The only way I believe a computer could out-do a very skilled discretionary trader is with highly advanced artificial intelligence. The system would need to learn to trade much the way a human does. This kind of technology is still very far off... And well, to tell you the truth, it scares the crap out of me. BTW... It is easier to make bigger % profits on a smaller account simply because trading is 80% phychological. If tommorrow I started trading with an account size 5 times bigger than what I have now, I am pretty sure my performance would be altered. Its like war... In a controlled training exercise you may be the best soldier in your group, but that doesnt mean you would do as well in real combat. Fear and anxiety play a very strong role in performance.
I don't want to pick a fight or anything like that, but both your assumptions are absolutely 100% wrong! 1.) Many great traders go on the route to become money managers only to turn back and trade their own money exclusively. The burnout rate is extremely high. If you talk to professional traders like Linda Raschke, Sunny Harris, Tony Oz, Larry Katz etc., you would hear a very similar story. They all turn down offers to manage money. 2.) Cash is a position to the professional trader. Money managers and professional traders can go on for weeks without executing a single trade. Check out the book the Stock Trader by Tony Oz, which is very similar to your June Trading Journal thread. He did not execute a single trade on 4 out of the 20 trading days of the challenge. That is 20% of the challenge time. Linda Raschke told us in her seminar that she could sit on the sidelines for a couple of weeks waiting for the right setup. Tony Oz told us in his seminar that a swing/position trader who can catch 2-5 extreme swings a year can take vacations six months of the year. Here is some food for thought. Suppose you followed Tony Oz's newsletter: http://www.stockjunkie.com/archive.htm http://www.stockjunkie.com/newsletr.htm Let's say you bought QQQ on 4/4 at 35 and sold it at the price target of 44 on 4/18. You would have made 20%. The next trade from his May issue came in on 5/14. The exit was on 5/22. This trade was good for 13%. The next trade was from 5/22 to 5/30 and this one was good for 12%. The next trade was from 5/30-6/7 and this one was good for 11%. The last two trades there were somewhat tricky, so I will exclude them. My point is that by making only 4 trades in two months, you could have achieved returns of 56% (not compounded). All this while sitting out almost an entire month being all in cash. Now, I wish I could say that I followed that road map, but I didn't. I had to struggle with the market day in and day out to make a total of 23% over the same time frame. It wasn't until I read the June issue that I realized that I could have done more than twice as well just executing four trades over the same time period. Time to get ready for the market, I hope our dear friend Alan will make us all happy Bulls and Bears Bill
jmcgraw You said ============ BTW... It is easier to make bigger % profits on a smaller account simply because trading is 80% phychological. If tommorrow I started trading with an account size 5 times bigger than what I have now, I am pretty sure my performance would be altered. ============ I agree wholeheartedly. Larger account size affects performance. However, while this is true, it doesn't mean that it is EASY to make 50% consistently in a 20K account. As I said, 50% is a phenomenal performance in ANY portfolio. Wet
To tell you the truth, I do not think I could tell or program myself everything in my mind, when I go and do a trade. There are so many variables that are in my head that I don't think I can physically put them all on paper if I wanted to. It seems impossible to me. Another thing is I actually love trading, on Sundays I really want to get to work. I don't know what I would do if I coudln't trade, probably spend long hours in the casino.
It really depends on your trading style. Maybe I am too used to day trading but every day I can look back and say there are so many opportunities I missed from my morning research (and I am talking about realistic ones, for example, news hit a sector that should lead to profit yet I didn't do anything). There are position traders who trade in and out of the market every day, there are position traders who trade every once in a while when all of the criterias are meet. I wouldn't call the former gambling, it is of course easy to say "oh today was a crappy day I could have done better had I went to the beach", but you don't know that, you never know what will happen tommorrow, next week, next month, that's why we play the game. As for intraday traders, there is simply no excuse to take any time off whatsoever (except vacations and personal matters of course) . . . I believe one can make money day trading in any environment when played properly, I know for a fact I am capable of doing better than what I have been doing, even in this summer market. My belief is that at equivalent skill levels, those putting more effort into the game will always come out ahead than those who put in less. Sure, me and many traders at my firm could have took last two months off and not miss much (for some even come out ahead), but it is called the love of the game. I have only missed one game this year because of illness. And many of those legendary traders who later chose trading with their own money, USED TO work for a fund company or professional trading firm, that's where they grew their wings, sharpened their skills, and perhaps more importantly, got their own trading capital. My original point was if you are passionate about trading, you will find a way to trade bigger accounts and make more money. And until you do, you haven't accomplished anything yet, I know I haven't . . .
Hitman, Intraday trading is different from swing/position trading. If you are a swing trader or position trader, and you primarily go long (I rarely short, not because I think there's anything wrong with it, but I'm not good at it), then to go long when conditions are bearish is, very simply put, gambling. As I see it, the difference between trading and gambling is drawn with a fine line. If you trade when risk/reward is on your side, you are not gambling. If you trade when risk/reward is not on your side, you are gambling plain and simple. I hate gambling, since I love my capital. Wet
It's not gambling if it's one of a trader's strategies. Some people want the market to be bearish before they go long and some want it bullish before going short. Market psych suggests otherwise though. I personally don't mind market conditions b/c I make the same amount of profit either way. I like to "ride each momemtum wave" and get off before it breaks. Disadvantages: 1)if you don't get out soon enough you will probably wipe out, esp if market conditions are against you. 2)requires intense concentration and dexterity Advantages:1) small consistent profits 2)You can trade whenever you want
MktSkillz You said (wish I could figure out how to quote): ============================================ It's not gambling if it's one of a trader's strategies. Some people want the market to be bearish before they go long and some want it bullish before going short. Market psych suggests otherwise though. ============================================ When you are swing trading, I fail to see how trading in conditions where the risk/reward ratio is no longer on your side isn't gambling. Isn't the "trend your friend"? =========================== I personally don't mind market conditions b/c I make the same amount of profit either way. I like to "ride each momemtum wave" and get off before it breaks. =========================== Sure, short in a downdraft, long in an updraft. But the risk/reward is on your side. If a stock was trending up, you'd short it short term? If a stock began to break down, you'd go long for a short term trade? =========================== Disadvantages: 1)if you don't get out soon enough you will probably wipe out, esp if market conditions are against you. 2)requires intense concentration and dexterity Advantages:1) small consistent profits 2)You can trade whenever you want =========================== You got that right (disadvantages). But if risk/reward is against me, sounds like a better idea to either (a) switch strategies (go long instead of short, etc) or (b) sit it out. On advantage (2), not much of an advantage. I could take a 15 min drive to Foxwoods and gamble whenever I want too. But I don't consider that an edge. Gambling, in short, is putting one's money into a transaction where the odds are against you. Trading isn't gambling when the odds are in your favor. All I'm saying. If you admit that you are trading when the odds are against you, sounds to me like you are gambling. Wet
Wet, I agree with you that trading when the odds are against you isn't smart, but that doesn't mean you can't go long when bearish or short when bullish.As a matter of fact, I only trade when the odds are in my favor during a specific time frame. First you must define the time frame that you are analyzing before you can determine which way the signs point. My time frame is usually b/w 5-10 minutes b/c momentum usually reverses every 5-10 minutes. I look to capitalize on these swings even if it is a .05 reversal. I like to call my strategy momemtum-scalping. I use L2 primarily and TA(overall stock conditions) as a secondary indicator. The advantage is that I can trade no matter what the overall market conditions or indices are. I don't have to wait for the indices to be in a certain direction or for the chart to show a specific pattern since I analyze short time frames. I think this is a big advantage b/c it allows me to enter any stock after just watching it for about 5 minutes and I don't have to "sit out" when the overall conditions are against me. I feel my strategy suits me and my skills and I'm very profitable. But like I said, it takes intense concentration and dexterity. You can't just sit back and wait for the stock to hit all your signals, you must be able to make split second decisions based on your observations.
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