I'll paraphrase Mark Douglas here. The casino wins because it HAS to play EVERY game and it has a statistical advantage (edge) in its favor. The fact that the casino has to play every game means its edge can be very slim and it still comes out ahead. As traders, we determine an edge and optimally we play every game, that is, we trade every setup we've determined has a better chance of winning than losing. If we pick and choose trades from among those setups, we reduce our statistical advantage. I trade setups that have proven over time to have a better chance of winning than of losing, and I trade with an initial risk:reward ratio of 1:2 or better. I learned this strategy from Geez (http://www.elitetrader.com/vb/showthread.php?s=&threadid=148752), watching him trade in real time for months. It's a win/win scenario. The casino is not gambling; the casino always wins because of its slight statistical edge and the fact that it must play EVERY game. The customers are gambling; they cannot play every game. If you set up your trading business correctly, you are the casino. How is that a form of gambling? Lescor has proven over time the huge reward that comes from having a statistical advantage.
Trading is about threading water monday to thursday and doubling one's account on friday. Everything else is, as far as my understanding goes, a lie or a self-delusion based on deceitful perception. "There is no reality, only perceptions, and unfilled orders." The best trader in the world. "I trade on the concept of variant perceptions". Michael Steinhardt- Retired billionaire trader.
This is exactly my points here. If you limit yourself trading ES intraday in this market with no volatility, most people will not have your discipline to be patient and wait for that set up and trade one or two times a day, hence gambling with very bad odds because of the large cost. Lescor said he would be happy average $0.02 per share. Don Millerâs edge is about $5.00 for ES even in the good old days of 2008. We are not gamblers but we have to think in terms of odds in this statistical game.
May I suggest we return this thread to Corey. I think it's unlikely that he wants to spend his time going through the long off-topics posts on everything from ES (which he repeatedly has stated that he doesn't trade much), CL and random comments.
I agree thoroughly. Lescor made it clear that this was goIng to be a journal, but there is long rambles of discourse between others, many questIons FROM people trying to dig out free advice. As he said in the OP: ⦠There is a lot of negativity, disbelief, and cynicism about trading expressed on this site. I think most people who are well prepared and willing to work can make it as traders. Hopefully this year doesnât suck and I can provide some encouragement to those working at it and prove the haters wrong. â¦My journal will be light on specifics of what or how I trade. A lot of what I do is liquidity sensitive and I do not want to invite people to try to reverse engineer my systems and then compete with me for fills ⦠Iâm only going to report weekly results. Iâve always treated daily p/lâs as noise and donât pay attention to any time frame shorter than a week when it comes to tracking profits.
A little different weekly update to report this time. Monday was uneventful, +4k. As I mentioned earlier I got clocked pretty good on Tuesday, -18k. A couple really bad trades, those outliers that just happen. They are part of the system and how I trade. They happen and I am ok with that. Wednesday I got nailed in some INTC earnings-related trades, -7k Maybe a bit of poor judgment or oversight on my part. INTC was up a lot pre-market and I didn't adjust properly for some related stocks and hot hit. That happens too, it's part of the risk of how I trade and earnings season for me is largely about trying to avoid those sector related stocks that aren't always easy to discern. Friday was really good, +15k. Had a couple good shorts early and the system kept me in as the market sold off. Made about 4 or 5k on the spike in intraday volatility caused by the GS news. Felt like a little slice of the good old days for a couple hours. But the week was all about Thursday. -81k, over 1.8M shares traded. The single greatest risk with how I trade is operator error or some kind of major system malfunction. I send 1000's of orders before the open fishing for good opening prints. I only get filled on a tiny fraction of these, often times well under 1%. To mitigate the gargantuan risk of something going drastically wrong with this order volume, I've built in all kinds of fail safes and red flags to alert me to any kind of problem before I hit 'send'. Well on Thursday I found a hole in my defense and it bit me pretty hard. I operate very much by rote in the pre-market. I have a routine that I don't waver from. It makes me efficient with all the pre-open prep I do and it reduces the risk of screw ups or forgetting something. It's so routine that I don't even remember doing this, but I somehow copied and pasted the wrong prices into the wrong column on the wrong spreadsheet, thus sending 1000's of orders at prices that were completely out to lunch. It was just a total brain fart. The volume of fills and messages overwhelmed my system causing freeze ups and slow downs as I frantically tried to cancel all remaining orders. It was a couple minutes before I could do more than pound my fist and curse. When the remaining orders canceled I was left with over 250 positions, almost all short. Some of these stocks are pretty thin, especially in a sleepy market, and I created some big gap down opens. Of course the market just ticked higher non-stop. Even with the odd tiny pull back my pl just kept getting worse because I was short all kinds of stuff at terrible prices. All I could do was slice up my positions and try to exit as gingerly as I could. I was screwed from the get go, no doubt about it. It took about 45 minutes to get flat and the market never did anything but slowly and tortuously grind higher the whole time. I've made these kinds of errors a few times over the years. Each time it causes me to re-think my approach, analyze ways to tighten up the system and consider if the reward is worth the risk. It's been 2 1/2 years since I've had one of these and I thought I had all the bases covered pretty well. I've already figured out what to do to prevent this specific error from happening again. The bottom line is that the system is not broken, it was 100% operator error. Looking back at this system for the past several years shows that even with this kind of risk, it is worth it to continue. But I won't lie, it was really hard to come in the next day and go through all the motions again and fire off all those orders. But for my mental state and to get over the debacle, I had to do it. For me, mental recovery is measured by how long I can go without thinking about it. For the rest of the day I don't think I made it more than 15 minutes. Three days later now and I think I'm doing pretty good in getting over it. Writing this post actually helps.