The Pro's "je ne sais quoi"

[DionysusToast]

if it's nonsense, why are you agreeing with the idea?
:clap:

if putting a stop at a ta level isn't so bright, surely some other 'random' place such as x points dictated by some strange concept of 2% of account size being risked is equally thoughtless.

at the end of the day, the whole concept of a 'stop' is to get out when you decide the market is no longer in your favour. does one print at some 'magic number' really tell you that probability is against you, or would that best be decided to see how the market reacts at that level over a few more prints (eg)?

to have a target and hard stop and waiting to see which gets hit first is just a gamble. it isnt speculating. even if a target is x times further away than the stop, your still flipping a (slightly weighted?) coin.

a trader need to learn how to read a market and manage the trade. not simply bail (win or lose) because some price has printed that is significant to the trader and the trader alone.

Charlie Chan - let's say for a second that you'd never placed a trade in your life - then your observations would be correct.

On the other hand, let's say you have some discipline and keep a journal of your trades and you are fairly consistent in the reasons for taking a trade.

Over time, you'll have a fair idea of how much room any specific trade needs before you know it's gone wrong. It's not very scientific, I know.

I don't get, nor do I need to get my entries spot on & this leads me to need a stop loss of some sort. Perhaps others can 'read the markets' with the accuracy you suggest. I rather think this is an extremely small pool of people. Especially when it comes to day trading where there is a lot of noise.

The market cannot be read all of the time, so to suggest that you can just 'read the market' when the trade goes against you is presuming there's some pro 'market readers' out there who can at any time tell what's what. If a market is slowly grinding against you, there's no real way of telling when it's going to turn - momentum isn't really on one side or the other, it's fairly even but it's grinding down. These types of market are very tough to read, although I guess some these mysterious 'pros' can do it.

Now - I'm all for getting out before the stop is hit if it's the market can be read but you have to draw the line somewhere as the market is very often vague.

 

[oildaytrader]

True - but Clint in Miss Moneypenny would have made up for it.

We need Dirty Harry to clean up Wall street's den of thieves.

http://www.fastcompany.com/magazine/58/jellis.html

 

[charliechan]

CC, you're right of course, simply being employed by a bank does not make one a master trader.

But let's go back to the original point of the thread .. why do "pros" make money.

The simple answer is they have clients. Retail investors do not have clients.

Are the "pros" all brilliant and disciplined traders? No, some of them suck but they have clients from whom they make money. Howie Hubler (he of MS fame) made money for years off his clients. When he then headed up a spun off prop unit within the bank, he nearly took the bank down with him.

I have two main points really -

1. stop imagining that institutional traders are all amazing.. I would estimate the ratio of brilliant traders to be fewer than 10 pct. The profits come mainly from clients.

2. you can intellectualise stop losses however you want, but for the vast majority of traders, not entering a stop when the trade is entered is a route to disaster. You, CC, are different and I commend your discipline, but it is unusual.

Agreed.

 

[charliechan]

Charlie Chan - let's say for a second that you'd never placed a trade in your life - then your observations would be correct.

On the other hand, let's say you have some discipline and keep a journal of your trades and you are fairly consistent in the reasons for taking a trade.

Over time, you'll have a fair idea of how much room any specific trade needs before you know it's gone wrong. It's not very scientific, I know.

I don't get, nor do I need to get my entries spot on & this leads me to need a stop loss of some sort. Perhaps others can 'read the markets' with the accuracy you suggest. I rather think this is an extremely small pool of people. Especially when it comes to day trading where there is a lot of noise.

The market cannot be read all of the time, so to suggest that you can just 'read the market' when the trade goes against you is presuming there's some pro 'market readers' out there who can at any time tell what's what. If a market is slowly grinding against you, there's no real way of telling when it's going to turn - momentum isn't really on one side or the other, it's fairly even but it's grinding down. These types of market are very tough to read, although I guess some these mysterious 'pros' can do it.

Now - I'm all for getting out before the stop is hit if it's the market can be read but you have to draw the line somewhere as the market is very often vague.

2 points you & the thread make:

1/ gauging market - very few people can do it
2/ whats the difference between pro & loser?

are you starting to notice a correlation?

you make a point about markets sometimes being hard to read and a 'pro' being able to make money out of it. this raises another 2 points:
1/ if momentum is the game plan, then a 'pro' wouldnt trade that market. a traders job isnt to trade, a traders job is in fact to do nothing - squat, most of the time. in truth the market rarely gives 'sure' opportunities worth trading.
2/ a 'pro' may be able to make money out of a non-directional market just as well as a retail guy IF his game plan is to trade balanced/efficient market periods as opposed momentum/trending/in efficient markets.

it doesnt take a pro to see if the market is directionless or not as you know. you just need the right strategy for the right market cycle/phase, and sit on your hands if you are unsure - usually when the market is between the 2 phases. the transitions between the 2 phases does indeed make the market hard to read as your rightly say. this is the phase where money is mostly lost from those who just cant stop themselves getting some market action, who think they need to be in the market if they are to make money - probably from some work/effort ethic that comes from a professional/rat race environment, but is a poisonous attitude for a trader

 

[charliechan]

i know i'm gunna get shot down for this, with accusations that the poster is an alias of mine given its his 1st post, but it isn't. honest.

http://www.trade2win.com/boards/general-trading-chat/103396-stop-loss-statistics.html#post1249538

 

[DionysusToast]

2 points you & the thread make:

1/ gauging market - very few people can do it
2/ whats the difference between pro & loser?

are you starting to notice a correlation?

you make a point about markets sometimes being hard to read and a 'pro' being able to make money out of it. this raises another 2 points:
1/ if momentum is the game plan, then a 'pro' wouldnt trade that market. a traders job isnt to trade, a traders job is in fact to do nothing - squat, most of the time. in truth the market rarely gives 'sure' opportunities worth trading.
2/ a 'pro' may be able to make money out of a non-directional market just as well as a retail guy IF his game plan is to trade balanced/efficient market periods as opposed momentum/trending/in efficient markets.

it doesnt take a pro to see if the market is directionless or not as you know. you just need the right strategy for the right market cycle/phase, and sit on your hands if you are unsure - usually when the market is between the 2 phases. the transitions between the 2 phases does indeed make the market hard to read as your rightly say. this is the phase where money is mostly lost from those who just cant stop themselves getting some market action, who think they need to be in the market if they are to make money - probably from some work/effort ethic that comes from a professional/rat race environment, but is a poisonous attitude for a trader

No-one can read the market all of the time in my opinion.

If you are taking outright positions (which is but one style of trading) and you are not moving the market yourself. Then you will wait until you are fairly sure that the market is about to do something. It may be that a lot of the time, you are seeing noise (aka the unreadable). As you say - you will be waiting for conditions to be right, I would also say that you are waiting for conditions to be readable.

Now - as things go against you - what is to say that the market is now readable at all ? Are you saying that the market is readable at all times by certain people YET these same people also sit on their hands most of the time ?

If the market was readable all the time, then there would be no reason at any time not to be in a trade. You'd never sit on your hands because you'd always have a read on where the market was headed and trade accordingly.

There are of course trades that do not need stop - there are options strategies where there's a maximum risk which occurs at a certain price, where a loss will occur only if price ends up within a certain range.

 

[Shakone]

I don't understand this argument. You have to have a hard stop. Your connection and phones could die, your office could be on fire, your computer could give you the blue screen of death, you could have a heart attack. You have to have a stop.

The more you understand about market movement, the more you can find a decent size stop that will get you out if you're wrong. Nothing to say you can't get out earlier with a mental stop, but you'll still have a stop.

 

[charliechan]

Now - as things go against you - what is to say that the market is now readable at all ? Are you saying that the market is readable at all times by certain people YET these same people also sit on their hands most of the time ?

If the market was readable all the time, then there would be no reason at any time not to be in a trade. You'd never sit on your hands because you'd always have a read on where the market was headed and trade accordingly.

.

it doesnt matter who you are: george soros or ODT. sometimes, you must say you cant decipher the probabilities. this is natural. it is an indication the market is in a transition phase relative to the frame through which you are looking at the market.

if at this point you arent in a trade - you stay out or look at a different market.

if you are in a trade, you either tighten that mental stop/alert to a ZONE (not a price) you think will invalidate your hopes and see if things are more clear at this level, or you exit. you can always get back in again remember if you want.

i dont anyone has an understanding of the market all the time. shifting out a frame may well give more back ground/help, but nothing is certain is it.

 

[GammaJammer]

It stands for oversexed and underpaid traders.

Define 'oversexed' please ODT. Touch of sour grapes?

 

[meanreversion]

it doesnt matter who you are: george soros or ODT.

Oh my! Please let that be the first and last time Soros and ODDT (oildaydemotrader) are mentioned in the same sentence, ever again !!!

 

[GammaJammer]

Oh my! Please let that be the first and last time Soros and ODDT (oildaydemotrader) are mentioned in the same sentence, ever again !!!

Clearly not, since you also mentioned it, and now I'm quoting you, to make matters worse.

Come to think of it, have they ever been seen in the same room together? They may actually even be the same person......

 

[meanreversion]

ODT is actually Warren Buffett in disguise. To think we had the Sage of Omaha on t2w all this time and we didn't realise it..

 

[meanreversion]

GJ, is your username an allusion to a trading style you adopt when you perceive the market to be short of gamma? Or something else altogether?

 

[GammaJammer]

Not quite. I think I typed the story out once already on T2W so it'll be in the vaults somewhere...