abc1 has started a very interesting discussion. Here is my take from the perspective of a fulltime trader. I've been trading for 10 years (broke even first 2 years and have made at least six figures every year of the last 8 years). The first couple years of making money more often then not felt like luck. However, I felt at times really 'skillful and smart'. The markets have gone through many changes since then and so has my viewpoint. Most of the time during those first few years I felt my luck would run out so I saved as much as I could. But as each year goes by and I continue to increase my income...my view point as changed and I have become more comfortable with my trading future. I now liken trading successfully as more akin to being a casino. The casino (myself) has an edge over the gambling public. Over the short run, some gamblers might take some money from the casino. But over the long run, the casinos make money due to a built in edge (odds). I'm never 100% sure that a single trade will be a winner. But over the longer run, I'm more confident in my 'ability' to generate income.
Just a comment on your first sentence above. I think you're describing investing vs. trading, IMO. We tend to "enter" trades, either long or short, based on a set of criteria. The "buy first" types don't tend to last very long, and many go broke "waiting" for the stock to go up. Retail traders are limited to what they can do, and I realize that. And I realize that your broker basically steals your interest money on the cash generated from short sales (our guys get a full 5% from Goldman Sachs)...this allows for more working strategies, like opening only, mergers, and pairs, etc. Regardless of all that, if you limit yourself to "buy first" - then you've eliminated 50% of your profit opportunities. The market is guaranteed to go up, and go down, every day. FWIW, Don
actually, i am implying that more leverage allows me to take on less risk. it is the strategy you use that determines the risk you take, not the amount of leverage you are given.
Wow man, you need to read some trading books, I don't even know where to begin, your conclusions are almost all off
I've not used the word random. My point is that while one can use information to place a trade; the moment they enter that trade the profit or loss is generally out of their control (stops/limits aside.) The reasons for this include :- - Price movement is not predictable - Price movement at any time is rarely in one person's control; certainly not the average trader. Think of the size it would take one person/entity to create and maintain a large movement in one direction. - You are just one of many other market participants out there using different reasons to buy and sell all day long. - Company news may appear which was not in one's grasp at the point of opening the trade. - Larger market forces (econ data, political etc) - In short, unforseeable events post trade. It follows that it is difficult to claim skill for successful trading. At the very least it is difficult to prove. All I wanted was some well considered discussion on my thoughts; not insults or bashing. abc1
Just have to tackle these 2 points as there are times when price movement is predictable and able to be controlled and those are during times of breakouts or breakdowns when stop losses get taken out. Average traders love to use big fat round numbers so these price levels, when taken out, open the door to a tsunami of buying or selling (depending on resistance or support getting taken out). These tsunami create predictable price moves of 25 cents - $2, depending the stock. You don't need a big account to control the price during these times, just surf the wave of price momentum
Think of it like this. Call the toss of a coin 1 years worth of trading. A head is an up year, a tail a down year. Now say 100,000 people toss the coin 10 times. You would expect 5 of each head and tails for the majority. At the extremes are 10 up years or 10 down years, both of which are very unlikely combinations. Also, every toin coss costs money (for comission, living cost etc)so skew the results accordingly. I hope you can see the point I am trying to make. abc1
The concept of leverage to me implies margin trading or trading on borrowed funds or a combination of the two. Even if you are using leverage to become more hedged/reduce risk you are still leveraged at least one if not both sides. It is certainly increased risk; although to varying levels as your situation suggests. abc1
Fair point Mr Sykes and I'll take a bow. However, how many people have access to see where stops are ? Even if these are listed on say level 2/order book it is surely a judgement call whether it is support or resistance, e.g., buy limits or sell stops etc ? Again that momentum you describe is probably quite difficult to jump on. Surely if stops get triggered and executed the market will adjust to the new level before traders can jump on at the stop price ? abc1