First, caveats:
1. I do not sell anything.
2. I try to stay away from commenting on these fora but somethines I just cannot help myself.
3. It is believed that more than 90%, and perhaps much more than 90% of all people who have ever tried their hand at trading never made a dime in it.
4. Over the years, I have seen posts on these fora entitled "Help, I had a million dollars and I have only $100,000 left" and "Help, I lost 40% of my capital."
5. I cannot tell you how I am trading because it took me nearly a decade to develop my trading method and statistically test the results for profitability before I was able to start trading live. (Thus, it cost me at least hundreds of thousand dollars in lost income).
6. There are many wrong and unproductive myths about trading such as
(a) "Markets are unpredictable because they are random." They are not, they are stochastic, namely, there are patterns that can be uncovered and used profitably so our success rate can be higher than 50% and possibly much higher than 50%. Whereas if the markets would be purely random, our success rate in the longer run would be merely 50/50 resulting in no profits whatsoever.
(b) "Stop loss must be big," which of course depends on the market and your understanding of it.
(c) "Indicators do not work because they reflect only the past whereas we are interested in the future." That falsity disregards the fact that in trading we are making decisions under the conditions of uncertainty and the only thing we have available to us is the past. And precisely because the financial markets are not random but they are stochastic, there are also indicators that can tell us with a high degree of probability what is going to happen in the market next.
(d) And, of course, some "traders" at the "investment companies" hired off the street with no knowledge and experience in trading tell their clients if they lose their money as they usually do: "I told you there was a risk and you did not invest enough."
So my fair warning to anybody who wants to try his hand at trading would be as follows:
1. Based on my experience, it may take you years to become profitable as a trader.
2. There are many charlatans trying to sell their method of trading to you via manuals and courses. You would be best advised to stay away from the charlatans. There is a simple test of this: If somebody tell you that he can make more money teaching and consulting in trading than by actual trading - I have seen people making such claims on these fora, he cannot trade successfully and his method of trading is not profitable. (After you become profitable yourself, you will find that you can make much more money trading than by teaching how to trade.)
3. Most literature on trading or advice even on this fora and even from the "trading companies" and from the purveyors of trading software on FF falls into two categories:
(a) For instance, a lesson entitled "How to Use Bollinger Bans in Trading" will describe what the Bollinger Band is but tells you nothing about how to use it profitably in your trading. That is the difference between what is call a "descriptive model" vs. an "explanatory model."
(b) Claims along the lines of the myths described above.
4. JP Morgan Chase trading claimed in one past quarter that they did not have a single unprofitable day during the quarter. That is possible though unlikely. But the issue at hand is actually different:
(a) We, as small retail traders, are trading using a $1,000 software and perhaps a super duper laptop with the fastest processor money can buy, all for, say, $2,500.
Then we use an Internet connection with a latency at best of 45 milliseconds and frequently much more so there is some "slippage" between the time we hit the
button and the time the trade is excuted by the exchange.
(b) It is said that 80% of the trading is done automatically by computers. We should not compare ourselves to the large Wall Street firms that employ hundreds of Ivy League educated engineers and computer programmers and use large computers costing millions of dollars. In addition, they may place their computers next to the exchange so they can save even an infinitesimally small fraction of a second it takes for the electric signal to travel from their computer to the exchange and back at the speed of light.
So this is my fair warning. I am out of here and will respectfully decline to particiapte in any possible discussion of these issues in the future.
1. I do not sell anything.
2. I try to stay away from commenting on these fora but somethines I just cannot help myself.
3. It is believed that more than 90%, and perhaps much more than 90% of all people who have ever tried their hand at trading never made a dime in it.
4. Over the years, I have seen posts on these fora entitled "Help, I had a million dollars and I have only $100,000 left" and "Help, I lost 40% of my capital."
5. I cannot tell you how I am trading because it took me nearly a decade to develop my trading method and statistically test the results for profitability before I was able to start trading live. (Thus, it cost me at least hundreds of thousand dollars in lost income).
6. There are many wrong and unproductive myths about trading such as
(a) "Markets are unpredictable because they are random." They are not, they are stochastic, namely, there are patterns that can be uncovered and used profitably so our success rate can be higher than 50% and possibly much higher than 50%. Whereas if the markets would be purely random, our success rate in the longer run would be merely 50/50 resulting in no profits whatsoever.
(b) "Stop loss must be big," which of course depends on the market and your understanding of it.
(c) "Indicators do not work because they reflect only the past whereas we are interested in the future." That falsity disregards the fact that in trading we are making decisions under the conditions of uncertainty and the only thing we have available to us is the past. And precisely because the financial markets are not random but they are stochastic, there are also indicators that can tell us with a high degree of probability what is going to happen in the market next.
(d) And, of course, some "traders" at the "investment companies" hired off the street with no knowledge and experience in trading tell their clients if they lose their money as they usually do: "I told you there was a risk and you did not invest enough."
So my fair warning to anybody who wants to try his hand at trading would be as follows:
1. Based on my experience, it may take you years to become profitable as a trader.
2. There are many charlatans trying to sell their method of trading to you via manuals and courses. You would be best advised to stay away from the charlatans. There is a simple test of this: If somebody tell you that he can make more money teaching and consulting in trading than by actual trading - I have seen people making such claims on these fora, he cannot trade successfully and his method of trading is not profitable. (After you become profitable yourself, you will find that you can make much more money trading than by teaching how to trade.)
3. Most literature on trading or advice even on this fora and even from the "trading companies" and from the purveyors of trading software on FF falls into two categories:
(a) For instance, a lesson entitled "How to Use Bollinger Bans in Trading" will describe what the Bollinger Band is but tells you nothing about how to use it profitably in your trading. That is the difference between what is call a "descriptive model" vs. an "explanatory model."
(b) Claims along the lines of the myths described above.
4. JP Morgan Chase trading claimed in one past quarter that they did not have a single unprofitable day during the quarter. That is possible though unlikely. But the issue at hand is actually different:
(a) We, as small retail traders, are trading using a $1,000 software and perhaps a super duper laptop with the fastest processor money can buy, all for, say, $2,500.
Then we use an Internet connection with a latency at best of 45 milliseconds and frequently much more so there is some "slippage" between the time we hit the
button and the time the trade is excuted by the exchange.
(b) It is said that 80% of the trading is done automatically by computers. We should not compare ourselves to the large Wall Street firms that employ hundreds of Ivy League educated engineers and computer programmers and use large computers costing millions of dollars. In addition, they may place their computers next to the exchange so they can save even an infinitesimally small fraction of a second it takes for the electric signal to travel from their computer to the exchange and back at the speed of light.
So this is my fair warning. I am out of here and will respectfully decline to particiapte in any possible discussion of these issues in the future.
