Some traders develop a "feel" for the markets. How does one go about developing this feel? I've read an article somewhere, where some pit traders that were once successful in the pits lose their effectiveness once they trade in front of a computer screen. Why is this? What skills did they have in the pit to profit and what causes those same traders to lose their effectiveness once they trade electronically? Thanks in advance.
Kinda how I trade. I just sit and watch, then when I know what is going on (or think I knoiw) I look for a good entry price (retracement of some sort, low vol). I don't know how to go about developing this other than practice practice practice. I've spent tens of thousands of hours behind trading screens. I find indicators of little value cause I know what they will look like just by looking at a bar chart anyway. I do draw trendlines quite a bit though.
When traders trade in the pit, they can see order flow and because they spend thousands of hours in the pit and develop their "feel" for price will do. After you put in thousands of hours like I have in the last couple of years looking at price action on the screen you get a "feel" aka intuition for what may happen more often than not. It comes down to time spent and experience just like any other profession. The market has memory. That doesn't mean it is grantee it just means it's more likely than not, probabilities.
I've asked this same question to many professionals over the years. There is no solid answer except experience. If you do something long enough you will eventually develop a feel for it. I do think a new trader should stick to one or two markets instead of using a stock screener to jump all over the place. Different markets have different rhythms. I could see how going from the pit to a screen could be confusing. In the pitt you can see people handing off orders, feel the excitement, react to what other traders are doing. If your sitting alone in your condo thats hard to do. There are sites that offer audio from the live pit. It's never helped me but I was never a pit trader. Caj
In the pit you know who is buying/selling..ie Goldman a buyer or Cargil a seller. Some traders even pick off the hand signals from the phone clerks to the brokers, then front run. In the pit you make relationships with the paper/brokers to help you out, look your way, give you the edge. Some will even let you know where the stops are in their deck. A lot of pit trading is not what you know..its who you know. Its also your position in the pit, how tall you are helps. Electronic trading has almost none of of these advantages. You need to do a lot more work to make electronic trading successful. Pit trading was a lot more fun thats for sure. electronic trading is a grind.
Pit trading is better suited for extroverted people. Introverted people should feel better in front of a screen than being elbow-to-elbow with a bunch of raucous guys. In the pit, traders can "lean on" customer orders. That's not the case on the screen. In the pit, you can swap stories and jokes with other traders during slow periods. Screen-based traders have to resort to eMail, instant messaging or the telephone to attempt to do that. Auditory/sensory oriented people tend to do better in the pit. Again, a lot of that input is lost when you're in front of a screen. Visually-oriented people can do better in front of the screen if they're focused on higher-quality information and don't get bored easily.
I can imagine some don't do so well because they are forced to play by the rules. Obviously I don't know how rampant the practices are now adays, but if you read the book below it will remove most of the "wonder" as to how pit traders have an edge over retail. http://www.amazon.com/Brokers-Bagme...5837555?ie=UTF8&s=books&qid=1177549894&sr=8-1
Someone else mentioned indicators....and the fact that they don't tell you much...too true....I would ignore them if I were you. All you will develop a feel for is your reaction to an ever decreasing account balance. Some use them successfully but I think they are actually a hindrance to most. The market moves in cycles....really not difficult if you use the right charts and intervals. Not talking Gann, Elliot, the Moon, etc. etc. ... Some people do use each of these and say they are successful but that isn't what I am talking about.... I would concentrate on trend trading and finding higher lows and lower highs....they work as well as anything and better than most other methods...that and a little homework each night to decide where major support and resistance levels might be encountered the next day should work out for you....there is a learning curve....but at least you are concentrating on something that can be traded profitably..... There are two threads (there may be more) that immediately come to mind here on ET.... http://www.elitetrader.com/vb/showthread.php?s=&threadid=80582 AND http://www.elitetrader.com/vb/showthread.php?s=&threadid=46620 Pay particular attention to the posts by Proflogic and ignore the naysayers....ET is full of people who exist to bash methods (I am not sure any of them actually trade)... Best Wishes, HM