Not true Bernoulli. The words comparative and competitive apply where two or more parties can be measured in terms of performance. If you continue to cling to this point of view that trading is some form of gladiatorial contest, you will remain forever trapped within the confines of your own limited thinking. The markets are chaotic by nature for the reasons I gave on page one. Either you accept this or you do not. If you accept this, then ask yourself why you would want to do battle with chaos. If you do not accept this, then so be it. It is a characteristic of human nature to measure everything in sight (and out of sight for that matter) and eventually relate it to one's self. It is a bit like a GPS in reality as people need to know where they are in the greater order of things so that they may think that they know who they are. This is a fallacy in their thinking. This is insecurity at it's devilish best and traps people within their own fears. I mine 'n' net points per lot every day from the ES coalface. Where the points come from is immaterial to me as I have no idea of the other side's motive to trade. They could be on a draw down inside a profitable trade on a longer time frame; or hedging; or just taking a loss. Who cares. It is of no concern to me. And as for the expression "I just take what the market gives" Are you crazy!! Am I a street beggar? I have committed an enormous amount of thought (focus) into trading the way that I trade and as far as I am concerned the only variables confronting me each day are: * how many minutes do I need to trade. * how many trades will it take. I am neither comparative or competitive ... I am just focused.
Larry Harris uses the term "comparative advantage" in his book because - as he writes - trading is a zero sum game. That means the winners gain from the losers. For sure, it is not easy to grasp ones comparative advantage if there is one (for most players their is a comparative disadvantage). And a lot of participants in the markets don't care about such "theoretical stuff" anyway (hm, little bit short sighted and lazy?). Notwithstanding, it is very helpful to ponder about the comparative advantage one may have or not have because it gives you the insights to better understand the market structure with all the different participants and your position in it. So, for me, a tiny scalper in the financial future markets (2 figure lots only), what could be my comparative advantage? Against the big guys it is that my orders have not much effect and I can easily offer liquidity through limit orders without being afraid to colour the order book to much. I do not have to trade a lot, I can wait patiently. Against the other small trader my comparative advantage could be that I am quite disciplined, do every night my preparation, be very flexible, have a tough money management and enough financial resources. Anyway, interesting responses to this thread. Thanks.
Some are saying to be in the mkt all the time is to milk the mkt like a farm boy milks a cow. Never miss a drop or drop a drop. WOW, and i actually trade in real life and have real time losses, what a dummy i am. Anyone that thinks they can trade like some profess are kidding themselves. i concede i am a lousy trader for missing some ticks. I concede that i can not win a argument by being realistic. thks for the memories. "What a joke" .............. Guy is from Disneyland Gotta admit this little tribe was fun.
BG You bear out the very point that I am trying to make.... namely do not go down the competitive / comparative track. If your sole aim is to be consistently profitable and you cannot imagine how to do this by being in the market the entire time, then do not compromise your plan or yourself. Do not do it. To be entirely in the market would not even enter my head. It matters nothing to me that other people may even mention it because it does not fit within my parameters.
As Bernoulli pointed out, Harris' definition of comparative advantage is different from Ricardo's classic conception. Ricardo would tell you that your comparative advantage is to trade the ES instead of spending 60% of your time trading the ES and 40% trading the 5 yr and 10 yr spread. Even though there are traders out there who are better at doing each trade (and both), you are better off trading the ES because you have the highest probability of success with that instrument. Although I don't agree with how Harris uses the term, it is critical to know how to allocate your time and capital.
Ok, let me look at what has been put forward by Jack Hershey tidbits: Jack states "my goal is to trade the ES to take ALL that is offered by PRICE CHANGE from the pool of capital and put it in my account. Softly, and without any antagonism regarding mkt participants." "I am all in and on the right side of the mkt." other psyche-babble follows about adjusting size when mkts slow and when participation is heavier, but always, ALWAYS on the right side. Noise is just a reflection of the mkts ranges in other words and Jack is saying he adjusts his size relative to the number of ticks per bar. Wow, this guy is good, i mean REAL GOOD. Jack is a non trader, his sayings are what one might expect in a perfect world, real traders know there is no such animal. Comparative advantage is not comparing fiction with fact and choosing the one that fits you personally. Comparative advantage is when you can produce a result at a cheaper cost than the other guy, nation, trader etc. Ok, i have bet the farm that Jack is a non-trader, that is a given. Now i want to state a bit on price vs volume. jack says: "the psychology of the mkt is what causes PRICE movement in a given direction. I continue to hold as the mkt dictates to me that it is trending." In my world i understand that as following price relative to a moving average to see if price is still trending. Would anyone agree? Jack goes on to say "limits of movement are telegraphed as time passes and mkt players acknowledge these limits." Then he takes profits and reverses. "So, profits are taken and i am in the mkt on the right side as usual. Noise may help me tweak out a little more than expected." Again, Fantasyland trading. He continues an old mantra: "I know i have to be in the mkt to make money. So i am in. I know i have to be on the right side of the mkt. So i stay on the right side of the mkt." jack is still trying to convince himself he has to be on the right side of the mkt to make money. I think even most newbies have that down pat real soon in the real world. Someone that lives in Fantasyland though might need to reinforce false beliefs all the time. jack goes on to say that volume is his leading indicator. he states: "you do entry and exit blah, blah. I do seamanship and i continue to tack and i "continue and reverse." jack, look out the window, YOU are in Arizona. jack says: " Volume leads price. My leading indicator of volume is sentiment, i mark the sentiment change which, then, volume responds to and then, in turn, price responds to volume." jack says: it is all soft and the capacity of the mkt at any given time FLOATS my BOAT. the surface has ripples, waves and tides. And i have a boat and it is seaworthy and i am not on the beach at ANY given time since i am a seaman who has seamanship DOWN COLD for the boat i float." so did popeye the sailor man. Ok, to wrap this all up: jack says sentiment changes cause volume to change and that is his main dog and pony trick. What changes sentiment i ask? If the mkt feels to is in equilibrium and nothing changes relative to fundamentals etc, then the mkt has no reason to DISPLAY ANY VOLUME. The players are all happy with their bets, correct?.............. What will create a change in volume? A change in sentiment as jack says. BUT, the BIG BUT. What will cause a change in sentiment besides a change in price? PRICE is the cause of players to change positions, nothing else. volume always follows. Thus what is the first thing a trader coming back into the room will look at to check his her position? RIGHT ...PRICE. all else is late. no one walks in the room from the john and looks at volume. DONE, thank you
One might question whether one wants to be on the "right side of the market", all the time -- the market ensures that those who have been right will be "wrong" eventually, relatively speaking, on all time frames. Graphically and in hindsight the shifts are somewhat easy to point to; in real time blocks of prices blink past within miliseconds and nearly always when you are least prepared, assuming you have been "in rhythm" for the period preceeding.
Fearless, sorry you really do not get the point. "'Comparative advantage" has absolutely nothing to do with how long you are in which market or how you call what you do (mining or whatever). But it is really interesting that it is so hard for so many to grasp this concept. And it seems to be even harder to accept it. I think Larry Harris is right when he say that it can be a comparative advantage to know her/his comparative advantage.
Then you must stay with your thoughts about Larry and convert them into profits. That will be your comparative advantage.