Worst market ever?

Discussion in 'Trading' started by daniel_m, Apr 21, 2002.

  1. 2001-present is the first End-Of-The-World-As-We-Know-It that I've been through as a trader. For those that can remember, how does it compare to other "periods of adversity", like S&L crisis, '87 crash, 82 recession, 74 recession?

    My estimate: I give it 15 years max before we are all irrationally exbuberant again.

    Daniel
     
  2. Same stuff, different day.
     
  3. Sometimes I ask myself this question: can you become a great trader, a million dollar + trader in a sideways market? I mean can anybody mention a trading legend who didn't make it first in a raging bull market or a new, inefficient market ? Or should all the small traders stop and come back in 10 years?
     
  4. tuna

    tuna

    Interesting...,From only starting full time a little over a year ago i think the ability to adapt is a BIG issue.
    I know you guys think "loser" as soon as anything under $1 is mentioned but maybe its time to open up your minds a little...
    last week ADSX,RAZF take a look..Fonx a few weeks back too.. theres movers around i think we just got to have the gear to get on top of em quick...
    Nasdaq moving sideways take a look down in the pig farm.. Adapt...somethings always moving its just a matter of what..
    Must agree tho it must be alot less stressfull and better for the pocket in a bull run.
     
  5. Babak

    Babak

    shhhhhh! keep quiet!! :D :D
     
  6. tntneo

    tntneo Moderator

    LOL babak :)
    sideways market are easier to trade. I don't understand why so many just don't get to this idea.
    granted, a bull market makes you money without much thinking. but trading as a biz is not about a bull or bear market. the best markets go nowhere, they are the predictible ones.
    bull markets are dangerous because you don't know when they stop (and many got caught, unable to adapt to a bear market). bear markets tricky for the reversal (and shorting).

    this is not the worst market ever.
    the direction of the market does not matter that much, up down or sideways, as long as there is volatility. also, traders should be more opened and trade what can make them money (strategies and markets).

    my reply is for traders (this site is about trading). for investors it's another story. there, the market is tough and possibly could get much worse this summer or fall or later. Speculative bubbles don't burst without lasting effects.
    In that context I am glad I manage my own investments and that it's possible to trade.

    tntneo
     
  7. "There is no bull side or bear side for a trader. There is only the right side."

    Successful traders can make money in any kind of market, whether bull, bear or sideways. Even in the current sideways market, there are mini trends that can be played on both the up and downside. There are also traditional trends that appear during certain times of the year. For instance, as we approach summer, traditionally that has been a time when the market slides downward. The beginning of the year is traditionally the January effect when the market goes up. Learn these trends and take advantage. Read Tony Oz' book "The Stock Trader" to see how he still made great profits on the long side during the crash of 2000.

    Selling naked options in a stagnant market is another option (pardon the pun) for a successful trader. In those situations, a market that goes nowhere is exactly what will put the most cash in your pocket. The point is that there are myriad ways to profit in any kind of market. The problem happens to traders who are only used to trading one style or way and can't adapt to different conditions, like long side only or short side only traders when the overall trend changes, or scalpers when volume is light, etc. The best traders have learned as many different ways to make money as possible, and adapt to the situation rather than try to make it what they want it to be.
     
  8. I shouldn't have called this thread "worst market ever?"...I certainly don't think it's even a "bad" market (let alone the worst EVER)...I'm having a ball in it!

    I started the thread in response to a comment made by MissedTheBoat that the next bull market (or period of irrational exuberance) was decades away. I personally believe that it won't be more than 15 years. (There may or may not be a speculative "bubble" again - and I'd fall of my seat if it was tech stocks again.)

    I really wanted to get some traders who traded through other times of recession, national crises or periods of pessimistic sentiment (91,87,82,74 etc) to comment on the similarities/differences between then and now.

    On reflection though, since most of us on this site day trade, I guess I'm unlikely to hear from traders trading during those times.

    Daniel
     
  9. Brandonf

    Brandonf ET Sponsor

    My opinion is that people fail in trading for pretty much the same reasons people fail at other things every day. They are not willing to put in the work, they are not willing to be self critical <b> in a positive way </b> and they can't take the pain of loss to their ego's. Everything goes back to the mean in trading, and that would logically include the number of traders. The week of the 8th to the 12th, I didnt do anything right. I took 21 trades (which is more than I usually take) and took stops on 16 of those trades (much higher than my normal ratio) Obviously I was doing something wrong. <b>NOT THE MARKET, ME! </B>

    Last weekend I had to evaluate my results. Anything less would be to let myself and those who depend on me to be at the top of my game down. Here is a brief analysis I sent out, and I hope that maybe the format, and the idea behind it, can help some of you who are having a hard time with "This market".

    --------

    As traders we are our own best teachers, and experience gives us most of our most valuable lessons. In particular, losses or a string of losses present us with excellent opportunities to access and evaluate. A trader can turn losses into a strength, or let them destroy him/her. This is what separates the pro and the novice.

    Losses and strings of losses occur for one of two reasons. Mathematics, that is every system has an expected drawdown and the longer you use it, the more likely it is you will run into the loss cluster, or Discipline. When you loose focus and discipline, a drawdown will always follow. When in a drawdown, we must evaluate which of these caused it and take the appropriate action.

    As anyone who is a member of the Live Trading Room knows, I ran into a loss cluster last week. At weeks end, I had two positive days and three negative days on my account. Net, I was produced a small loss (small because I realized I was not "in synch" with the market and reduced my size.) This weekend then, my job was to determine why I had this loss, and what I can do about it going forward.

    The flip flop nature (up one day, down the next, choppy) of the market last week was very difficult for me. I hate it when traders say something like "This market is impossible" because its simply not true, you can trade any market, its simply a matter of having the discipline to do it. "Difficult" market conditions are NEVER an excuse for a breakdown in discipline no matter how much we wish it could be.

    The biggest mistakes I made had to do with fighting the trend. One problem I have struggled with through out my career as a trader is that if I miss the first few swings on a trend day, then I have a very hard time going with that trend. Once I miss the first few swing moves, I have a habit of then trying to become a top or bottom picker. This is something I need to work on if I want to bring my trading to the next level. As we all know from experience trend days have a habit of becoming very overbought/oversold and then becoming more so.

    I let a few losses distract me from my overall plan and confidence level. I lost my edge by loosing confidence. On five occasions I had a trade stop me out, and then almost immediately give me a signal to re-enter. I did not take any of them, and of the five only one resulted in a stop. Had I taken them all, instead of having a loss I would have had a near average week.

    The next mistake I made was another that I have a tendency to make when I start to experience a drawdown, and it has to do with patience. This occurred on two levels. I was not patient in letting something I was in work out (Example, from Friday CAT short), and on four occasions I entered a trade before a proper setup had occurred out of fear that I would miss something.

    I did do some things right, most of them related to risk control. Despite that fact that it was a "bad" week, my loss was less than 2 1/2 % of equity in my account. When I realized that I was not performing at peak levels I reduced my position sizing. Had I not done this, the loss would have been over 10%. This re affirms that risk management is THE SINGLE MOST IMPORTANT PART OF MY TRADING PLAN. Without a firm plan in place to handle loosing periods, I would have been taken out of the game long ago. Its also very important for a trader to maintain a positive attitude at all times, and I feel I did a good job in this regard. I did not blame "the market" for my mistakes, and continued to focus on opportunity and not adversity.

    Coming into the new week it is important that I really focus on the basics, continuation patterns in bigger time frames, reversals in the shorter ones and Oops patterns. When things are going very well you can afford to try some fancy things here and there, but if you find yourself out of synch, you must get back to the basics. I also need to further reduce my risk profile until I get a few wins under my belt to prove to myself that I'm back into my game. Once I have done this, then I can go back to trading sizes that are more in line with my account size

    Brandon Fredrickson
     
  10. just21

    just21

    From Barrons this week.......

    By LAWRENCE G. MCMILLAN

    The current market is a bumpy one. Recently, the Standard & Poor's 500-stock index oscillated -- up one day, down the next -- for about a week and a half, and the same pattern held for S&P futures and the breadth of the Nasdaq market (advancing issues minus declining issues). But because these daily movements offset one another, they've kept the market range-bound.

    In fact, option buyers have struggled with ever-decreasing "implied" volatility (the option market's projection of how much the stock is expected to move during the life of the option) and a directionless market. Option sellers might be profiting, but there is an inherently large risk in selling options when volatility is too low, a risk that is unacceptable to many traders.



    ....I made nearly 20% of margin used selling out of the money calls and puts last expiry cycle. This included getting delivered on some three of twenty out of the money puts and calls that were in the money by expiry. I know volatility is low and I am at risk of a volitility "event". Am I taking an "UNACCEPTABLE" risk as larry puts it?
     
    #10     Apr 21, 2002