FAQ How Long Does it Take to Make a Stable Income from Trading?

[petetrades]

You're assuming all traders trade the same. You mention price action changes. Markets have close correlation with economies and the cycles in economies are directly responsible for changes in market conditions alongside event news. If you want examples of successful traders you could ask here, if any are willing to share, or do a little research and you will find them. Sounds to me like you can't believe it to be true and perhaps this is based on your experience. Whatever it is I assure you there are many that do it year in, year out.

The vast majority of evidence suggests that retail traders who have had profitable edges in correlated markets and economic sectors do not have consistent edges in these markets, therefore their income is not stable, which is what the OP was asking about. It is widely accepted that any stable edge related to trading around news events and economic releases does not exist due to speed of execution in trading being reduced to milliseconds and lower. At higher time frames for trading after news and economic data, the proprietary research and insider knowledge that institutions have for interpreting and trading accordingly is variable among institutions and not a stable edge for retail traders looking for a stable income.

 

[dbphoenix]

The vast majority of evidence suggests that retail traders who have had profitable edges in correlated markets and economic sectors do not have consistent edges in these markets, therefore their income is not stable, which is what the OP was asking about. It is widely accepted that any stable edge related to trading around news events and economic releases does not exist due to speed of execution in trading being reduced to milliseconds and lower. At higher time frames for trading after news and economic data, the proprietary research and insider knowledge that institutions have for interpreting and trading accordingly is variable among institutions and not a stable edge for retail traders looking for a stable income.

What is "widely accepted" is irrelevant if one is making a stable and consistent income from trading. If one is not making such an income, then of course making that income is impossible.

What is possible depends entirely on the individual trader. As Ed Seykota said, "A losing trader can do little to transform himself into a winning trader. A losing trader is not going to want to transform himself. That’s the kind of thing winning traders do."

 

[forker]

It is widely accepted that any stable edge related to trading around news events and economic releases does not exist due to speed of execution in trading being reduced to milliseconds and lower.

Define edge around news events? When trading news the last thing you want to be doing is defining an edge based on technical parameters to trade the release. Think about it, how can you possibly define an edge technically when you are operating against an economic release? - you can't. For this reason, technical traders will typically wait until the initial reaction takes place (often longer) until they do business. Speed of execution really only becomes important when the methods being used are of a scalping nature. That being said spreads will most definitely defeat any technical scalping edge on a news release so again the intelligent trader will wait. News driven moves can last an entire session so there is plenty of scope to take advantage of it.

At higher time frames for trading after news and economic data, the proprietary research and insider knowledge that institutions have for interpreting and trading accordingly is variable among institutions and not a stable edge for retail traders looking for a stable income.

Insider knowledge is illegal so perhaps you are referring to the research itself. I can tell you first hand that there is nothing magical about how institutions research. They have teams of analysts and sometimes they pay external experts for their research. They also have analysts that apply financial models and price testing to determine their risk exposure which isn't necessary when you aren't carrying huge portfolios. The biggest difference between institutions and retails is speed of processing research and not the availability of content. We can access the same terminals they can, i use Eikon as an example and it only costs me $99 a month. I have real-time economic data, analyst research, analyst polls, access to premium content and indexed video content. I have end of day access to other markets and limited access to premium content in equities for example but i don't need it.

As for an edge when it comes to trading i have it and its stable and reliable. My edge comes from knowing all the economies i trade, where in the cycle they are, which is weakest and strongest and i know what the central banks are tracking and their expectations. An edge for me is being able to trade long term shifts in economies as well as session deviations on releases. Its not difficult just a lot of work which is a process i enjoy (makes all the difference). I am not unique i assure you so i really cannot relate to your assessment of it not being possible for a stable income. I suspect your experience or reading you have done has lead you to believe a stable income is not possible.

 

[petetrades]

Define edge around news events? When trading news the last thing you want to be doing is defining an edge based on technical parameters to trade the release. Think about it, how can you possibly define an edge technically when you are operating against an economic release? - you can't. For this reason, technical traders will typically wait until the initial reaction takes place (often longer) until they do business. Speed of execution really only becomes important when the methods being used are of a scalping nature. That being said spreads will most definitely defeat any technical scalping edge on a news release so again the intelligent trader will wait. News driven moves can last an entire session so there is plenty of scope to take advantage of it.


Insider knowledge is illegal so perhaps you are referring to the research itself. I can tell you first hand that there is nothing magical about how institutions research. They have teams of analysts and sometimes they pay external experts for their research. They also have analysts that apply financial models and price testing to determine their risk exposure which isn't necessary when you aren't carrying huge portfolios. The biggest difference between institutions and retails is speed of processing research and not the availability of content. We can access the same terminals they can, i use Eikon as an example and it only costs me $99 a month. I have real-time economic data, analyst research, analyst polls, access to premium content and indexed video content. I have end of day access to other markets and limited access to premium content in equities for example but i don't need it.

As for an edge when it comes to trading i have it and its stable and reliable. My edge comes from knowing all the economies i trade, where in the cycle they are, which is weakest and strongest and i know what the central banks are tracking and their expectations. An edge for me is being able to trade long term shifts in economies as well as session deviations on releases. Its not difficult just a lot of work which is a process i enjoy (makes all the difference). I am not unique i assure you so i really cannot relate to your assessment of it not being possible for a stable income. I suspect your experience or reading you have done has lead you to believe a stable income is not possible.

Intraday price movement is more random than you're suggesting, and when not random it can often be based on institutions moving price to areas of liquidity based on calculations of cumulative delta and order book type analysis, not necessarily to a fair price based on economic analysis. If you're trading spot forex as your profile suggests you could be taking money from amateurs. There is no evidence such a claimed consistent edge based largely on a macroeconomic perspective can be transferred to a highly liquid market dominated by institutional highspeed algorithms such as the ES futures. Minimal retail participation in currency futures suggest such an edge is indeed a black swan, if it exists. My experience suggests people on forums suggesting they have a consistent trading edge are usually selling mentoring services or trading material.

 

[tar]

Hypothetical discussion , a couple of long term statements would settle the issue .

 

[forker]

Intraday price movement is more random than you're suggesting, and when not random it can often be based on institutions moving price to areas of liquidity based on calculations of cumulative delta and order book type analysis, not necessarily to a fair price based on economic analysis. If you're trading spot forex as your profile suggests you could be taking money from amateurs. There is no evidence such a claimed consistent edge based largely on a macroeconomic perspective can be transferred to a highly liquid market dominated by institutional highspeed algorithms such as the ES futures. Minimal retail participation in currency futures suggest such an edge is indeed a black swan, if it exists. My experience suggests people on forums suggesting they have a consistent trading edge are usually selling mentoring services or trading material.

I have no experience trading other markets and cannot comment in any capacity other than opinion and speculation. You might be right, you might be wrong, i'll leave others with experience in different markets to add their context. All i can say is that high speed algorithms from what i have read scrap tiny amounts of profit and will transact in milliseconds. I can't see how this area of trading would affect traders getting into trends but it probably will have an impact on traders trading in a scalping capacity.

 

[petetrades]

I have no experience trading other markets and cannot comment in any capacity other than opinion and speculation. You might be right, you might be wrong, i'll leave others with experience in different markets to add their context. All i can say is that high speed algorithms from what i have read scrap tiny amounts of profit and will transact in milliseconds. I can't see how this area of trading would affect traders getting into trends but it probably will have an impact on traders trading in a scalping capacity.

The price action seen on the globex daily charts of the US stock market indexes such as the ES futures following the recent Trump election results is a pertinent non-speculative example of how automated institutional trading programs are altering price action for trends and making markets more hazardous for retail traders.

Intraday support and resistance is no longer a valid concept except in hindsight and for market pundits. The previous support levels on the ES, the July low of 2065, the August low of 2100 and the November low of 2078 were broken in an hour of selling and did not regain any semblence of support until price went nearly 40 points below the July support level in a matter of minutes. Looking over ES daily charts, there is no precedent for this extreme and wide-range type of intraday downtrend, reversal, and new intraday bullish trend except when price action is the result of automated trading programs.

Many price action vendors suggest price behavior is a result of human DNA and therefore patterns repeat themselves, the evidence shows the patterns have changed and this explains why they are now selling archaic price action theory for stable income rather than trading for a living.

 

[forker]

The price action seen on the globex daily charts of the US stock market indexes such as the ES futures following the recent Trump election results is a pertinent non-speculative example of how automated institutional trading programs are altering price action for trends and making markets more hazardous for retail traders.

Intraday support and resistance is no longer a valid concept except in hindsight and for market pundits. The previous support levels on the ES, the July low of 2065, the August low of 2100 and the November low of 2078 were broken in an hour of selling and did not regain any semblence of support until price went nearly 40 points below the July support level in a matter of minutes. Looking over ES daily charts, there is no precedent for this extreme and wide-range type of intraday downtrend, reversal, and new intraday bullish trend except when price action is the result of automated trading programs.

Many price action vendors suggest price behavior is a result of human DNA and therefore patterns repeat themselves, the evidence shows the patterns have changed and this explains why they are now selling archaic price action theory for stable income rather than trading for a living.

I don't know how people can trade indices as they are comprised of so many moving elements that it doesn't make sense that any technical or other factor could possibly give any edge (just my opinion of it). You can have one element affecting the index and then another element blow it out the water. Have you tried trading pure instruments instead of indices?

 

[petetrades]

I don't know how people can trade indices as they are comprised of so many moving elements that it doesn't make sense that any technical or other factor could possibly give any edge (just my opinion of it). You can have one element affecting the index and then another element blow it out the water. Have you tried trading pure instruments instead of indices?

Yes, similar sort of high-risk algorithm volatility can be seen on commodoties like CL, what appears to be a valid trend can reverse in under a minute due to strength in cross-correlated markets like the USD.

 

[forker]

Yes, similar sort of high-risk algorithm volatility can be seen on commodoties like CL, what appears to be a valid trend can reverse in under a minute due to strength in cross-correlated markets like the USD.

But that could be a legitimate reason especially if the commodity is priced in dollars. I use oil news to trade cad or milk for kiwi. So you might find some large dollar specific data come out with a deviation and dollar sells off taking anything priced in dollars with it.

 

[dbphoenix]

I don't know how people can trade indices as they are comprised of so many moving elements that it doesn't make sense that any technical or other factor could possibly give any edge (just my opinion of it). You can have one element affecting the index and then another element blow it out the water.

If I may interject. Think of yourself as a psychologist studying and predicting -- within N degrees of confidence -- the behavior of an individual. Now think of yourself as a sociologist doing the same thing with a mob. The mob may be made up of a hundred individuals who, individually, may act at cross-purposes with others in the group. And while you may not be able to predict the behavior of any given individual at any given point or segment of time, you can -- again with N degrees of confidence -- predict the behavior of the mob. Two practical examples of this are predicting the behavior of those who favor Brexit vs those who don't, or the behavior of Trump supporters vs Trump detractors.

The index is the mob.

One can of course trade the one hundred -- or the ten most-heavily-weighted -- stocks in the index, simultaneously. But those who trade the indices and the index futures find it easier and simpler to just trade the index. That is, after all, to a large extent, what the index is for.

 

[petetrades]

If I may interject. Think of yourself as a psychologist studying and predicting -- within N degrees of confidence -- the behavior of an individual. Now think of yourself as a sociologist doing the same thing with a mob. The mob may be made up of a hundred individuals who, individually, may act at cross-purposes with others in the group. And while you may not be able to predict the behavior of any given individual at any given point or segment of time, you can -- again with N degrees of confidence -- predict the behavior of the mob. Two practical examples of this are predicting the behavior of those who favor Brexit vs those who don't, or the behavior of Trump supporters vs Trump detractors.

The index is the mob.

One can of course trade the one hundred -- or the ten most-heavily-weighted -- stocks in the index, simultaneously. But those who trade the indices and the index futures find it easier and simpler to just trade the index. That is, after all, to a large extent, what the index is for.

No, for a retail trader they need to have a positive expectancy, an expectation that they can manage risk with a higher reward over a series of trades . If I'm right about the ES bouncing after a news event but I need a 10-40 point stop or am stopped out 4 times for 5-10 points before price goes the direction my chart reading suggests it will I would be best advised to trade a different instrument or not trade at all.

P.S. dbphoenix, do you trade for consistent income?

 

[forker]

What's your trade strategy for the es? Define what you use or have used as a technical setup. I traded technically for a decade before a slow transition into fundamental trading and for the last 3 years no technical at all. I am interested in how another market is approached

 

[dbphoenix]

No, for a retail trader they need to have a positive expectancy, an expectation that they can manage risk with a higher reward over a series of trades . If I'm right about the ES bouncing after a news event but I need a 10-40 point stop or am stopped out 4 times for 5-10 points before price goes the direction my chart reading suggests it will I would be best advised to trade a different instrument or not trade at all.

Of course the small retail trader has to trade for consistent profitability over a series of trades. Otherwise, there's no point in doing it. As for the ES, I don't bother with it given all the arbitrage that goes on and given the chief componenets. I trade the NQ. Simpler and more directional.

P.S. dbphoenix, do you trade for consistent income?

Yes. However, it was not my intention to become a part of this exchange. I was only responding to a particular point that was raised. If for some reason you're curious about how I trade, click the links in my signature. Otherwise, back to our regularly-scheduled program.

 

[petetrades]

What's your trade strategy for the es? Define what you use or have used as a technical setup. I traded technically for a decade before a slow transition into fundamental trading and for the last 3 years no technical at all. I am interested in how another market is approached

It's a failed strategy, look for reversal trades after trendline overshoots and 3 possible exhaustion waves when price has deviated far beyond fast moving averages and 2 standard deviations of VWAP or look for with-trend trades away from slower moving averages and VWAP 2 dev when the short-term momentum suggests trend follow through rather than mean reversion is more likely.

dbphoenix, the reason why it's not so obvious what a small retail trader's goals are is I am aware of your reputation, that you are primarily a trading vendor and not a trader who extracts stable income from trading. Successfully trading the NQ for stable income requires very precise entries and wide and tight stops at times, something much easier said than done, especially with retail commission costs.

 

[forker]

It's a failed strategy, look for reversal trades after trendline overshoots and 3 possible exhaustion waves when price has deviated far beyond fast moving averages and 2 standard deviations of VWAP or look for with-trend trades away from slower moving averages and VWAP 2 dev when the short-term momentum suggests trend follow through rather than mean reversion is more likely.

dbphoenix, the reason why it's not so obvious what a small retail trader's goals are is I am aware of your reputation, that you are primarily a trading vendor and not a trader who extracts stable income from trading. Successfully trading the NQ for stable income requires very precise entries and wide and tight stops at times, something much easier said than done, especially with retail commission costs.

So what's your plan going forward?

 

[dbphoenix]

dbphoenix, the reason why it's not so obvious what a small retail trader's goals are is I am aware of your reputation, that you are primarily a trading vendor and not a trader who extracts stable income from trading. Successfully trading the NQ for stable income requires very precise entries and wide and tight stops at times, something much easier said than done, especially with retail commission costs.

I'm not "primarily" a trading vendor. I have a book, large sections of which I've posted for free. As far as "not a trader", I've been in the market since 1977, trading online since 1997. I'm not particularly concerned about your views regarding my income nor the stability thereof, even if you were able to prove that you are a "real trader" who makes a stable income, as I have no interest in emulating you in any way.

Have yourself a nice day.

 

[counter_violent]

No, for a retail trader they need to have a positive expectancy, an expectation that they can manage risk with a higher reward over a series of trades . If I'm right about the ES bouncing after a news event but I need a 10-40 point stop or am stopped out 4 times for 5-10 points before price goes the direction my chart reading suggests it will I would be best advised to trade a different instrument or not trade at all.

P.S. dbphoenix, do you trade for consistent income?

So it sounds like you don't have a different plan for "event risk" where technicals often go out of the window.

My plan for these types of news events is to use multiple smaller position sizing. No stops and opposing positions (if needed) in highly correlated instruments to the original position.

Sometimes your position goes straight to the target and other times you end up working either or both sides of that equation until resolved.

 

[bosun2016]

It took me about 6 years to establish my income. Some may be less or even more.

 

[Signalcalc]

It took me about 6 years to establish my income. Some may be less or even more.

I wonder what the average length of time it takes for those that are intent on making it a significant proportion of their monthly income.

And I wonder what journeys these people have taken to get there, are their journeys all different or is there a common theme where the same experiences are shared, but in isolation.

I wonder what the evolutionary journey of a trader that reaches the monthly income goal actually is. And how ordinary or not these traders are.