If you can make money why don't you....?

[Arch Stanton]

Hi Guys

A couple of quick questions for you if anyone can help.
I am just starting to look into part-time trading and will be reading everthing recommended on this site before I begin, however a couple of things immediately spring to mind.

Firstly, I presume many of you on this site make money by trading on various markets, so, if you can make say £2000 a year why can't you just increase your stakes and make £20k or £200k a year using the same methods?

Secondly, everything I have read regarding "trading systems" for sale have advised me to stay away from them. They appear to be scams with the only person making any money being the person selling the system.
However I dont think this is neccesarily correct.
As I have said, I presume lots of people on this site are making money by trading.
These people must be following some system, whether it is one they have been taught or one they have developed for themselves. If they have a system that works surely they would be justified in selling their succesful way of making money and presumably this is what some of these expensive trading systems are doing?

I hope someone can answer these questions as I am seriously beggining to doubt whether a private trader can make money without inside information.

Thank you.

 

[Mathemagician]

Hi Guys

A couple of quick questions for you if anyone can help.
I am just starting to look into part-time trading and will be reading everthing recommended on this site before I begin, however a couple of things immediately spring to mind.

Welcome and best of luck on your journey!

Firstly, I presume many of you on this site make money by trading on various markets, so, if you can make say £2000 a year why can't you just increase your stakes and make £20k or £200k a year using the same methods?

Because risk increases as well. All else being equal, the absolute risk is 100x greater when targeting 200k than when targeting 2k. You may find this hard to believe, but on the internet not everyone who claims to be wildly profitable at trading has a large trading account to match (makes one wonder how good at trading they really are, doesn't it?) and cannot afford the additional risk. Don't get me wrong, there's nothing wrong with starting small and working your way up. It's just that cuffs and collar don't always match, if you know what I mean, when it comes to peoples' egos and their actual track records.

Secondly, everything I have read regarding "trading systems" for sale have advised me to stay away from them. They appear to be scams with the only person making any money being the person selling the system.
However I dont think this is neccesarily correct.
As I have said, I presume lots of people on this site are making money by trading.
These people must be following some system, whether it is one they have been taught or one they have developed for themselves. If they have a system that works surely they would be justified in selling their succesful way of making money and presumably this is what some of these expensive trading systems are doing?

I belive this is correct but you should know that I am one of these "evil" system vendors so my views are not necessarily objective. Of course, that doesn't mean my views are incorrect, either! There are strong (and equally non-objective) views on both sides of this issue. The best thing you can do if you're considering leasing or buying a system is speak to brokers who execute that particular system and actual clients, both past and present if possible.

I hope someone can answer these questions as I am seriously beggining to doubt whether a private trader can make money without inside information.

Thank you.

Don't lose sight of your goals. It is possible to make a good living trading without being an institution. It's just a different game, is all, with different strategies and tactics for winning.

jj

 

[Mathemagician]

Hmmm... Arch Stanton... Where do I know that name?

jj

 

[Mathemagician]

Yes! The loot was buried in the Unknown grave next to Arch Stanton's in The Good, The Bad, and The Ugly!!! Ha!

jj

 

[Arch Stanton]

Wow, I wasn't expecting such a quick, thorough reply, thank you.

Arch Stanton - the name next to the grave with the buried treasure - ring a bell?

 

[TheBramble]

Firstly, I presume many of you on this site make money by trading on various markets, so, if you can make say £2000 a year why can't you just increase your stakes and make £20k or £200k a year using the same methods?

As jj has already mentioned, if you limit your risk to a small percentage of your total trading capital (which you should IMO), then you are constrained by that risked amount to receive the reward related to that risk as per the R:R profile for your specific system(s).

Secondly, everything I have read regarding "trading systems" for sale have advised me to stay away from them. They appear to be scams with the only person making any money being the person selling the system.
However I dont think this is neccesarily correct.

As I have said, I presume lots of people on this site are making money by trading.
These people must be following some system, whether it is one they have been taught or one they have developed for themselves. If they have a system that works surely they would be justified in selling their succesful way of making money and presumably this is what some of these expensive trading systems are doing?

Why would anyone go to the trouble of marketing a system if it worked so well? They would simply trade it. Wouldn’t you, if you had one?

I hope someone can answer these questions as I am seriously beggining to doubt whether a private trader can make money without inside information.

Well, inside information is hard to beat, but there are degrees of information retrieval between inside information and clueless meanderings and you would be astounded (quite seriously) at just how easily and quickly folk give up their research into what would make all the difference, imagining it should or will be very easy, and they fail to go the extra yard…

 

[Arch Stanton]

TheBramble - thanks for replying.

As you say, it is difficult to scale up a profitable system. In which case maybe that is why people are selling systems rather than making millions with them.

Mathemagician - by the way, what is your system, you sound honest enough!

 

[Mathemagician]

Why would anyone go to the trouble of marketing a system if it worked so well? They would simply trade it. Wouldn’t you, if you had one?

Ah, without a doubt, if someone has ONE good model there's no way it would make sense to market it. However, what if you had a few dozen and were not trading all of them? I don't know of any business that would not jump at the chance to generate revenue from its excess inventory so long as doing so did not harm their existing operations.

jj

 

[TheBramble]

TheBramble - thanks for replying.

As you say, it is difficult to scale up a profitable system. In which case maybe that is why people are selling systems rather than making millions with them.

But I didn't say that, you did.

If you have a system that works, you trade it up. If you don't, then of course, the only way you can make money with it is to sell it.

Mathemagician - by the way, what is your system, you sound honest enough!

Based on what?

 

[MrGecko]

Firstly, I presume many of you on this site make money by trading on various markets

Don't be so sure

so, if you can make say £2000 a year why can't you just increase your stakes and make £20k or £200k a year using the same methods?

Well, this depends on the particular market and strategy that said trader uses; without getting anal about the detail, a trade you make for $2000 might not work if you put down $20,000 (plucked the numbers out of the air). Basically the bigger your positions, the more you are going to be influencing the market - single trades of $2000 dont, trades of $20,000,000 might (again, depending on the product and so on...) move the market. Its a bit like saying "why dont McLaren just stick a rocket on the back of their car, then Lewis is sure to win" - the dynamic and behaviour of the car would change, and this is also true (to a certain extent at least) in the markets.

By far the biggest barrier to this scaling up though is the traders themselves. Even if we have a proven, profitable technique for trading, and we say that we know for certain it will continue to work in the future, and that the size of our trades doesnt make a difference to the behaviour of the market (never going to happen, but bear with me), the way traders treat a $2000 trade is different to a $20,000 trade and so on. There is plenty of literature available, in books and here on T2W, about Discipline, Psychology, money management etc... but in laymans terms, when scaling up most traders choke and balls it up.

W.R.T. Systems, I can't comment because I've never paid for one, and most of my trades are a combination of PA and discretion. IMO, if you want to learn how to trade well, you've got to learn yourself. Then you might get an understanding of why it isnt as easy to go from $2000 to $200,000 as just having more cash.

 

[nine]

Mathemagician - by the way, what is your system, you sound honest enough!

Arch,

Mathemagician can't really respond to that. He is an advisor on this board helping people to find their way around and contributing to clarity in discussions.

He is also involved in the system business. We allow vendors to contribute to the board as long as they don't solicit, advertise, or make a point of their product. His Advisor status is no more an endorsement of his product's capabilities than any of the mail out adverts is an endorsement of those products.

Generally speaking a vendor may have their website as part of their identity so that if people are interested they can follow up. You just left click on a persons name and you'll see if there is a website as well as the ability to send private messages.

Nine.

 

[Mathemagician]

Excellent post, MrGecko. I'd throw you some reps for it if I could. (Apparently I need to spread some around first!)

jj

 

[Arch Stanton]

TheBramble, sorry, didn't mean to misquote you, I know how annoying that can be.

All very helpful replies, the mist is begining to clear.

 

[TheBramble]

TheBramble, sorry, didn't mean to misquote you, I know how annoying that can be.

All very helpful replies, the mist is begining to clear.

Hmmmm. jury is still out...

 

[FXSCALPER2]

People don't scale up because they don't have a winning method, Those who do, scale up.

 

[DC STOXX]

Hi Guys

A couple of quick questions for you if anyone can help.


Firstly, I presume many of you on this site make money by trading on various markets, so, if you can make say £2000 a year why can't you just increase your stakes and make £20k or £200k a year using the same methods?



Thank you.

If you trade a liquid market then sure,

Lets do an example, you have a black box system which trades Bund futures. And lets say it averages you 5 ticks per day.
You may start with a 5 lot, and that would be 250 euros a day, As your account increases you move to 10 lots, now your making 500 euros a day, now your account size is increaing even faster and before you know it your system is trading 50 lots, thats now 2500 euros per day!
Now your capital is increasing at a very fast pace and you are trading 500 lot clips average 25k a day....at this point obviously liquidity and slippage becomes an issue and furthermore not many traders can increase in the way i have just described for various reasons, its all very well on paper and it is possible and is done by traders on their own accounts....

You need to not blow your account in the process though, trading isn't about making a million ticks occasionally, its about making a few ticks everyday with SIZE:smart:

 

[rnicoll]

Firstly, I presume many of you on this site make money by trading on various markets, so, if you can make say £2000 a year why can't you just increase your stakes and make £20k or £200k a year using the same methods?

If I was psychologically up to that sort of trading, I'd be making 3-4 times what I do already, anyway. I consistently close trades too early due to nerves; sure, sometimes it saves me a nasty loss, but most of the time I miss some really nice profits.

As I have said, I presume lots of people on this site are making money by trading. These people must be following some system, whether it is one they have been taught or one they have developed for themselves. If they have a system that works surely they would be justified in selling their succesful way of making money and presumably this is what some of these expensive trading systems are doing?

Most systems people will sell you are "Do this simple thing, and make money". My "system" is; spend 2-3 hours a day keeping up with news. Consider carefully the news, taking into account experience gained from the last few years of this. Predict direction whatever I'm trading will take, based on that. Work out good time to get in/out of the market, based on trends and predicted direction.

It might be possible to do some sort of news analysis using latent semantic analysis to guess the positivity/negativity of any given article, which would be a good step towards automation, but for now it's a lot easier to do it by hand...

 

[MrGecko]

It might be possible to do some sort of news analysis using latent semantic analysis to guess the positivity/negativity of any given article, which would be a good step towards automation, but for now it's a lot easier to do it by hand...

Even if you could manage such a system, it's likely that any "edge" it gives you would get eaten up by the big boys. (I think you can do something similar with a BBG not certain, IIRC one of the conditions of the licence is that you can't send the data out to another comp. Certainly possible for figure releases such as NF though). A good example of this would be the Fed statement today, and the "act in a timely manner" and "downside risks" (or whatever they were) comments; to make it work, you need a "fed watcher", a quant, an IT guy and a trader to put all the pieces together - all before the statement comes out.

Aside from that, you also need to know about the sentiment and positioning of real money going into the release in order to take a stab about how the market might react, so that you can program your trade algo - its great if you can design a system that can automate the interpretation of statements, but knowing this before anyone else does and knowing what to do with it are different tasks altogether.

 

[dcraig1]

Even if you could manage such a system, it's likely that any "edge" it gives you would get eaten up by the big boys. (I think you can do something similar with a BBG not certain, IIRC one of the conditions of the licence is that you can't send the data out to another comp. Certainly possible for figure releases such as NF though). A good example of this would be the Fed statement today, and the "act in a timely manner" and "downside risks" (or whatever they were) comments; to make it work, you need a "fed watcher", a quant, an IT guy and a trader to put all the pieces together - all before the statement comes out.

Aside from that, you also need to know about the sentiment and positioning of real money going into the release in order to take a stab about how the market might react, so that you can program your trade algo - its great if you can design a system that can automate the interpretation of statements, but knowing this before anyone else does and knowing what to do with it are different tasks altogether.

With some exceptions, it's the reaction to the news that counts rather than the news itself which opens quite a lot of possibilites including some sort of integration with other trading methodologies including TA. Possibly the construction of a sentiment index that weights news content against strength of market reaction. Not easy, I know, but possibly more productive than trying to play things like the high frequency trading game.

I have been developing a screener/scanner (actually it's more or less done) and one of the more interesting screening criteria is the amount by which a stocks last earnings release exceeded analyists forecasts. Seems to me there could other relatively simple such news that may contribute to an "edge", but integration with other analysis would be mandatory to realise any edge.

 

[mp6140]

MP --- ATSA NICE PIZZA, and the explanation is pretty good also !

Arch,

Mathemagician can't really respond to that. He is an advisor on this board helping people to find their way around and contributing to clarity in discussions.

He is also involved in the system business. We allow vendors to contribute to the board as long as they don't solicit, advertise, or make a point of their product. His Advisor status is no more an endorsement of his product's capabilities than any of the mail out adverts is an endorsement of those products.

Generally speaking a vendor may have their website as part of their identity so that if people are interested they can follow up. You just left click on a persons name and you'll see if there is a website as well as the ability to send private messages.

Nine.

trade well
mp