Quoted from austinp: Ex-floor traders seem to struggle more than any other profession when it comes to retail trading. Everything they learned = did on the floor which worked to facilitate order flow absolutely gets them killed on our side of the screens. Unlearning old tactics and embracing new ones is one helluva tough struggle. austinp, I'm curious, are you an ex-floor trader? On what eveidence do yuo base this statement? This comment flies in the face of everything I've ever seen, and I AM an ex-floor trader.
<b>T56</b>, I should refine that to say doctors and floor traders (in my experience) seem to struggle most. I've worked with several hundred traders since early 2000, first with a large (at the time) options website and otherwise after that. What I've experienced with floor traders is the following: #1: Persistence on fading direction... always trying to buy dips and sell rallies. #2: Persistence on scaling into = adding to losing positions. Market goes against them? Cost average down #3: Persistence in cutting profits short... scalping out at the first hint of black in the account. #4: Extreme reluctance to hold trades for 30min, hour, two hours if necessary. Once a trade is opened, seek any excuse to "bail out" asap. #5: Persistence in fighting a poor day. When price action is flat, keep taking trades long & short, dig a big hole while trying to make something work, rather than standing aside. ** Last year I began working with two guys as a team, both very personable and intelligent. One was an ex-floor trader, one had little trading experience at all. Both began trading the exact-same method approach, same emini markets. The floor trader insisted on seeking "fade trades", over-traded his account, blew out and took a couple months off to regroup. The inexperienced trader studied hard, worked hard, followed the market, followed the tools and has succeeded greatly. Only two net-loss days all month so far, very profitable in ER. His former partner (floor trader) is ready to try again, feels he has personal issues worked out. I believe he can do very well in time, but we discussed the liability of floor trader experience as it pertains to being off-floor on the retail side. Heck, I've overcome a lot worse problems = shortfalls as a trader than most anyone else. Floor traders can have some strengths of experience too, but I've witnessed a lot of bright, savvy guys implode as retail traders while leaning on the past tools that worked for them in the pit.
ur right. my style that i developed on the floor back fired on me big time... down there i had all the capital in the world to influence price behavior.. but now with limited money and buying power, im not realizing that i have to conform to a new style... and i paid dearly for that... i picked up snowboarding in one day cause i never skied.. not only did i get fvked by hybrid and lost a career.. but it screwed me twice... god darnit!
Hi austin, Yuo make some good points, and yes, floor trader do tend to trade the way you describe. The really good ones however, use a great deal of discretion and judgment, and did not just relexively trade as you describe. Most of the guys I knew who were actually good floor traders used the order flow and volume to gauge the market. The guys who averaged down/up were most often market makers who were constantly quoting a two-sided market, so they'd end up with postions all up and down their cards, and thus all up and down the price. I'll wholeheartedly agree that simply buying the breaks, selling the rallies, and averaging will be the death of most people, but those whom I've known to be good on the floor didn't have much trouble being good off the floor. They struggled a bit initially with order execution mechanics, and of course, if you're paying anything more than clearing fees, then making markets is tough (I don't yet see how that could be done retail, especially in equities, maybe in options with wide spreads...) My point is that good trading skills will generally transcend specific environments. I do agree that doctors make horrible traders generally, as do engineers. Had both in the family, and I think it has to do with the need for precision and certainty - necessary in these feilds, but much more ephemeral in trading.
What trading school did you go to that advocated averaging down? If you have the right training I think you can be successful doing this. It all comes down to the training and discipline. I have a Black Lab that I trained to do his dumps in the toilet in the downstairs bathroom. He even pulls the lever and gives the OUst air freshener a blast before he turns out the light.
A perfectionist who has learned that failure is ok can learn to trade. I was one such person. Perfect to a flaw (Oops, I was imperfect, but you couldnt tell me that. LOL) Being an engineer. The wisest pc of advise came from a psychologist. He told me quit trying to be so perfect. You spend more time trying to be perfect when you probably got it working better than 90% of the people out there in the 1st 10 minutes. The last 50 minutes you've just been wasting time. Loosen up a bit, and have fun with life. Trying to be perfect will eventually stress you out. Class A personalities have this bad. I've only been trading for 4 months myself (this go round. I got burned a few years back, like alot of us Perfectionists who were clueless) This time I started small. (100 to 500 share lots) and what I learned most (which is what you may have missed) is Money Management. Watching those losses has allowed me to be up, not down. While you are panicking, step back. Study Risk/Money management and look at all your mistakes and jump back in. As others have said, never average down in a losing trade. Thats insane. You might as well hit Harrahs and bet it all. At least you'll get a free drink out of it. LOL. Honestly, since rejoining the fold, I avg 3 out of 5 losing trades, but those 2 winners. Biggest thing is I keep my losers SMALL and I jump out QUICK. It's like being in the middle of a gun fight and you dont have a gun. Dont stay, you'll get shot.
Haven't read thru the whole thread but you might consider swing-trading first. It's not as harried, you're holding for a few days or wks at the most so it's still short-term, but you don't have to stay glued to the mkt 24/7. There's less noise. You have more time and leisure to think things thru. When/if you start having consistent success at it, and it may take yrs, not months, then you could consider trading on the shorter timeframes. H
ur right.... i need sometime off.. and re evaluate things.. i was running on empty.. chasing lost money not focusing on money management... fear that i will lose more dug me a bigger whole... its just like trying to quite smoking.. once one realizes how bad cigs are, and all the propaganda surrounding it... what do they do.. chain smoke 5 more.. from the outside.. its really pathetic... but since i have the human flaw of emotions.. some bad ones tend to take over the drivers seat weather i like it or not.. real bummer when i see it clearly. there is hope.. i need to relax.. cause i do have skills.. and im noy bragging either.. i look over my trades.. at least 60% are in the green the second i jump in.. i have a good feel of the momentum of stocks.. its just when im wrong... my process of thinking goes haywire.. not always.. but u wanna laugh.. i lost the 15k in 6 fvkin trades.. and if u count the money i made trading right... bout 6k.. it adds up even more
Proper risk management will tell you when to get out of a winner or a loser. If you are up 500 and it tanks, where was your exit defined??? Like you said, emotion got the best of yu. would it have been so bad to jump in get up $500 and possibly jump out when it trailed back to you only being up $300??/ Do that a few times and the winners pile up. Take a break and come back refreshed. DOnt wait 5 years like I did. LOL. I wanted to get back in the game in 2003, but my failures held me back. I jumped back in (tepidly) in June 2006 (the middle of the correction no less. ) Then 4 months ago I decided to get serious. I look at my mistakes and realized it was risk management that I was missing. Once I focused on that, I started making money and not giving it back. As a matter of fact, I watch movies while I trade. I forces me to stay relaxed. Nothing like a good comedy while I am stuck to my monitors watching the numbers.
Adjust...the markets are bigger than you..probably nothing you can know more important than that...it's like standing in front of a herd of elephants telling them to turn around...it's better to watch where they're going and either follow along or wait for them to turn around. Get $25k in an account and trade it...$25k will keep you borderline so you likely won't be able to daytrade and if you do and lose anything you'll be unable to anymore...swing trading and trendtrading are nice...find what suits you and do it in small amounts. Hey, I'm sure I make more than most day traders and I'm sure I also have about 10% of their stress...so find something that doesn't keep you up at night and work on it....you'll eventually feel suited to one thing or another. Good luck