Profitable Strategies being impacted by the #'s using them.

Discussion in 'Trading' started by rtharp, May 9, 2002.

  1. jaan


    are you also amazed every time someone claims the earth is round? :)

    but seriously, i don't think the size of the system has anything to do with it being zero-sum game or not.

    myself, too, i think that stockmarket is close enough to a zero-sum game (from monetary aspect), especially in shorter timeframes.

    - jaan
    #31     May 11, 2002
  2. Rigel


    I agree that trading is a zero sum game. It can be demostrated IMO by taking the statement "Profitable strategies are not impacted by the number of people using them." and expanding it to see how it holds up. The expansion would be "If everyone were using profitable strategies then everyone would be profitable" which of course is nonsense. Only individuals or closed groups can prevail. Sad but true.
    p.s.- This is not a closed group.:(
    #32     May 11, 2002
  3. nitro


    This kind of reasoning, evaluating a function at it's boundary conditions, is critical in problem solving. It nicely gives a simple proof of why everyone cannot be using a (the same) "winning" strategy.

    When I went to Bright to get training, these thoughts came to me over and over - how many people can profitably "fit" into these strategies that are being taught, without it hurting the strategy itself? To make it worse, I had gone to Bright's training classes by seperating them out over a two year period. Both classes were jamed, so I knew that these "strategies/tactics" had been and would have been getting out like gossip in Washington DC. To make it "worse," I had also known that Echo traders were ex-Bright traders, had essentially copied a successful business model, and implemented it themselves, including the training! So I was off by a factor of two the number of traders learning these strategies.

    Yet I reasoned, well, this has gotten out to hundreds if not thousands of traders, yet "where are the customers yatchs ?" Then it hit me _TRADING_CANNOT_BE_TAUGHT_, only strategies can be taught - these are not the same thing!

    As the second course went on, I started to hear things that I had not heard about in the first one, and how the market had changed and a "refactoring" or in some case "scraping of" some the strategies that had been expoused a couple of years earlier. In the middle of the week, on Wednesday, they were having an advanced course available only to Bright traders. I tried to sneak in, but was caught by Bob (lol). I learned the title of the talk tho - that was enough for me - when I got home, I would spend every waking moment thinking about how a strategy that had been taught at the "introductory" class could be modified and why it would have to be modified, etc...

    At this time, I understood that there was a "conflict of interests" between the traders that had gotten access to these strategies, and first rate prop firms that needed successful traders to keep its cash cow going - Bright's and Echo's would love to have _EVERY_ trader be wildly successful, as they would rake in the commissions like it was falling from the sky, but other traders, once having learned them, wouldn't want them to "get out." (funny how I wanted the Brights to stop teaching these strategies once _I_ had learned of them - selfish bastard that I am :) )

    Because I had been to two Bright sessions, I realized then that if I were going to have longevity as a trader, I would need to differentiate myself from every other trader that had gotten access to the strategies, and to monitor the ones that I was using "blindly" closely for signs that they had been "arbed out."

    I realize now that trading is less "strategy" and more of an evolving process. The real gift that the Brights taught me was _HOW_ to think about the markets, how they are put together stich by stich. Knowing this, I set out to modify the strategies that were taught to suit my own style, and to keep a daily regimen of understanding how any new rule, or new offering, etc., would give me an edge, and how this change would affect the structural basis of the markets. I would have to keep, at least in step with the markets, and as I got better at it, one step ahead.

    My anxiety dissolved once I had this newfound point of view...

    #33     May 11, 2002
  4. Trading is not zero sum -- if it were brokerage/clearing houses wouldn't exist; the commisions don't allow for trading to be a zero sum game. Its a neg. sum game at best. There are implications though with short selling; the difference in design between equities and future contracts.
    #34     May 11, 2002
  5. I agree Nitro. I think this board knows pretty who my father is and he has written quite a lot about expectancy of systems. So this isn't new concept to me.

    #35     May 11, 2002
  6. Nitro

    There are some gems in your posts.

    I agree wholeheartedly again.

    By being able to think for myself, have a general view of what is working NOW in this market and what worked before I can trade well and in the future.

    #36     May 11, 2002
  7. I thought you were your father ...
    #37     May 11, 2002
  8. No you're thinking about Darth Vader, he is really Luke Skywalker's father, or the movie "Terminator" where the guy from the future was also his own father.
    #38     May 11, 2002
  9. Miki


    Is it possible that the 25k rule had some impact on trading profits?

    Easy money has stopped coming in - the smart money is more careful?
    #39     May 11, 2002
  10. vinigar


    Evolution is the key here...I think that its both ways ...some strategies that are shared will no longer be effective over time, while others will become even more effective. Next, the adaptability of the particular trader; his experiences, his trading methods and the climate of the market all contribute to a successful technique. Moreover, I think that its entirely possible to SPAM a strategy, getting everyone on the bandwagon, so to speak and then using it to your advantage. Ever place a trade and lose and sit back and wonder if you've been had ? That is spammed into believing that a particular strategy works and everyone else is on the bandwagon....except the guy who spammed the strategy. You see it can go both ways as regards this matter. You must evolve, adapt constantly and stay on top of things, so that you know what is effective any more:)
    #40     May 11, 2002