If the "trend is your friend" is generally accepted wisdom, then how do we also accept the generally aknowledged wisdom that most of the people are wrong most of the time? I for one will ALWAYS buy a drastic down move, and short a drastic up move (be it in the market or a specific issue). Now my style is to buy strong stocks on a reasonable dip, and short weak ones on a bounce. But when I see a situation like IRF today, I am a buyer. Did it work? No....but these plays have to be kept tight on the losing side.
When the spread is wider on an ECN than on the exchange (say in the qqq's), it isn't anything to complain about. It is simply that there are no either no sellers at the offer, or buyers at the bid. Remember, you may complain about specialists on the floor, but on the ECNs, we make the market. If we are not there, there is no market. The enemy is us A safeguard does exist however. If you put in a market order on an ECN, and there is no price equal to or better than the exchange price, you just don't get a fill...not until the prices move to the market, or new bids/offers come in. But you will never be filled at a worse price. I have often watched the prices of the qqq's on my level 2 instinet terminal while watching the prices on the amex. Occasionally you can arb the difference if you are fast enough. I have to believe however (though I don't know for certain), that the specialist has to be looking at the same thing, so it is a rare occurance to catch them flatfooted. Personally, I can't type or click fast enough to route my orders to take advantage of these situations. But I do work alongside some guys that do it. In better markets, I would say it isn't worth the effort to scalp a penny or two (or three or whatever....). But these days, every little bit helps. Too bad I am a bit older than the Nintendo generation. I think that quick fingered video game talent comes into play on this kind of thing. When the specialist's spread does widen, making it easier to "middle" on an ECN, it is most likely due to a faster market. So even if you see an opportunity, while it exists for someone, it is unlikely to be you. Remember that the ECN's (the one I get to see stand alone is INCA) really are limited in size. You may see a bid or offer you want inside the specialist's spread, but what good is it if you go market on say 1000 shares and the price you want is only good for 100? Or worse, an odd lot (not on INCA, but certainly possible on say ISLD) You then get filled on the other 900 at the specialist's price anyway (in most cases). By the time that happens, you may not want the trade. And even the fastest can't type in a limit order price fast enough to avoid that. And if they do, again, the trade is probably going the wrong way by that time. My thought is basically if you have conviction about the trade, don't sweat the penny (pennies). Why miss a trade with an unfilled limit order when a market order would have given you the certain fill? Bear in mind, this is coming from a guy who trains traders to use limit orders virtually always to open positions. But the reason for that is I don't want the new traders to chase, so I have them ALWAYS open long trades by entering "bid" in the price box, eliminating them from buying into up movement, and "offer" when opening shorts. But that is just to establish good habits for trainees (which we all are for years really). Having said that, after you have disciplined yourself, sometimes you just want the trade beause you really believe in it. Timing then doesn't need to be perfect. That is when you should use market orders anyway (to open....closing trades, well sometimes you just NEED to get out). And I agree with Don....the specialists don't want to ruin the good thing they have going. Hopefully the day will come (sooner the better) when they make themselves obsolete. Until then, they are just a part of our cost of doing business.
I could give a glib answer here too, but my real advice is to start watching a few stocks and get a "feel" for them. Pick say 4 or 5 stocks in 4 or 5 different industry groups. Make sure they are actively traded. Watch what these stocks do relative to each other both within their own groups and compared to the other groups. Watch what one group does compared to another. Watch what they (both the stocks and the groups) do relative to the markets as a whole.....s&p, and nasdaq. I don't think the Dow, which is only 30 stocks is all that important to watch, but watch it anyway....doesn't take much time. Look at charts of the stocks you follow. See if you recognize any repetitive patterns. Do paper trades...keep score for yourself. (Make sure you buy at the offer and sell at the bid!...it will be worse in real life, so don't cheat by going by last price). Go over your trades when you are done. See if you can spot what the winning trades had in common. What the losing trades had in common. (other than results). Don't buy stocks that are moving up very quickly. Don't try to short stocks that have sold off dramatically. Know what rules apply to shorting stocks! Don't buy stocks that are laggards. Buy the strongest stocks, short the weakest. Successful day trading consists of (IMHO) 1. Discipline 2. Timing 3. Stock Selection Hope this helps....best of luck!
Notice that #1 on my list of 3 is Discipline. It is what seperates the winners from the losers. All the other stuff comes more naturally. I know it is hard to admit you are wrong and get out of a loser. It is also hard to take a winner sometimes because of greed. Set rules for yourself and stick to them. You can always change your own rules, but if (when) you do, then stick to the new ones. If you want to be a trader, you cannot be an investor (at least not with your trading money). Don't have opinions. Act and react quickly. Don't predict what tomorrow will bring. Don't be afraid to lose. It is part of the cylce. Everyone loses. The idea is to lose less. I know there are guys here that say they virtually never lose.....don't believe them. I lose frequently. I have a lot of losing days overall. But at the end of the year, I make a very respectable living. I have mentioned this before....I average maybe 1/10th of 1% per day. This means I have a high percentage of losing days. You will read on this site about the guys that make 3,4, 5% a day every day. or at least average that. ....it doesn't work that way. Why am I entrusted to trade millions of dollars and they are not if they are that much better than me? Does it make sense to you? Again, good luck and be patient. Learn from your mistakes!
In each of the past 6 years, I have averaged 25-35% return on my daytrading. I am an employee. It is not my money. From 1995 through the first half of 2000, I averaged over 100% on my personal investments (buy and hold). From the last half of 2000 until today, I have essentially given all of my gains back (personal account). Negative in a few positions. Slightly positive in most, and one big winner (AZA which became JNJ...but it is slipping now). SO: Overall, I guess the daytrading was better IN THIS PARTICULAR TIME FRAME. Had I quit both 2 years ago, it would have been the opposite. But I do believe that my daytrading (and yes, I do overnight...but only single night holds) has been more consistent. quote: -------------------------------------------------------------------------------- Originally posted by VOLUME There are some animals on this site. Many million plus guys. -------------------------------------------------------------------------------- Probably quite a few. "I am not an animal" (elephant man). But I trade a lot of dollars....many millions...just not my own, which makes it a job, not a hobby, not a gamble. Stay tuned, I am almost ready to expose the super secret to successful trading ...I will do it in the next few days...that's a promise!!!
I said I would do this, so here goes: I have worked with thousands of traders. I have been paid to train hundreds of traders. I have made a lot of money for my employers and lost plenty in my own accounts. I have been a market maker, stock broker, proprietary trader, firm trader, and private money manager. Why did I do so poorly in my own account.....? Reason: accountability! Purpose of this post: To try and help individuals to successfully trade their own accounts...in other words, the typical ET trader. The one most common thing I see newer traders doing wrong is over-trading. It is understandable to me that new traders are impatient. They are told to learn from their mistakes. Not to be afraid to lose. Encouraged to trade a lot of small positions in order to more quickly gain experience. They want to speed up the learning process to get to their goal of making money as quickly as possible. Traders are encouraged in some cases to generate commisions, order flow, ticket charges, desk charges. They feel like they have to trade to get their moneys' worth. Maybe they get a volume discount. Newer traders read trading books, learn a zillion chart patterns and trading systems. They talk about technical theories, fundamentals, momentum, relative strength. They drool over technology that screens out parameters. They go to chat rooms and bulletin boards. They pay to "learn to trade" at seminars. Some of these things I did. Most I did not. But invariably, I always made money for other people, and just couldn't do it for myself. So after too many years of this, I came up with a mental approach that seems so obvious, but nonetheless took me forever to grasp. I had to treat myself as a customer/client. I could not use my intuition, my gut, my hopes and prayers in my own account. I never did for the clients, the employers and investors I had. Just for me. And what did it get me? POOR RESULTS. So here is my Super Secret....if you are trading your own money, think of it as anyone's but your own. Have a reason for every single trade. Every single move. How would you EXPLAIN what you were doing to your mother if it were her money (as an example..use your own....your wife, child, priest, whatever). Could you explain? Or would you say "it's my job...I'm doing my job...I know what I'm doing"...etc.). The fact of the matter is I always knew that I could be questioned by those whose money I controlled. I knew I needed to have an informed and reasonable response. And I never got into a position I couldn't comfortably justify. But my own money? I didn't need to justify anything to myself. I felt I "knew what I was doing". I had my OPINIONS. I had my long term outlook, while I never used that in regard to my professional trading. I am going to paraphrase something someone once said to me....We were working together managing money for an asian bank whose owners were very hard to deal with. I hope I can get his point across. I wish I could remember his words.. It was something like this: "My wife went out one morning wearing gym shorts and a tee shirt over a bathing suit. She was going to meet her friends for breakfast and a day of boating. It was very cold, but it was very early. It was July in Arizona. I said to her, "honey it's freezing...take something warm". She said "no, it will warm up, it's summer." Well it stayed cold and got colder still during the day. Rain,, wind, everything that "shouldn't have been". Her day on the water was ruined of course. Her car broke down on the freeway. The heat didn't work in the car, and the windows were home in the garage (an old jeep). She sat and froze until she finally got a tow after hours of shivering on the side of the road." (I guess this was pre-cellphone days). His point to me was to never assume to know what was going to happen no matter the circumstances. I never saw him make a trade he didn't believe would work. But he never "knew" it would work. He stayed consistent, but he stayed disciplined. If he was wrong, he saw it and changed his position. He believed what could be, but he knew what was. He, and experience, taught me that opinions are plentiful. Their value is another thing entirely. Now it is important to have opinions...no doubt....if you don't think something should or will happen, you cannot possibly initiate a trade. But be nimble. Don't hold opinions too long if they turn out to be incorrect. I work with traders that only fade a big up or down open. They believe this will work more often than not because they know from prior results that this works for them. I know guys that only trade Nasdaq stocks, and others that only trade listed. I know guys that never trade after 10:30 and guys that are done by then. And on, and on. Why do they do what they do? Because it is their discipline that they stay with what works for them. Do they keep the same style forever? No....traders have to adapt. But it is a slow process in general. So when things work well, you must press. When they don't, you must slow down. Or change. Usually one preceeds the next. I have talked here before about the 3 most critical aspects of trading: Discipline Timing Stock selection. Discipline alway is on top. Be accountable to yourself. Treat your money as if it was entrusted to you by whomever you most love, respect, fear... whatever works. Have a reason to make every trade. Be able to verbalize that reason. As importantly, have a reason to exit a trade. You hear "cut your loses and let your winners run"....That is so true. I so often have seen traders get our of good positions because they have achieved their "target price" "target of profit"....I say this is bad thinking. If the trade REMAINS a trade you would put ON at the time you "achieve target", why in the world would you take it off? To me, it is as important to have a reason to get out of a trade as to get in. Anyone can say to themselves they have a reason to exit a losing trade..."cut your losses"..Why then is it so hard for so many to have a real reason to get our of a winner? It should be, and is, easy. It just takes DISCIPLINE. If you give back X% of your profit; if the market changes, if the group starts to get weak, whatever. You have to have your disciplines and stick to them. Make your own rules, and stay consistant to them. I hope that all this typing can result in just one positive thought to just one person here. I have gone to so many "brainstorming" meetings in my career. I have listened to a million opinions, statements and arguments. I go though because I KNOW that if I pick up one single constructive thought I will have spent my time wisely. and believe me, they are few and far between. But I can remember single sentences said years ago in long boring meetings. Those senteces have added up to serve me well. Timing should be easier for new traders to learn. Just be patient and buy or short at the price you pre-determine. Don't chase. Stock selection...this is a bit tougher. I could write a hundred pages on this issue. But not being so inclined, have standards. Volume, percent of average volume, relative strength, news, whatever you are comfortable with. Know what your quote provider can tell you other than quotes alone. Look for trades, but don't be impulsive. Sometimes not making a trade is a great trade. Again, I truly hope someone, somewhere, finds one thing of value in what I have said.
quote: -------------------------------------------------------------------------------- Originally posted by Privateer I mean, how would you describe the difference in your trading style when trading for your own account vs. trading for a 3rd. parties account ? -------------------------------------------------------------------------------- Without getting into specifics right here, and some of your points are interesting for me to think about in retrospect, I have to say that the main difference was simply my mentality of accountability. I always have traded short term. I did not always trade the same instruments, but this was more a function of what my job was. When I was at the CBOE, I seldom traded stocks. When I did, it was because I was forced to because I was short calls or puts that went into the money. (market makers can do things regarding this that we as individuals cannot....a whole different subject). I traded as a firm trader where I could only trade stocks. I traded as a money manager and could do anything, but seldom did any "exotic" trading. But even then, I was quite short term. I was not a buy and hold guy. I truly believe that what I wrote already addressed your question. It was just the mind-set. I know this is not going to affect all traders the same way. One guy on this thread already pointed out his accountability to himself. I only know from experience that MOST traders do not trade as well when they trade for themselves as they do when they are responsible to others. I have heard that at one of the big firms a few years ago (think it was Schonfeld, but not 100% sure), traders were encouraged to put up money and get a higher payout. It turned out to be a disaster, and afterwards, the whole experiment was abandoned. The successful traders turned into losing traders when they were trading with their own capital. I am sure there are others here that know the specific details of this better than I, but the mentality seemed to affect the bottom line. Maybe they had fewer rules. Maybe they traded scared. Lots of "maybe's". Maybe someone here was at that firm at the time and can tell us what happened and why they think it turned out as it did.
quote: -------------------------------------------------------------------------------- Originally posted by futurecurrents My other career was an active, on-the-go type activity. To just sit and do nothing all morning is tough. It doesn't feel right.. like I'm wasting time, and sooo boring. I am probably not alone in my addiction to the excitement of trading. -------------------------------------------------------------------------------- I had a friend that wanted to trade. I tried to talk him out of it. I knew he was both too impulsive and too compulsive. He chased every stock he saw uptick. He watched so many stocks on his screen he had to make his font smaller to fit them in. I told him he was an over-trader. His argument was that he had always made more money the harder he worked. And he did. He became a very wealthy guy years before. Selling automotive products. Never made a dime trading. Lasted a few months and walked away. But what he (and so many others) did not understand that often the "hard work" in trading is going through what you call the "boring" times. Being disciplined is hard work. Not trading is hard work. Watching the "action" and not participating is hard work. Inaction does not equate to doing nothing though it may appear that way. It is the DECISION to "do nothing" that makes that very "inaction" work. Our job is about making decisions, not about making trades. Anyone can hit the buy or sell button. Deciding when to do it is something else. It is what seperates work from play. Trading from amusement. You most definitely are not alone in your addiction to the excitement of trading...do what you have to to kick the addiction if you can. Hey, guys I worked with gambled pretty big stakes to pass the time when they weren't trading. The losers usually saved money overall by not trading while they were pissing away money playing poker or whatever. I cleared through First Options when I was a market maker. Their lounge upstairs from the CBOE was a veritable casino there were so many gin, poker, and backgammon games going on there. All that was missing were cocktail waitresses. This was how these guys relaxed!!! Me, I played chess. But I still had to play for money. Not that I wanted to....I just couldn't get anyone interested in playing for the sake of the game. So I guess most traders like to gamble. Just don't do it in the market. Try and make that a job.
quote: -------------------------------------------------------------------------------- Originally posted by chasinfla Accountability is a great motivator that has a way of sobering one up and helping him keep focused on what's important. Whoever you are accountable to probably wants you to do very, very well, maybe even more so than you yourself do. 'Working' for that one instead of for yourself is also a cure for selfishness, which, among many other things, breeds myopia. -------------------------------------------------------------------------------- Best trader I know trades out of his home. He has several high net worth individuals and has dicretionary trading accounts in their names. He doesn't trade his own money at all. He only trades the s&p minis, and his returns over the past several years have ranged from a low of 30%+ to over 300% last year. He has always been biased to the downside, so that helped big time when his time came. He takes a small one time management fee, and 20% of the profits. I wish I knew how he does what he does. But he is very secretive about his trading style and strategies. Only reason he disclosed his returns to me is he wants me to raise more money for him. He has non-disclosure agreements with his clients, so he can't show his track record. All he can do is make his pitch and then show results with initial investments that lead to bigger investments after a short time. He too has expressed his belief in "accountability" and truly feels he could not get the results he has achieved if not for this. His money goes in the bank.
quote: -------------------------------------------------------------------------------- Originally posted by catcando I don't care if you make 30K or 250K/yr., just some confirmation of your existence. If this is not you, please don't respond. Please elaborate on how long you have been trading full time as well. Thanks! -------------------------------------------------------------------------------- We exist. My trading, in several different capacities, has been my sole source of income for about 14 years. (Excluding a period of time when I was unable to trade for personal reasons....during which I still observed and stayed informed as to the market activity on an almost daily basis). As others here say, it is not easy. It takes time and the ability to understand that it is a career. A combined experience of highs and lows. The real satisfaction of a career comes from a progressive attitude to learn, work harder and achieve results. The time spent learning and improving, including the struggles, should be rewarding in itself. If not, then this is not a suitable profession for you. Putting in the proper work can enable you to make enormous amounts of money. Working at trading means analyzing your trades, recognizing your strengths and correcting your weaknesses. It means being vigilant for what is working currently in each market environment you encounter. Looking for things that negatively impact your trading is very important. Recognizing them lets you remedy them. Traders incomes can be erratic so it is important to save during the good times to more comfortably get through the bad times. And there will be times that are either downright bad, or less than what you would require if you were to live hand to mouth. Either way, you need to retain a cushion, because hand to mouth doesn't work in this profession. Or any other in which your income is erratic, which is to say, essentially, any business or non-salaried job Overall it is a career with great freedom and hours. It should be done by those that find it enjoyable. If it is too stressful, then again, it is not for you. If you trade with discipline and learn from your mistakes and successes, it can be one of the most financially rewarding endeavors anywhere. Notice the repetition of the words "career" and "profession". You will find them constantly in the posts of those of us that have traded as our means of support. It is not a hobby or a lark. As the words imply, it requires effort and dedication. And sometimes heartache By the way, I have a mortgage, a wife, two kids in college, one more yet to go in another year. I have car payments, have to pay all the usual bills, and taxes. I do not have >$10 million like the gentleman who posted just prior to me, but I have managed to live a comfortable lifestyle and enjoy my working time almost as much as my leisure time. That quality of life has a value I can't put a dollar amount on.