i joined a prop firm a not long ago. Their trading style is very different from what i imagine. i have been spending my time watching the future , reading the tape and etc. Now i am barely profitable, but i am glad i didn't lose much during learning curve. I trade in an office that do a lot of pair trades. i personally don't think that style fits me. Can someone name some other common trading style these days, and is there always a need for a system? are there pure discretionary traders around that make good money?
I'm a pure discretionary trader on the Oslo Stock Exchange. So far this year, I'm up 85% (it's not a small account).
hi fong its hard to say what style is what when a lot of times many of the styles are used together. for example, a good pair trader don't neccessarily base his judgement on statistical analysis only. he looks into technical analysis of two given stocks and even research into their fundamentals. in order to get the best price for entry and exits, the trader may take his time reading the tape and watching the futures/volumn. you see this trader has combined many different styles in making his trades. of course, this is not neccessary for one to become profitable. however, rather than thinking about styles of trading, whats most important to a new trader is to develop a right mindset. noone can really tell you how that can be achieved. but i can tell you having too much strategies and ideas when you first begin can mess up your discipline. trading becomes confusing and the mind becomes unstable while taking losses. its important to focus on learning one objective till you master it and is able to trade confidently especially when you are striving to turn profitable.
well.... i am getting information overloaded....... our firm does much pair trading, and like you said i am just a beginner. i don't think its such good idea to do too much at the same time. so far, all the style i have heard; scalping, swing, pair, trend, and i saw Don Bright's OO forum( its a good strategy, but it only last like half hour in the morning ) i am not in the hurry to get into complicated stuff, making consistent money is my priority now. i just can't help but wonder what my thesis for trading is? what's my strength and weakness, and what style of trading would i use? if any one has any tips on what other skill or style i can work on , or any comments to what i just mention, let me know
Can you elaborate on how you accomplished that? Lots of leverage, 1-2 securities, bet it all on 1 trade? Thx!
Therein lies the problem: having a priority of "making consistent money" while at the same time not sure of what kind of trading you want to do. The only real way to find out which method and time-frame you're best suited to is to just get in there and trade, but it will cost you in the short run. Consistency only comes with confidence, and confidence is only achieved after a long period of trial and error. I think the best route is to trade very small for now while you explore your options; once you discover which direction suits you best, see if you can find others who have already achieved some level of success in that same style and maybe they can steepen (yes folks, the steeper the curve = easier the route ) the learning curve a bit. Good luck!
I tried trading futures longer term, where my best trades lasted 2-4 weeks. I made money, but I was uncomfortable with the equity swings. I tried daytrading stocks, and I found sitting and staring at a computer screen all day was like watching grass grow. Currently I am trading stocks very short term, but with an automated trading system (ATS). It gives me the smooth equity curve of a busy system, yet doesn't require watching the market or making rapid decisions. Jack Schwager showed in his "Market Wizards" books that there are as many ways to take money from the markets as there are traders. To that, I would add that it is important to find something that fits you (your temperament, your capital, your risk tolerance, etc). You have to understand yourself and your unique needs and abilities. Then looks for an approach that fits.
Are you ready to take the time to build a system and follow it blindly? (not a two second answer!) If not, then systematic trading may not be for you. Are you ready to come up every morning with no trading plan and try to capture fractions like a pure scalper? If not, then you may look to combine mechanical and discretionary trading. For inspiration, read or re-read Monroe Trout's interview in New Market Wizards. Also check out Linda Bradford Raschke approach++
In answer to the original poster, I am discretionary and, yes, I do make a few cents out of this game... I tried the emini index futures, and couldn't make em work for me (too noisey and too many fakeouts)... I tried equity options, and found that there were too many variables to consider for my little brain... I have never been net profitable with emini index futures or with options... But I have generally been net profitable with stocks... So I stick with what turned my grubstake into a workable account back in the bubble days: STOCKS... I am intraday primarily, these days, though I am not averse to swing trading... I sometimes carry overnighters particularly if my gut tells me the move has legs... I enter on both intraday breakouts and on reactions, depending on my gut feel i.e. I am discretionary trader... I try and keep risk in check, 0.25%-0.5% of my account on a single trade these days... I sometimes have profit targets, I sometimes trail stops: it again depends on my gut feel... I have rules on risk, but I occasionally break em e.g. if my gut tells me that the trade is a biggie, I sometimes risk more of my account e.g. 1%-2%... Depending on the friendliness of the market and the strategy being used, my hit rate can be anything from 40% to 70%... my reward:risk ratio ranges from 1:1 to 'large':1, where large can be 50... if I get a 'large' it's generally cos I got lucky in a position trading trend (after having entered as a daytrade, deciding to carry overnight and then deciding to position trade it as an afterthought) and was relaxed enough not to bail for a 'rational' profit target... I may get one 'large' trade a year... 'large' trades are nice if I was aggressive (or arrogant) enough to have position sized at 1%+ ... the more I trust my gut, the less stressed out I feel about everything... to delegate the entry and exit decision to a rigid trading system would drive me nuts... For me, trading is artistry, discipline and a bit luck... it ain't really a science... I believe my gut contains information that computers and their scientific trading systems can't contain (but I ain't quite sure what it is)...
Trading, especially short term trading, is about doing what is working now. Opgs, pairs, scalping, news, these are the ways that traders make money in today's market. If you want to succeed, then I suggest that you adapt to what is working now.