Edge VS Mentality

[Edge VS Mentality]

If what you're saying is true than no one would ever make money consistently from trading or investing. That's obviously not the case, and is not what I'm arguing for or against here.

 

 

Slept on it! He's got an edge (Arnold), but, you don't need his 'edge' to make money.

 

Good trading.

[Edge VS Mentality]

You are still not focused on my main point. I just used Arnold as an example. He is just some arbitrary hedgie that I looked up and has no bearing on my point.

 

However just in my brief reading of his accomplishments I tend to disagree. He made Enron an estimated $750 million dollars. He then left after Enron collapsed and formed a hedge fund (with 5 million) that has made returns excess off 175%-350%(while managing first millions and then billions) since 2002. What you are saying is once in a lifetime has been occurring for the past 5 or 6 years. As far as I'm concerned, he's got some talent. But like I said it doesn't matter as that is just some arbitrary figure I used to illustrate my main point.

 

 

:doh:

 

 

Arnold is an energy trader with dosh and an expert team around him. If that's an edge, then you've got no chance, sweet pea.

 

Good luck.

[Edge VS Mentality]

One more thing:

 

Ask yourself this. On Monday take your exact strategy and setup, but instead of trading your usual amount imagine you have $10 million on it. Do you act differently? Does it affect you? Think about it honestly. Does it affect you? If so I submit to you that there is mental work yet to be done which is what this thread is about.

 

I know it would affect me haha.

 

 

Arnold had no edge, bud. He took his own wealth and knowledge, formed a team comprising of ex-Enron colleagues and probably thier asset worth, and exploited a once in a life time opportunity.

 

You'll never get that kind of edge, Jon.

 

That's fortunate opportunity, not edge, there's a difference.

 

Even Arnold would probably agree that what he did was opportunistic, and not an ongoing edge.

[Edge VS Mentality]

It was never about which approach is better as if you can only use one (even though the title does make it seem that way) what every noobie should be looking for is why SO many traders fail, or at least, leave a boat load of profit on the table. I simply can't go about trading the way every single other person does when almost every single other person either fails completely, breaks even, or make modest amount of money. No I'm not looking for some holy grail. I don't expect some billionaire trader to come in and say "Oh you just have to use THESE indicators...". I expect the answer is much more complex and a lot less tangible than than. That's what this thread is about. Consider this:

 

"In a clash of the titans that is likely to be remembered for years to come,John Arnold took on Amaranth’s Brian Hunter last year in a battle over the direction of natural-gas prices. Hunter, the bull, got the horns when prices — along with his ability to trade out of the supremely dark corner into which he had painted himself — weakened in the summer. Arnold, formerly of Enron, squeezed his foe like a laundress wringing out a wet tube sock.

In the end,Arnold and his team of 10 traders — including right- hand man Michael Maggi and natural-gas guru Bill Perkins — walked away from the dustpile with a mountain of cash. Amaranth was wiped off the map.

Arnold claimed the bulk of the profits. He guided Centaurus to gaudy returns (on an estimated $2billion in assets) of 317 percent before fees. Apart from one “lousy”year (only 178 per- cent in 2005), the fund has always finished above 200 per- centsince inception in 2002.

 

 

Of course that is an extreme example, but you get the point. I had to disagree with DB when he said that it was simply that most noobie's don't take the time to develop a winning strategy. I'm sure this IS the case a lot of the time, but I'm not talking about Joe Schmoe looking for the holy grail and who thinks about trading for an hour a day, I'm talking about the people who study and study until their faces are blue, or the people who do have a method, but can only manage to bring in 100k per year. Of course he knows much much more than me and I have learned a lot from him, but I can't bring myself to believe that the difference between the average decent trader and John Arnold who's never had a less than +150% on billions is simply hard work (i.e. strategy development). That would be too easy. There are too many people willing to put in the work and time that simply don't achieve the millions that are left on the table each day in futures trading.

 

So I have to ask myself, what is the difference? I have a hunch, but will save it for later today.

 

 

He couldn't stop Enron collapsing, so i guess JD Arnold isn't God, just another trader, but with more liquidity at his fingertips. Besides, he has a team,...there is no 'I' in team.

 

Tell you what, let's use Nick Leeson, in a conversation about stops.

[Edge VS Mentality]

Nvesta81,

Here what Linda Bradford Rasche has to say about mechanical systems in her article on Tape Reading:

 

"I've known hundreds of professional traders throughout my career. I don't want to disappoint you, but I know of only two who where able to make a steady living for themselves with a mechanical system. (I am not counting the well-capitalized CTA's who are running a money-management program with "OPM" - other people's money.) All those other traders used some type of discretion that invariably involved watching the price action at some moment - even if just to move a stop up or down.

If you can learn to follow the price action, you will be two steps ahead of the game because price is faster than any derivative. You may have heard the saying, "The only truth is the current PRICE." Your job as a trader will become ten times easier once you accept this. This means ignoring news, opinions, and personal biases "

 

 

Good post.

 

The critical area is 'a' price(s), SR, which are the decision(s) point(s), then there are the runs inbetween (i hope i'm not talking dihorea).

 

It's the effeciency around SR with proficient order management that creates differences in profits between different traders....and that's just the consistently profitable traders.

 

There are no edges, just better observations, it's all in the mind. (Better traders are born, Firewalker:o)

 

IMHO!

[How is Your Trade Aggressiveness?]

The more threads I have read, whether it is about a trading style, a type of method to trade, a timeframe preference.. each thread invariably tends to take a detour briefly.. One poster thinks another is being hateful or stepping on their method, the other poster backpedals signaling that "was not the intent” and it occurred to me that a lot of these tend to boil down to one simple statement: "Oh well I trade this way because that is what I am comfortable with and what works for me." Generally one trader is far more aggressive in their trade choices than the other trader in the conversation.

 

With my study of VSA I also saw this come to pass even with Tom Williams and Todd K (both work together in the same company and present VSA to students.) Tom Williams is an aggressive trader- when he has determined that he is looking to go long when he sees a bar that suits his fancy and BAM he is in. Todd K on the other hand waits for confirmation. He will wait out the next bar or even two before he gets in to his position.

 

What this does for the more conservative trader is give him/her a higher probability of success. What it does for the aggressive trader is let him/her be in on the entire start of the move when it does plow northward.

 

I have a good fellow trader who is more "confirmation oriented" and I tend to be the Tom Williams aggressive trader apparently.

 

I wanted to get a feel of how some of the traders here feel they fit into what category vs. the other? If I see a beautiful bull move on the horizon but will be unable to physically be at my platform to pull the trigger at the "perfect moment" I will accept the drawdown to be sure I get in on the trade. My fellow and well-respected trader from above would think I was crazy because he'd wait for the confirmation of that trend to form before pulling the trigger. Plus he is less susceptible to the fact that if it did decide to punch down a tad lower- I am now either stopped out or riding a nasty drawdown before the good times come.

 

I'd be interested in hearing others own self-reflection of what type of trader they really are. I'd be very interested in people who once sat in the "Aggressive Chair" and had a moment of clarity to become a more "Conservative Trader."

 

Once again I see an inadvertent lesson I was taught by a wonderful friend and fellow trader that I had to come too on my own... my aggressive days may be coming to an end... I may be leaning towards the “Conservative” and “boring” side with higher probability of win than I currently do now!

Aaron

 

 

Mainstream TA is an endless supply of patterns, techniques, methods etc. Depending on which books a person reads, what they see in a chart and the individuals personality is all relavant.

 

Personally i've never really understood the aggresive/passive arguement, Jeckyll and Hyde trading in an individual can't be good for the curve.

 

Good trading.

[The Unknown Future: To Predict or Not to Predict]

People are up in arms around the world over high fuel prices...they have to pay for thier investments...they think their pension is just money that pops up out of thin air...the dumb money pays for itself the pros just move the money according to what the dumb money wants or maybe doesn't want in most cases.

 

Professional intent must surely be the only thing to pick up on in order to predict.

 

I may be wrong, just some thoughts.

[The Unknown Future: To Predict or Not to Predict]

Thanks for the contribution.

 

It's an interesting about human behaviour... because does it imply that human behaviour hasn't changed over time? Do markets fundamentally move in the same way as they used to do? What about all the trading that's been executed through automated computer systems, without human intervention? Does it affect the way the market moves?

 

 

It's interesting about how it's all really fuelled. Think about one single person and how much they actually pay into the system, the markets, by way of pensions, mortgages, savings, borrowing etc. Then thier use of commodities, where they work, what thier job is for any particular company, thier earnings for what they produce and so on.

 

I suspect the real dumb money doesn't even know that they are dumb money and have no direct interest in the markets such as being an active speculator.

 

Again, just some thought.

[The Unknown Future: To Predict or Not to Predict]

Before I go off about this or that concept or idea, let's make clear first that none of this is representative of my own trading, let alone my own personal view about the market.

 

This thread is intended to discuss two fundamentally opposing views:

 

(1) The market is completely predictable and all you need to do is find the right key to decipher its language. But basically the market will do whatever it plans to do, regardless of any 'external influence' or manipulation. In other words, the path of price is laid out in advance.

 

(2) The other one is that the market is unpredictable, but not random. Randomness and unpredictability are not the same, but that's topic for another discussion. The second view is what I think most people would adhere to, and it's also what Douglas says in his "5 fundamental truths": on the one hand "anything can happen" and on the other hand "you don't need to know what's going to happen next, in order to make money of it".

 

Throughout history however, a lot of people have tried to determine what is going to happen next (rather than trade in the moment). Whether or not they were successful and to what extent, is another matter. Everybody knows that from time to time a new method or guru comes along, claiming he has found the secret to the markets.

 

Some people probably have not given the above much thought. Perhaps because they need not have to, and their trading is doing just fine.

 

The more time I studied charts, the more I observed that price moved in a very "orderly" fashion... although there are times where I have no idea what the market is going to do, I still make money by following my plan. On other times, the market acts like if it was destined to this or that. But let's not get into anything too esoteric

 

Thoughts, views, opinions,... all welcome in this thread!

 

 

Morning FW.

 

Thought provoking thread you have here. We don't know how the participants of a market will behave in the future, but we know how they are behaving now and we know how they have behaved in the past...so we have to able to pick up on behaviour and it's effect on price and then how the price is effecting behaviour and so on (circular).

 

Cycles start and end for reasons, so everything is known in advance once a trader has the ability to pin point the start of a cycle, he can then stay on top of the cycle through his/her knowledge of participant activity within the cycle.

 

Just some input.

[Bulls N Bears.. Its All in My Mind]

 

Or is it perhaps not selling, but just liquidation of actual positions?

If the public can only go long, and participation is greater in upmoves, should we not expect those moves to happen quicker and be steeper?

 

 

 

Interesting!

 

 

Maybe the fear of a drop is greater than the fear of a rise? But, it's institutional money that makes the market, so why do they stop competing so suddenly, and probably more importantly, what's the strategy/call for the resumption of the competing? What are the institutions up to?:question:

[Trading The Wyckoff Way]

Good question, sulong (I was afraid the first question might be something along the lines of "Did W wear boxers or briefs?"). And I don't want to pundit the answer because I really have no idea, and there are some awfully smart people in this neighborhood.

 

It may help to keep in mind that these charts were done by hand (though they may have been provided by a service). Therefore, one would include only that information that he considered to be important, as today. Ergo the open price may not have been considered to be all that important (I know the logic here is a stretch and that there may be other possible conclusions). It may also help to keep in mind that W was not about bars but about flow, or "waves" (but you knew that). He was also about energy, and balance, and he would more likely have been interested in who won the daily contest than in what the relative positions of the players were at the beginning of the contest. Whatever follow-through there might be the following day would be told by the high and the low.

 

All this is just conjecture, though. I'll have to chew on this some more. The answer may be embarrassingly simple.

 

 

 

This may be the logic, DB. Gann (i know it's not Wyckoff), suggested that the majority of overnight orders were placed by non-professionals, the 'pros' would then take advantage of these orders after the opening depending on their view of the market.

 

Maybe part of the reason why Wyckoff dismissed openings in the main is because they were not normally professionally motivated, and also because of the reasons you yourself have given, DB.

 

?

[Risk/reward in the Long Run ...]

Judging by your posts here and elsewhere, you appear to be fairly new, and much of what you want to know may become clear as you become more experienced (I'd like to say "will" become clear, but that is often not the case). Issues of nearby rewards and tight stops and trailing stops and risk:reward ratios and where do I enter/exit and how I do I distinguish up from down are among the most common puzzlements that beset beginners and are all a consequence of their not knowing just what it is that they're looking at.

 

Once you understand what you're looking at and become familiar with it, you should be able to determine the best entry for your risk tolerance, and you will have defined what constitutes a reversal signal (I say "should" because many people never do). Once that's accomplished, it's simply (but not necessarily easily) a matter of entering when you're supposed to and staying in until you get your reversal signal. At that point, all the issues regarding stops and r:r and cutting profits short and so forth will for the most part evaporate.

 

 

Hi DB.

 

Good post, and may i say, i'm enjoying reading your 'work' again.

 

I suppose true risk lies within a traders own understanding of supply and demand, greed and fear, market psychology, strength and weakness, price action, support and resistance.

 

People/traders often argue about 'the numbers', different ratios and so on, but this is only in context/reference to thier own ability, and to a certain degree, has no real relavence or bearing to anybody else, or dare i say, even the market.

 

 

Good to read you again, DB.