I think it's "that 95%" who try to make trading too hard. Each trade is a gamble. Now, "probabilities", that's a whole other story. The definition of gambling is different than the definition of probabilities. Each trade is a gamble. (Oh, did I already say that?)
I was just thinking about this last week. I spent 2 days in sim doing the opposite of what looked like a good trade. I'd go short where I'd normally go long, and put in a buy limit where I usually had a stop. (Amazing how fast some of those buy limits were filled on a quick spike down). Anyway I still lost. I'm still not sure why. I mean I know my losses were big & my wins were small which explains it, but there's something more to it. I'll have to think about this some more.
The problem is that traders look for logic where there is none. Too many unknown unknowns. "There are many ships at the bottom of the sea. I am quite certain all of them had chart rooms." --Rick Santelli
============= Mr Mac-a -TT Good points on plan- we used to gamble/take quarters out of pool halls[teenagers]. Frankly that was gambling, not sure it was legal, police occasionaly walked in walked out, dont know why. But a casino is not near as happy with winners[''card cheats'' they call them] as; an exchange/stock broker are happy/reward winners etc... - BIG difference. ================================ Mr Mac-a TT; One flaw; planning is not execution because of not limited to- -gaps, slippage, comissions, storms, droughts, floods/shipwrecks, suprise rate cuts/increasses.......................................... Australian trader named Guppy wrote something i never forgot; ''never confuse a high probability with infallibility''. Australian trader got his trading office flooded OUT. Mine[TN ,USA]lacked an inch or so,[to flood] one year[14 inches of rain] in one month, average 4 inches per month. PS I am not saying .25 is a good target just because it worked with smoke filled dim lights,teen age pool hall gambling murray TT
Incorrect. Trading is not gambling (legal) in a very fundamental way. Trading is based on information. Information is not equally disseminated in the market. Actually, it is more than inequal. it can be polluted - ie. rumor, incorrect news (intentional or not), etc. Hence, people lose money on that disparity. Gambling in reputable casino is a fair game in terms of information exchange. The dealer/house knows as much as you regarding what cards will be coming from the deck. So you are on equal footing against the house in terms of information. Mathematically, you are not. To compare gambling to trading, you would have to setup a game where some people can see all the table's cards, while others can't. And they bet against each other rather against the house.
These are good thoughts. However, many new traders start like you are. They start with a plan. The problem is the plan isn't based on the reality. A good example is a trader starts with okay, I'll risk no more then 4 points on this trade, I'll do this or that, yadda yadda yadda. But, does this or that work? You see if trading is like gambling then what is your edge? Some ideas sound reasonable but aren't supported to be reasonable, i.e I'll make 4 points per day trading the ES and risk no more then 1.5 point per trade. But, you can't know that if you don't know it. But you see what you are trying to do is next to impossible. I mean that, if the average trader compare himself to my abilities to predict the market then I'm like the 300 pound hulk made of pure muscle. Yes, there are training techniques, things I've learned.. But, I found what my body responded too. Most people can get to a certain level of training but then they plateau. T You see what you are trying to do? If you do what I do then what you are trying to do is really simple. But just because it simple doesn't make it any easier. This is why it is so difficult! Now, there may be other traders who have another edge where they are superior to anything I could do with that. An example, I know a trader who has some phd's, very math savvy and sees the market mathematical. While I'm a strong programmer, I'm not good at all at math. I could never be successful if I adopted his method and even if I were then it wouldn't be meaningful for me. You see, trading is a necessary act of service for me because I have such strong talent in it. I didn't get into trading to get into trading: I got into trading because predicting the market was one of my strongest abilities. Now, did I always have the talent? I had some talent but it had to be developed by training. But, I wouldn't have persisted had the training not continued to pay off. The first rule of gambling is to focus on your strengths. But, how do you know your strengths? This is difficult. You have to only do what you are best at. Plans can come later. Planning may be necessary but is no where near sufficient for success. I did all the planning stuff myself too. This or that. I can tell you it didn't prove beneficial. What proved beneficial was to find and focus on my strengths. That should be your plan. Sometimes you can develop new strengths if they build on existing strengths. A good example is I started by predicting 1 or 2 day momentum swings. I was calling direction. The past year I learned to trade off the momentum from the open. This is a different method but still used my strengths. I also developed a different style where I would take out a measured move of say 4 or 5 points (using a large risk). This is a different way of trading but still taking advantage of my strengths. I even have programmed systematic futures strategies. This is an entirely different method of trading. But, the results were strong so I started to trade that. Again, this makes use of my programming ability. You won't see me however doing advanced calculus to find an edge or studying the balance sheets of a company because that's not a strength of mine. That's too far and away. These are good thoughts and you might like my "The Logics" http://www.elitetrader.com/vb/showthread.php?s=&threadid=221630 I would encourage, also, that whatever model you come up with is both sufficiently complex to model the market with some degree of realism and yet sufficiently simple to allow you to act on a regular basis. Let me say, such a conceptual model is not trivial and is something I'm not willing to give away. You may look at SMB's training methodology though for a methodology that seems better then some others (what they give away on their website -- never took any training they offer). In the Logics, this is referred to as the The Foundation. I don't understand what Ray Barros talks about half the time but his methods seem like a worthwhile starting place for building a sufficiently complex Foundation. The important thing is not just to focus on technical analysis.