Do not confuse passive investing with trading, especially high frequency trading. Those that engage in high frequency trading without a relatively high degree of insight can still make huge profits. However, when these people encounter loss, they are generally incapable of properly handling it and lose big. This is because of the nature of the relationship between fundamentals and price. Over the long run, prices generally converge with what the fundamentals demand. Most people with a decent business sense are capable of gauging fundamental fundamentals (yes, I repeated the word twice on purpose). Through a relatively passive, long term strategy, it is not too difficult to end up profitable or break-even using this approach; This is the approach that most people should take. When it comes to short term, high frequency trading, price is motivated more heavily by other factors that are much more difficult to assess. Furthermore, exit and entry points generally need to be much more accurate. Assessing this information accurately on a *consistent* basis, and being able to derive a profitable execution plan requires far more insight than passive investing. In this approach, losses are encountered far more often, further exacerbating the problem of people not being prepared for loss. "Complex" approaches to the market aren't put in place primarily to make profits; They are so that the losses can be handled, which in turn ultimately yield larger profits. After all, you can think of any profitable strategy as a sequence of trades, with the "bad" trades being eliminated or minimized. The value of insight when it comes to wealth is not primarily in the process of creating wealth - it lies in the ability to stay wealthy and replicate the process. Hence, a fool might find gold, but the smart man is always making money selling shovels. Look into people that are profitable over a long term. You will find that the *majority* of these people are very thorough. Last, but not least, companies tend to take the most profitable, efficient, minimal effort approach to decision making. If the notion that "Keep it simple is the most profitable trading strategy" were true in absolute terms, companies would not be offering 500k salaries for highly educated quants - they would just hire random people and save money. These people still try to keep it simple - it is just that their version of simplicity is leagues above what most people consider complex; More specifically, they choose "the simplest implementations of complex matters".
The answer to your question was in my post, "..a fool might find gold, but the smart man is always making money selling shovels.". By "work", I take it that you mean being employed by someone else. You can be employed for someone else, and still make a ton of money. There are employees at Goldman Sachs that make more than the CEO - the term "employee" does not necessarily mean lower reward. More specific to the case of the quant: Being employed for a good organization often provides access to resources and capital that one would not get on their own, or would take an undesirable amount of time to attain. It also allows a person to operate free of many of the burdens associated with being a lone wolf, such as having to directly deal with investors. Also, many quants get performance pay on top of their already high salaries. Check the job boards at Wilmott - you will find many job postings with high 6 figure (or even 7 figure) salaries + performance pay. The consistency of this pay compensates for a potential - but less likely - chance of higher pay-day working alone. I am graduating soon and I can trade on my own, become a quant for a company, or go into a completely different field. The amount of capital I would have access to on my own, even with significant returns, would not yield as as high a salary as a well paying quant job when adjusted for probability of attainment. However, that consistent salary through employment is significantly higher than what most traders will ever make. I am smart enough to know how smart I am not, and hard-working enough to become smarter. Hence, I would ultimately like to work for myself, but I will make that move based on what is most profitable, not based on pride.
Contrary to the amusing suggestion of the thread opener that only as a dumbass can you become rich, no, dumbasses do not make themselves rich. Also, as already pointed out, some small time 'invest and hold' is not trading. As well it is misleading to think that simple trading as an approach by a raw newcomer will work. It won't. It is only from study, knowledge and experience that an amateur trader learns how to simplify what he or she is doing. That is not simple; it merely becomes simpler as the result of extensive learning. OK so now lets cut to the chase. Assume day trading in a liquid and volatile futures market (eg CL). Assume trading the swings of each days price gyrations, open to close. Assume there must be triggers for entry and exit/reverse in order to be taking net gains from each successive swing. Now where are we? Well, next, two qualities are required for a successful trader: sufficient savvy and a trading temperament. You have to find a reliable methodology (this requires savvy) and you have to implement your methodology (this requires a suitable trading temperament). A trading temperament is timely trading: fast trades or slower trades as needed in alliance with patience when not to trade - an overall combination that eludes most. And so then triggers to trade must be in place. Triggers can be precise which I wager is a surprise to most on ET. But you will want to include in your methodology some sort of on indicator which should be an on-chart indicator (for example MACD and stochastic are not on-chart indicators). You can have something workable which is not precise and not even an indicator. You may be reading set-ups. I use precision. I have lines intersecting price, that set fast triggers in a gradient to slower triggers. And I work off fast and slower charts.
There are two ways to go. One is to bet on the US and world economies and just buy and hold good companies. So far that has worked well. A variation on that is value investing and that entails a little market timing, buying when the price is best... a simplification of that is simply to buy only when the major indexes are down to a significant point using some TA, that has worked well so far... The other way to go is to assume that everything is spelled out in a chart, learning to interpret price and volume and price/volume combined, s/r, and learning the various patterns that price can form up... the latter method provides a very nimble capability but it's very, very hard to learn since nobody shares their knowledge very much... once mastered it will never leave one flatfooted in a meltdown... [unless one has technical problems with their chart package and broker and can't exit a position without experiencing a panic moment as in what happened to me the other day ] The argument tires me as to which is best because I have the question well defined, have investigated the methods, success and failures, etc, of each and most people that want to argue will never do that... the obvious answer is to work and do the long term things, work on daytrading in spare time and eventually there is no argument, you will master both and do both. If you can set up your finances so that the worst case scenarios of each way don't detract from the effectiveness of the other you will sleep well at night...
from experience and someone can correct me .......it's hard to go for home runs with a win rate of under 50 pct tho. That's the kicker. Precision wins.
Yeah, managing the good winner correctly after a series of losing trades is one of the toughest emotional challenges in this business. And, IMO, that is the reason why so many fail to trade simple trading methods, which have relatively low hitrate and why these low hitrate high R/R methods are the most profitable.
Entering with the lowest amount of heat possible is key because then you can use as much leverage as possible and you can kill the loss ASAP should you be wrong. Then as far as the exit you take what the market can give you whatever that may be either by trailing or scaling. But learning about those no heat high probability turning points is what really takes you to the next level. NH