Just lost £150 on IGIndex

[MrBrilliant]

If you really want to learn start by reading these books:

Reminiscences of a stock operator, Lefevre
The art of contrary thinking, O'Neill
Fooled by randomness, Taleb
Antifragile, Taleb
Popular delusions, Mackay
How to trade in stocks, Livermore

Thanks for the list, much appreciated.

 

[D70]

Top tips:

1. Stop coming to this website immediately. You'll waste countless hours reading zero content.
2. Trade only on a "demo" account.
3. Figure out a "strategy" and do 100 trades.
4. Assess in minute detail those 100 trades and make any necessary amendments (even reversing the strategy).
5. Make another 100 trades. Repeat previous steps until you are profitable over 100 trades.
6. Go "live" (if you get that far) with the amount you intended to go live with divided by 100.
7. If still profiable after 100 trades, increase account size.
8. Repeat step 7 .

 

[Templar42]

Thanks for the clarification...interesting stuff...have you found this to be an edge based on substantial empirical evidence or is it just a hunch based on anecdotal evidence/observations?

Thanks.

I'm afraid it's mostly a priori! I wish there were substantial empirical evidence one could draw on for this sort of thing. I get the sense that academic researchers don't care enough about the practicalities of trading to do this sort of research. For that matter, are there any good academic journals devoted to trading? Maybe a search is in order..

This seems worth a look:
http://www.journals.elsevier.com/journal-of-financial-markets/

 

[chaselancaster]

Thanks for that - I think it is important therefore to build your own empirical evidence about your own edge/potential edge and work out it's performance stats accordingly.

I'm afraid it's mostly a priori! I wish there were substantial empirical evidence one could draw on for this sort of thing. I get the sense that academic researchers don't care enough about the practicalities of trading to do this sort of research. For that matter, are there any good academic journals devoted to trading? Maybe a search is in order..

This seems worth a look:
Journal of Financial Markets - Elsevier

 

[new_trader]

My 2¢:

Opinions on how to make money trading can probably be divided into two groups: Group 1: Those who say you don’t need to understand what is going on in order to profit from it. This group will tell you to look for a ‘system’ or ‘strategy’ (‘strat’ if you’re cool), back test it, demo it, and then trade it. The common denominator is that the systems/strats/whatever’s are mechanical in nature meaning that the entry and exit signals are based on some kind of threshold that must be crossed. The threshold is either a moving average, a pivot point a previous high or low etc.

The second Group, which is the one I subscribe to, will tell you that you need to acquire a deep understanding of the market and how it ‘works’ in order to develop and cultivate a sound trading methodology. The methodology is developed through trial and error and continuous study and practice. This is the most arduous route because there are no shortcuts, no magic formulas, no thresholds, nothing that absolves the aspirant (yes, I know) from the responsibility of taking complete and absolute control of their decisions and judging the supply and demand situation.

One thing I would alter about D70’s post is that rather than trade 100 (or whatever) number in demo before going live is that instead you trade maybe 1 live for every 5 demo. That is the way I did it and actually continue to refine my methodology that way. When in doubt, demo trade it.

 

[D70]

My 2¢:

Opinions on how to make money trading can probably be divided into two groups: Group 1: Those who say you don’t need to understand what is going on in order to profit from it. This group will tell you to look for a ‘system’ or ‘strategy’ (‘strat’ if you’re cool), back test it, demo it, and then trade it. The common denominator is that the systems/strats/whatever’s are mechanical in nature meaning that the entry and exit signals are based on some kind of threshold that must be crossed. The threshold is either a moving average, a pivot point a previous high or low etc.

The second Group, which is the one I subscribe to, will tell you that you need to acquire a deep understanding of the market and how it ‘works’ in order to develop and cultivate a sound trading methodology. The methodology is developed through trial and error and continuous study and practice. This is the most arduous route because there are no shortcuts, no magic formulas, no thresholds, nothing that absolves the aspirant (yes, I know) from the responsibility of taking complete and absolute control of their decisions and judging the supply and demand situation.

One thing I would alter about D70’s post is that rather than trade 100 (or whatever) number in demo before going live is that instead you trade maybe 1 live for every 5 demo. That is the way I did it and actually continue to refine my methodology that way. When in doubt, demo trade it.

Agree. And given the market wizards book, it would appear that group 1 and group 2 are both 'right'. You should naturally gravitate towards the one that interests you, or a combination of both.

 

[Liquid validity]

My 2¢:

Opinions on how to make money trading can probably be divided into two groups: Group 1: Those who say you don’t need to understand what is going on in order to profit from it. This group will tell you to look for a ‘system’ or ‘strategy’ (‘strat’ if you’re cool), back test it, demo it, and then trade it. The common denominator is that the systems/strats/whatever’s are mechanical in nature meaning that the entry and exit signals are based on some kind of threshold that must be crossed. The threshold is either a moving average, a pivot point a previous high or low etc.

The second Group, which is the one I subscribe to, will tell you that you need to acquire a deep understanding of the market and how it ‘works’ in order to develop and cultivate a sound trading methodology. The methodology is developed through trial and error and continuous study and practice. This is the most arduous route because there are no shortcuts, no magic formulas, no thresholds, nothing that absolves the aspirant (yes, I know) from the responsibility of taking complete and absolute control of their decisions and judging the supply and demand situation.

One thing I would alter about D70’s post is that rather than trade 100 (or whatever) number in demo before going live is that instead you trade maybe 1 live for every 5 demo. That is the way I did it and actually continue to refine my methodology that way. When in doubt, demo trade it.

Good post, I'd take it a step further by saying don't even think about being in the
1st group until you have a reasonable understanding of the factors in play
for the 2nd group.
At that point, most will realise a mechanical approach is usually not that
efficient on a day to day basis.
Its seen as the easy option, its actually much harder, simply due to the fact
you must have a good understanding of both camps mentioned here.
Anyone starting out should not start with a mechanical method.

The common denominator is that the systems/strats/whatever’s are mechanical in nature meaning that the entry and exit signals are based on some kind of threshold that must be crossed. The threshold is either a moving average, a pivot point a previous high or low etc.

Which is why most of them don't work for long, if at all.

 

[Liquid validity]

Agree. And given the market wizards book, it would appear that group 1 and group 2 are both 'right'. You should naturally gravitate towards the one that interests you, or a combination of both.

Its worth noting that most (maybe all?) the traders in the wizards books
who ended up in group 1, started in group 2.
Even if failure resulted, the knowledge and experience gained,
is essential before entering group 1.
I think the vast majority in those books started out on the sell side in pits.

 

[The Artist]

Personally I don't really agree with the whole demo trading idea. In fact, I think demo trading should only be used to familiarize oneself with a trading platform and get comfortable with the different types of orders.
Beyond that, beginner or not, if you are not willing to lose money, then you have no chance. Therefore, one should use the opportunity to trade live as early as possible regardless of their abilities in order to develop an understanding of their own mental strengths and weaknesses in the face of real $ wins and losses.

A trading edge can have its ups and downs without necessarily jeopardising one's career, provided one can adjust and adapt. On the other hand, a trader needs to have a psychological edge at all times to successfully make a career out of this and only live trading can allow the building of a proper trading consciousness.
You don't want to become a wizard on demo, move on to profitable live trading for a year, and then discover that you completely decompose in the face of consecutive $ losses. You need to know you are able to handle any losses & wins, any protracted drawdowns & hot streaks, any slippage,...

Others have pointed out that you can't possibly know whether to go discretionary or mechanical as a beginner. That's mostly because as a beginner you first need to know how to master your own fear and greed. A fake $100,000 account will be of no value there.

Just my own $0.02.

 

[rawrschach]

I'm afraid it's mostly a priori! I wish there were substantial empirical evidence one could draw on for this sort of thing. I get the sense that academic researchers don't care enough about the practicalities of trading to do this sort of research. For that matter, are there any good academic journals devoted to trading? Maybe a search is in order..

This seems worth a look:
Journal of Financial Markets - Elsevier

As a former academic I can tell you with no uncertainty that academics are entirely self serving. Academia is a social game, they only care about their bull**** models and peer acceptance with no relevance to reality.

My professor, who has since won a nobel, was lecturing to me about models with no bubble, no ponzi, iid restrictions.

Srsly wtf.

 

[MrBrilliant]

As a former academic I can tell you with no uncertainty that academics are entirely self serving. Academia is a social game, they only care about their bull**** models and peer acceptance with no relevance to reality.

Yeah I can relate to this. One of my friends did some work on computational genetics based on random models. Turned out they'd been using the naive "rand()%n" style for the random number generator, so basically all their data was skewed/wrong. Nobody noticed. They published their paper in Nature (which is a big deal in that field).

 

[Shakone]

As a former academic I can tell you with no uncertainty that academics are entirely self serving. Academia is a social game, they only care about their bull**** models and peer acceptance with no relevance to reality.

My professor, who has since won a nobel, was lecturing to me about models with no bubble, no ponzi, iid restrictions.

Srsly wtf.

Well Black-Scholes assumed a bunch of things in their option model that aren't realistic, but it doesn't make it useless. That is the way research is done...

 

[Brumby]

My 2¢:

Opinions on how to make money trading can probably be divided into two groups: Group 1: Those who say you don’t need to understand what is going on in order to profit from it. This group will tell you to look for a ‘system’ or ‘strategy’ (‘strat’ if you’re cool), back test it, demo it, and then trade it. The common denominator is that the systems/strats/whatever’s are mechanical in nature meaning that the entry and exit signals are based on some kind of threshold that must be crossed. The threshold is either a moving average, a pivot point a previous high or low etc.

The second Group, which is the one I subscribe to, will tell you that you need to acquire a deep understanding of the market and how it ‘works’ in order to develop and cultivate a sound trading methodology. The methodology is developed through trial and error and continuous study and practice. This is the most arduous route because there are no shortcuts, no magic formulas, no thresholds, nothing that absolves the aspirant (yes, I know) from the responsibility of taking complete and absolute control of their decisions and judging the supply and demand situation.

In my view there are two distinct sub groups within group one that you have defined. The first sub-group are basically new entrants which recognises they need to have an edge but for reason of expediency they decide to purchase the edge i.e. systems or methods. Problem is this normally doesn't work very well because of personalility fit; psychological issues; and just lack of faith regardless of historical testing.

The second sub-group are actually seasoned professionals which have acquired the edge via the route mentioned in group two and so trading is now an issue of routinely stalking for the quality setup; flawless execution; mechanical money and trade management and maybe the occasional psychological issues during difficult market conditions.

I believe the main issue for any newbie is finding their way through the maze and acquiring what we commonly refer to as the "edge". How do you acquire an edge; what emphirical evidence exist to support it exist; and what exactly is it?

 

[D70]

In my view there are two distinct sub groups within group one that you have defined. The first sub-group are basically new entrants which recognises they need to have an edge but for reason of expediency they decide to purchase the edge i.e. systems or methods. Problem is this normally doesn't work very well because of personalility fit; psychological issues; and just lack of faith regardless of historical testing.

The second sub-group are actually seasoned professionals which have acquired the edge via the route mentioned in group two and so trading is now an issue of routinely stalking for the quality setup; flawless execution; mechanical money and trade management and maybe the occasional psychological issues during difficult market conditions.

I believe the main issue for any newbie is finding their way through the maze and acquiring what we commonly refer to as the "edge". How do you acquire an edge; what emphirical evidence exist to support it exist; and what exactly is it?

This thread made me think of this post, I was going to plagiarize it but thought it better I just find the link.

http://www.trade2win.com/boards/gen...rofits-r-u-even-net-winner-14.html#post590128


.

 

[rawrschach]

Well Black-Scholes assumed a bunch of things in their option model that aren't realistic, but it doesn't make it useless. That is the way research is done...

it's also why it's completely useless and irrelevant in any domain that can't be reduced to a nice iid distribution with finite variance ie. most of real life

 

[Shakone]

it's also why it's completely useless and irrelevant in any domain that can't be reduced to a nice iid distribution with finite variance ie. most of real life

So Black-Scholes is useless now? Come on...

 

[rawrschach]

I was referring to research 'methodology' in general but re Black Scholes it's over simplified so yes, in the long term it's useless. Unless you're a banker and are happy to overleverage and walk away with your bonus and golden handshake the day you blow up.

edit: I don't think you read my post past the word 'useless'. My point was that that kind of research is domain specific. Black Scholes is an oversimplification to make something mathematically tractable in a domain which is not tractable. It's worse than useless, it's downright dangerous.

Even in hard science which is only valid in, and generally only focuses on, the well behaved finite variance domain the 'top' researchers in the country will happily datamine anything to come up with the most bull**** relationships based on the most suspect data imaginable just so they can publish a paper and get citations.

 

[Hoggums]

My 2¢:

Opinions on how to make money trading can probably be divided into two groups: Group 1: Those who say you don’t need to understand what is going on in order to profit from it. This group will tell you to look for a ‘system’ or ‘strategy’ (‘strat’ if you’re cool), back test it, demo it, and then trade it. The common denominator is that the systems/strats/whatever’s are mechanical in nature meaning that the entry and exit signals are based on some kind of threshold that must be crossed. The threshold is either a moving average, a pivot point a previous high or low etc.

The second Group, which is the one I subscribe to, will tell you that you need to acquire a deep understanding of the market and how it ‘works’ in order to develop and cultivate a sound trading methodology. The methodology is developed through trial and error and continuous study and practice. This is the most arduous route because there are no shortcuts, no magic formulas, no thresholds, nothing that absolves the aspirant (yes, I know) from the responsibility of taking complete and absolute control of their decisions and judging the supply and demand situation.

One thing I would alter about D70’s post is that rather than trade 100 (or whatever) number in demo before going live is that instead you trade maybe 1 live for every 5 demo. That is the way I did it and actually continue to refine my methodology that way. When in doubt, demo trade it.

A good point, however you shouldn't write off group 1, because the reason a lot of the group 2's don't succeed is a lack of consistency and objectiveness which moving to group 1 would give.

However here's the catch - you can't be be a group 1 successful trader unless you've studied like the group 2's have and understand enough about the market to create an automatic strategy that will be profitable. You need to know how the market behaves, and how your system will react to it and design it accordingly.

And steer clear of anything with a moving average in it's components - you'll never get rich that way - think more creatively!

 

[Rambo35]

I think as long as you learned from your mistake you can view it as the price of education as you learn how to become a successful trader. We do learn by making mistakes, I am just not sure how many actually learn from their mistakes which is one reason so many traders fail.