Hello guys Im a beginner in the world of trading and the purpose of this thread is that i want to once and for all get answers to some questions which I find essential. I have read a few books on technical analysis and it got me really excited thinking that it is possible to make money out of trading and it is not purely based on luck or randomness but you can in fact improve your odds using charts, money management and having a system which you tested that works. I knew it would not be easy and take many years and there was no guarantee but it made me strongly believe investing time and money in trading was something which could pay off not only by diversification and long term investment strategies but also by analyzing price and history. However after reading several books and watching lectures from nobelprizetakers in economics who say that the market is almost completly random and others argueing how technical analysis is crap including people on this forum I am not sure what to believe. I know there are other topics around this area but I need to believe that if I choose to invest my time in trading that I have a chance of in the long run of improving my odds and account. These theories of randomwalk and efficient market, that price moves randomly and all knowledge is reflected in price has really made me depressed since basically these theories said there is no point in trying to beat the markets and if you do its "luck". My questions: Can you get an edge in the market? Is technical, fundamental analysis worth to study and learn about to improve your odds? Is combining them going to improve your odds? Does watching price movement on the screen for several years improve your profits and change you from a loser to a winner? Is randomwalk theory complete or are there exceptions in your oppinion? I would appreciate if you guys would want to give me your oppinion and experience regarding my questions. I know I am not the only one who has them. Maybe you guys can restore my faith and motivation for trading by proving complete randomwalk wrong.
Random walk is complete garbage. Check out this thread: http://www.elitetrader.com/vb/showthread.php?t=120781
What percentage of the Nobel winners and authors you refer to have more than a year of full time trading experience? If you see only randomness when you look at price charts of liquid instruments, then you must first learn to see.
It can be if you don't mind a 2 to 5 year learning curve. The reality is most traders fail because they just don't have the time, money or business plan needed to succeed. Yes there are edges/advantages. Most books are garbage and the market is not random. There is a logical reason why no matter what anyone does they are typically wrong. Your best bet for learning is at a prop firm and you need a real plan. Some examples or plan ideas are: I am going to focus on mid cap stocks that have news and trade only a certain type of stock (average volume and price range). Another idea is mastering pairs trading at a firm like Bright. You could sell option spreads on news stocks and so on...... The whole point is you need a niche that you will study and learn that in time you will master. The worst thing you can do is flip flop strategies and techniques. Dave
One thing is sure: the outcome of any *single* trade is a random event (unless you have inside information, or you are front-running your clients' trades both of which are officially illegal - although used a lot, just read the press). So, you first have to think in probabilities ... yes, the outcome of any single trade is a random event, however, a properly chosen & defined "pattern" can give you a a set of trades with a likely aggregate outcome (positive, if you have done your homework correctly). The larger the number of trades taken using that "pattern", the more likely that the aggregate outcome will converge. Finding one or more of these patterns is where the game starts.
"Is trading really worth the time and effort?" That depends on you. I love trading because it is like the largest poker game on earth and an intellectual challenge. Every day is different and the global flow of capital is always awesome to watch. Many are board to tears at the thought of watching charts,tape and news . You have to love the game to stay in it and survive as well as thrive. You probably won't make money for years in fact your first years you will likely blow out a few accounts. You need to love the game enough to stay in it for more than just the money . Once you figure out what you are doing the money will come as a byproduct. Once you make a lot of money it still goes back to just loving the game and it is almost as if the money is just points to keep score. If I lost everything and had to start over from scratch , I would. That's how much you need to love doing this to make it "worth it" to you. I have buddies in their 30's who will go to great ends every night just to get an hour or two of playing a video games in. To me it is a total waste of time and effort, to them it is the greatest thing in the world. Some people hate fishing and can't stand just sitting in a boat waiting for a possible bite on the line. Sometimes you get nothing. I still love fishing regardless and it is totally worth it to me. Life is short, so do whatever you love to do. Anything worthwhile is difficult to truly master. Whether you want to start a restaurant, be a Realtor, Trade, learn guitar, or whatever.
in short-no. imo-not in current environment. your odds are close to zero in daytrading(stocks). specially if you are one man army,trying to get rich from home.you might be much better off just investing your money here and there,but not in active trading.(and yes,those words are coming from a guy who been daytrading for well over a decade and never had a losing year(or even a month),the guy who was bold enough to post his statements here. i never seen ANYONE with a proven,stable and enough to make a living record here ,on ET(member since 2002). it's tough out there, and you are picking toughest and most competitive field. if you are young-get a real profession\skill. shit..i sound like emg...
Yes. If you're willing to do the work. Astonishingly few are. Probably not. FA is not what it was 30 or 40 years ago. There was a time when FA would tell you what to buy and TA would tell you when to buy it. But that's no longer the case. Most FA advocates seem to use it to convince themselves that the stock is worth more than it is. Stocks, however, are no longer the only game in town. Just watching it? No. Watching it to determine what makes price go up and down and developing a consistently-profitable trading plan that exploits those movements? Yes. Though nowadays, with replay, it needn't take years. The losers never do what's required to achieve consistent profitability. The winners do. So it's pretty much up to you. As previously stated, "random walk" is nonsense. Unless you think people behave randomly. If you do, then random walk may appeal to you. But then there are all sorts of bizarre theories floating about that appeal to at least some people. You've received some awfully good replies to your questions. But then the trolls haven't shown up yet. Don't be discouraged when they do.
Well, let's ask a few questions........ If there was any profession you were interested in I am sure you could find practitioners in your city. Doctor, auto mechanic, accountant, sales rep, programmer, customer service, construction, law, and more. Some will be easier to find than others. But you will find them. But I bet you won't find any traders. In your search for traders maybe you will join a meetup.com group or IBD or some other investment group. There you will find many people who actively trade. But you will be hard-pressed to find anyone who makes a living from trading. Everyone will either be working a job or retired from a job. What does that tell you about the possibilities of trading for a living? Of course it is not impossible. Of course the Market Wizards stories are true. Of course there are guys who made small fortunes as prop traders. Of course there are guys making big bucks as traders today. But obviously this is not something that is very common at all. Probably just a tiny fraction of guys with the right "X Factor" can do it and more rare than anyone wants to believe. If you love this then know the risks going in and try to find real legit mentors and traders to work with. And another thing. Forums and chat rooms are rife with liars. Not getting into accusing but I have seen it too many times to count in my short time studying trading. Sometimes it is relatively harmless things like telling little white lies or giving opinions on things that they have no experience with. But more rarely people create an entire online alter-ego where they play the role of guru/leader/superstar. This is dangerous and will fill you with false expectations and set you up for major disappointment. You will have to use your own common sense to weed out and avoid these characters. What I personally did was move trading to the back burner. I started day trading and followed online guru leaders. Never had any success with it after over a year. In time I saw some guru guys get busted for shenanigans like multiple aliases, contradictions in their postings, and other funny business. So I decided enough was enough and that I could not trust anything about day trading anymore..... now am in school now preparing for a real career and only trade on the side.