Does anybody really make any money?

This is a discussion on Does anybody really make any money? within the Psychology, Risk & Money Management forums, part of the Methods category; It's time for my usual cast of doubt over the markets. I usually get irritated replies - so here goes ...

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Old Apr 22, 2005, 3:50pm   #1
 
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Does anybody really make any money?

It's time for my usual cast of doubt over the markets. I usually get irritated replies - so here goes again.

Firstly, can anyone daytrade. I'm trying with the S&P & it looks pretty random to me. I read on this board so many times that you shouldn't predict the market but react to it. But surely reacting to the market is just predicting a follow through of what just last happened - a valid premise - but still predicting the market. Once a trade is placed are we not all just predicting the market.

It strikes me that technical analysis or at least ability to read markets is just like religion. Some people have been enlightened & are told what the market is doing all the time. Others have doubts but think that there is a god (technical analysis works). I must say in both there is a one sided conversation and in both we are constantly betrayed by our beloved religion. It just makes me wonder - are we just all effectively throwing darts at a board getting some wins & some losses. Add in to this the commission etc & that's why everybody loses.

Please put me straight, I once again need it -
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Old Apr 22, 2005, 4:01pm   #2
 
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'everybody loses' hmm. Losing is a part of trading. But I dont consistently lose, I'm up 50% this year. Sounds like someone suffering a drawdown...
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Old Apr 22, 2005, 4:05pm   #3
 
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sounds like you're having a bad time tubbs.

the good times, just as the bad, are constantly ebbing away...

it comes and goes.

the problem is that we are all trying to predict the market, by essentially calling one direction and trying to back it with a stake.

how about ignoring market direction and backing it with a stake?

how, i hear you ask?

well , open two trades on the same market. one long, one short. use two different futures contracts, or if SB-ing, use rolling cash and the current future.

now you dont have a preference for the way the market is moving, as no matter what happens, you can close a trade at a profit.

this is psychologically beneficial.

manage the open trades, and close each of them on what looks like a pattern reversal.

bearing in mind indices dont trend approx 70% of the time, you can close one at a profit at some point, and even if you were to leave the other trade open til the close, random theory implies that you should break-even over an extended number of trades (less spread)

its not a path to riches, but it is manageable.

FC
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Old Apr 22, 2005, 4:47pm   #4
 
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Tubbs started this thread An interesting idea Fettered - I actually don't trade since I lost my shirt - just looking for a viable concept - can't say I can find one - maybe something out of the box as you suggest.
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Old Apr 22, 2005, 4:48pm   #5
 
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Quote:
Originally Posted by Tubbs
An interesting idea Fettered - I actually don't trade since I lost my shirt -
i trade in the nude as well.
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Old Apr 22, 2005, 4:55pm   #6
 
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Do you have any sort of trading plan?
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Old Apr 22, 2005, 5:02pm   #7
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Quote:
Originally Posted by FetteredChinos
sounds like you're having a bad time tubbs.

the good times, just as the bad, are constantly ebbing away...

it comes and goes.

the problem is that we are all trying to predict the market, by essentially calling one direction and trying to back it with a stake.

how about ignoring market direction and backing it with a stake?

how, i hear you ask?

well , open two trades on the same market. one long, one short. use two different futures contracts, or if SB-ing, use rolling cash and the current future.

now you dont have a preference for the way the market is moving, as no matter what happens, you can close a trade at a profit.

this is psychologically beneficial.

manage the open trades, and close each of them on what looks like a pattern reversal.

bearing in mind indices dont trend approx 70% of the time, you can close one at a profit at some point, and even if you were to leave the other trade open til the close, random theory implies that you should break-even over an extended number of trades (less spread)

its not a path to riches, but it is manageable.

FC
this idea of your can be tested only in trading days such as today so far, otherwise i amnot so sure it will work,take yesterday e.g.
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Old Apr 22, 2005, 5:33pm   #8
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In my view there is a significant difference between predicting and reacting even after entering a trade. As an example, if I attempt to predict the market then I will be able to say how much profit I am going to make and where and when I will exit my trade.

In reality once I enter a trade I dont know where I will exit until I see certain things. All I know is that I have a plan for all eventualities.


Paul
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Old Apr 22, 2005, 6:59pm   #9
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Originally Posted by Trader333
All I know is that I have a plan for all eventualities.
Ah. At last. In a nutshell.

No disrespect to dbp, but a trading plan sounds like it could easily lead to 'paralysis from analysis' - I know, I've been there.

Textbook stuff for the academically minded and it'll keep you safely away from the potential 'lessons' the market wants to deliver (and you need to receive) that bit longer, but you can't make profits without losses.

'A plan for all eventualities' I like it. Good work Paul.
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Old Apr 22, 2005, 7:07pm   #10
 
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Not sure I see the difference between a trading plan and a plan for all eventualities since the former should include the latter. The crux of the matter is approaching the market with forethought of some sort.
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Old Apr 22, 2005, 7:11pm   #11
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Good response.

Care to share an exemplar Trading Plan so that we can understand all that it encompasses?
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Old Apr 22, 2005, 7:19pm   #12
 
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Timsk created a nice template, though the result is as individual as the trader. My current plan is only a half page, though it didn't start out that way.

http://www.trade2win.com/boards/show...320#post166320
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Old Apr 22, 2005, 10:13pm   #13
 
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Tubbs started this thread My point is on randomness. We can all have blind faith that we can read the market, yet maybe it's all just an illusion. I hope not. The trading plan thing is completely useless to me. I have all of those points already sussed. The one I'm having trouble with is buying the market and it actually going up. I have similar problem shorting. Apart from that I'm fine. It's a bit like all of those books on psychology of trading - you have to master yourself to trade - '******** you do' you have to buy before the market goes up - find any way of doing it and you've won. Smoke and mirrors. How can being in control of 'me' give me a profit?
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Old Apr 22, 2005, 10:21pm   #14
 
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Quote:
Originally Posted by Tubbs
The trading plan thing is completely useless to me. I have all of those points already sussed. The one I'm having trouble with is buying the market and it actually going up.
If you have a plan all worked out, what's the ratio of your winners to losers?

What's your profit to loss ratio?

What's the longest uninterrupted string of losers that you can expect over 50 trades?

What's the maximum drawdown that your setups provide in those same 50 trades?

How much of that drawdown are you willing to tolerate?
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Old Apr 22, 2005, 11:31pm   #15
 
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Tubbs,

IMO there is a big difference between "reacting to the market" and trading. When trading I specifically do not "react" to everything I see in the market because I know that my chosen market, HSI, has a huge number of volume and price fakes going on and to react to those is to invite the boys to chew you up and spit you out (been there for the first few months).

This trading plan stuff is good and necessary but first you must have one or more edges. The edge is a combination of entry criteria (setup conditions, and trigger), stop, and exit criteria (varies with the entry).

What I do, when trading, is to monitor the market and react not to the noise but to seeing my criteria occur in real time.

So, although I am reacting to the market, I am doing it through the filter of a set of criteria that I have extensively tested and can retest over time if I think Market conditions have changed and are making me less profitable. If you cant buy going up then the chances are that you dont have a clean, crisp, clear set of entry conditions that you are confident in.

So for your problem maybe this is criteria X. And criteria X might be, Market trending up, Market breaks out of X bar high by Y points. Don't buy now ... wait for retracement and buy on a) breakout of retracement within Z bars or some retracement criteria. Or something else. But if you dont have the criteria clearly in your mind then you wont be able to do it.

You may have a different issue but this is certainly worth having a good look at.

I enclose an extraction of some Mark Douglas material that some people seem to have found helpful in this area (I recommend his the disciplined trader and trading in the zone). It might be of value to you.

Kiwi

Quote:
Originally Posted by Tubbs
It's time for my usual cast of doubt over the markets. I usually get irritated replies - so here goes again.

Firstly, can anyone daytrade. I'm trying with the S&P & it looks pretty random to me. I read on this board so many times that you shouldn't predict the market but react to it. But surely reacting to the market is just predicting a follow through of what just last happened - a valid premise - but still predicting the market. Once a trade is placed are we not all just predicting the market.

It strikes me that technical analysis or at least ability to read markets is just like religion. Some people have been enlightened & are told what the market is doing all the time. Others have doubts but think that there is a god (technical analysis works). I must say in both there is a one sided conversation and in both we are constantly betrayed by our beloved religion. It just makes me wonder - are we just all effectively throwing darts at a board getting some wins & some losses. Add in to this the commission etc & that's why everybody loses.

Please put me straight, I once again need it -
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