate your efforts. You seem to imply that the successful discretionary traders have a strong tape reading component to their 'discretionary' feel, which makes sense, especially if they are very short term traders. Other heuristics, such as crude, sox, bkx, eur, whatever else gives the guy some confidence are also something I have witnessed in successful traders' actions.

    Yet,this discussion is unfortunately marred by semantics and biases. Take 'mechanical' for example. One can be very mechanical in the reading of tick, trin, breadth indicators etc, and trade 'mechanically' or at least partially, in a mechanical fashion off of those readings. To be more precise, when one describes a trader as 'mechanical', one still has to distinguish whether the 'mechanical' aspect of his trading is rooting in empirical observation (which would be heavily subject to small sample set defects and biases, for ex a momentum trader who no longer sees the wild swings or level II tricks that made him profitable but which have since disappeared), or whether the mechanical aspect is rooted in a firm understanding of microstructure, which is timeless and independent of market cycles.

    Market microstructure is understood by only an extreme minority, who are able to exploit it to 'perpetuity', and this regardless of which cycle we are in, and assuming a threshold of 'tradable volatility', with decent range enough to make the efforts worthwhile. I believe your work on tick, volume, breadth etc is a good step in the exploration of microstructure, necessary but insufficient, (although I'm sure you've done a lot more work than the work that I know of from your book, only one chapter with any details on the Pinball methods), there is a lot more to microstructure than that, as I'm sure you already know and teach.

    Regards
    Maverick




     
    #35     Aug 10, 2005

  6. A concise and accurate post.

    My question is this; why do so many people want to emulate or find out about successful traders instead of becoming one themselves?

    You cannot replicate another person or method of trading no matter how hard you may try, it is impossible to do without having some serious constraints in your trading. Learning about them may help you in your journey but it is no substitute for education and market experience. If you watch markets everyday for ten years and do not develop your own ideas and setups is this business really for you?

    It was a lonesome road for me to get to the point where other people throw money at you b/c you have developed into a consistently profitable trader. Shady characters get wind and you best be able to move quickly....

    You must have contempt for your peers during work hours and still maintain your sanity and humanity and love along with iron will power.


    Just some thoughts .... again, i know that there are many ways to skin a cat but has anyone really skinned a cat in this lifetime?lol

    Good trading to all...
     
    #36     Aug 10, 2005
  7.  
    #37     Aug 10, 2005
  8. i am a very small minnow swimming with levithans but please allow me to voice my humble opine.

    the key is systematic entries and discretionary exits. a system, once the initial order is triggered, MUST allow for changing market conditions minute by minute in order to absorb the max profit from the systematic entry. a systematic exit makes no sense due to the fluctuating dynamics of the market.

    trade well,

    jga
     
    #38     Aug 10, 2005
  9. no... only system traders can succeed!!

    :eek: :eek: :p :D :D :D



    Ice
    :cool:
     
    #39     Aug 10, 2005
  10. Hi Brett,

    Thank you for your clarification. Based on something I heard from Marty Schwartz in the Wall Street Uncut online interview... I made the adjustment that I am willing to exit (stop) when my entry is incorrect regardless whether the trade is correct or not. Personally this somewhat took the pressure off the decision process because I definitely know when my entry is incorrect... much easier than figuring out a trade is correct or not in real time. This only works along with good entry technique (separate from trade logic). It's kinda playing a head game with myself.

    Regards,
    William
     
    #40     Aug 10, 2005