Fucking Cyprus bullshit - Page 2

On March 20 2013 06:15 Gnarly wrote: You sound like one of those people who keeps telling me, irl, that it's impossible to ever win at poker, it's completely totally random, there's no fucking sense in ever trying.

Was pretty sure that this was going to be your response as it is consistent with the reasons for which you do what you do--tendency to not look for disconfirming information. The fact that you compare me to someone who, without much experience, states that winning at poker is impossible, despite the fact that I've stated I do trading as a profession, pretty much sums up your ability to objectively assess your activity. What I am telling you isn't an opinion or "attitude," it is a statement of fact based on quite a bit or research both academic and for profit.

OP plays play money?

On March 20 2013 00:35 phexac wrote: Based on my experience working at a trading firm, most retail "day traders" have no idea wtf they are doing. In most cases they aren't even thinking about the same thing as the professional traders do. In fact, being on the other side of their trades, one has to wonder whether they are thinking at all. On top of that, people who rely on technical analysis (aka reading charts) are essentially reading tea leaves with all the financial success that can be expected from that activity. You know when you are in a poker game and a dude shows up and plays 100% of his hands and will call pot size all-in bet to see one more card to make his baby flush draw. Then he will turn to you and talk about his deep thought-out strategy for playing poker that he's been using for the past 10 years, and you can tell this dude isn't even playing the same game as you. Without trying to be overly harsh, when it comes to trading, the OP is that guy, and I can only chuckle at "buying low and selling high is the foundation of my trading" comment. Yes, because there are all those people out there who purposefully try to buy high and sell low. It's like telling someone about your swimming technique by saying you like to stay on the surface of the water so that you can breathe. Thanks mate, that's helpful. And another pearl: "Pretty much BE due to my inability to put my money where my mouth is. Once that is done, things should be smooth sailing for the rest of my life." Now raise your hand if you've never heard this at the poker table. For reference, when I talk about retail day traders I refer to people who move in and out of positions fairly quickly (hours, days, weeks etc.) and not buy and hold guys who buy a stock and hold it for the next few years (mind you, those have a variety of faults of their own). The sad thing is that, just like with poker, there is a lot of information out there based in years and decades of research that shows why what the OP does cannot possibly work, gives historical evidence for it not working (ever) and even goes into some detail regarding what professional traders do, how they do it and why they are able to stay profitable (most of the time). The financial industry is very good at pitching the idea that retail traders can do well. Incorrect information spread both purposefully and due to ignorance on TV, through books, articles, financial websites only exacerbates the problem, as does people's tendency to lack the drive to search for disconfirming information to the opinion they hold. That tendency is what keeps the fish at the poker table from wondering about their strategy over the course of 10 years of playing. This post was far longer than what I had intended, but this is type of misconception about trading and investing activities is something I see a lot and it never ceases to amaze me. As for the OP getting a trading job, the only way I see that happening is if he has a personal connection who would be willing to hire him. Being a (good) poker player, assuming he is, is something that can definitely work in his favor since traders generally view that very positively. However, the truth of the matter is that most trading jobs are already spoken for, as those firms recruit at top schools and have very few positions for anyone who isn't studying there. For example, JP Morgan US, to use a name most people will recognize, in a recent year hired 8 traders for its summer Trading internship (from which most of its full-time hires are made). Two of those positions went to Chicago Booth MBA, two to Harvard MBA, two, I believe to Columbia MBA, and the remaining two to all other applicants, of which there were a couple of hundreds for each spot. Competition may not be as tough at some smaller prop shops, but they aren't exactly talking walk-ins either. I will conclude with a simple question to the OP. Seeing as you are looking for a job in trader, what type of trading do you want to do, why, and what do you think a person in that job actually does (please don't say buy and sell securities and try to make money)? You don't need to post it here, just know for yourself. Unless your answer to that is crisp, somewhat complete and at least approaches having the facts right, whatever slim chance you may otherwise have for securing a trading job, is actually not slim at all, it's non-existent.

ty for posting and sharing this insight

On March 20 2013 12:14 Rinny wrote: OP plays play money?

Being that I live in the states, I can't play online for real money, only live. I can't play live anymore because I'm no longer invited to the games because I kept winning them. (this isn't a brag because they were bad bad fish)

On March 20 2013 08:37 phexac wrote: Show nested quote + On March 20 2013 06:15 Gnarly wrote: You sound like one of those people who keeps telling me, irl, that it's impossible to ever win at poker, it's completely totally random, there's no fucking sense in ever trying. Was pretty sure that this was going to be your response as it is consistent with the reasons for which you do what you do--tendency to not look for disconfirming information. The fact that you compare me to someone who, without much experience, states that winning at poker is impossible, despite the fact that I've stated I do trading as a profession, pretty much sums up your ability to objectively assess your activity. What I am telling you isn't an opinion or "attitude," it is a statement of fact based on quite a bit or research both academic and for profit.

I didn't see that you stated that you professionally trade, just that you knew of some who do. What exactly are you telling me? Quit?

I'd also like to know a few things about how you trade, phexac. Do you trade in a pit or in an office? Do you ever read a chart, or tape-read, or is that too retail for you? Got quants that make an automated system for you? Are you able to read order books? Instead of being negative, why not give some insight into what you actually do? You typed up that really long post, and I'm just asking for a couple of pointers. About a 20th of the post you typed up, maybe.

Instead of making it seem like it's literally impossible for me to ever have a winning trade, that I can never possibly do anything right, which I know for a fact I've been able to win more trades lately than when I first started, why not give some pointers? I'm not asking for a full on mentorship or anything, but being in the finance world is something I'm very interested in. Instead of trying to crush the motivation I have, why not give just a couple pointers?

I know it's astronomically against me that I can be successful being a retail guy. Should that stop me, or anyone who has a will to be successful? Has anyone, ever, in the entire history of the world, ever made it with individual trading? I like the challenge, and I view the markets as the MOST challenging thing I could possibly do.

Sorry if I sound pissy, I didn't get enough sleep because my dog kept barking her head off.

in my opinion you can make money trading.

you have to work hard and work smart.

Here's a brief overview....

For most products (equities, currencies, fixed income, derivatives, etc.) there are several types of traders.

1. Execution - you have a trade from a client, execute it in an efficient manner, collect a fee. Say someone wants to sell 200,000 shares of Apple. That's a big trade that will likely move the market, so the trader will structure it over some time to try and get the best price for the client.
2. Sales trader - very similar to the above guy, except he is also responsible for client management. This guy is the result of automation and shrinking of the industry and margin. Where before you had a few sales guys and a few traders, now in some cases one dude can do all their jobs.
3. Market maker - this is what I do for options. The majority of this job is providing liquidity to the market for an edge and make your money on the spread. Your goal is to sell above fair value and buy below it. This means that you need to be quite good at figuring out what that fair value is. A lot of market makers will also do some prop trading where they will actually have an opinion regarding a security and try to trade on that. The latter makes up a relatively small portion of the activity though, say around 10%.
a. A subpoint to this is that when you trade, you are trading against this guy. If he makes money, you lose it, and you lose your broker commissions.
4. Pure prop traders - have an opinion, make bets based on it, hopefully profit. There is really not many of these guys. Usually prop trading will go along with another activity as in point 3.

Do not confuse prop traders with brokers. They do not do the same thing and have different compensation schema. Brokers purely match their customer with either another customer or a trader as they attempt to get them the best price. They live on commission and many actually don't have a very good idea about how traders make decisions. It's not their job and they don't really need to know.

Now, here are some reasons why a retail trader will have trouble.

1. Execution - Speed matters, and when I am talking about speed, I am talking microseconds. Trading operations have high levels of automation. A trader will control parameters of the trading system, but the system will do execution. This means it needs to send signals to and from the exchange as it places and executes orders. The speed of this signal depends on two factors - speed of system processing and ping of the connection. Trading operations spend millions to speed up both using hardware, software development, and looking for ways to get a faster connection. To give you an idea of how important it is and how much money is at stake, a few firms have considered building a series of their own microwave transmitters across the country from the their HQ to the exchange to shave off a few microseconds. With the communication speed they achieve, retail investor in their home relying on a broker to execute traders isn't even in the picture for any sort of top level trade execution. In practice that means that you are going to buy on average at a higher price and sell at a lower one. In a market as busy as currency, you just aren't getting in on a lot of the trades you need to make a profit. Your wins will be smaller and your losses larger than they need to be.

2. Support - traders at a shop have top of the line proprietary software, quants and analysts to help them keep track of the information they need and make decisions. A guy sitting alone at home simply cannot get access to the necessary information fast enough. In many products this means he likely does not have an edge. This includes currency, as it's a very complex market with a ton of liquidity and many many players. In the products where it is possible for a retail guy to win, the only practical way is specialization. Since I deal with options, I will talk about those. A retail trader needs to focus on one or two companies and get to know them super well. Well enough to gain an information edge over the field. This means this likely should not be one of the most active names. You aren't going to make a lot of money trying to trade Intel for example. The edges are just too small. Most traders fill those orders just to maintain the relationship with the broker and get in on better trades in less active names. Something smaller, with less activity, say Corning, maybe that is doable. The bottom line is, you need an information edge about whatever it is that you trade. You need to understand the product EXTREMELY well and know what moves it.

3. Capital - When your edge is in pennies, you need a lot of capital and a lot of activity to make any respectable amount of money. To get a larger edge, you need to know some information that the market does not then make the correct bet. That is incredibly hard.

Now here are the reasons why what you do cannot work

1. Chart reading doesn't work. You make money because you turn out to be right about the future. Charts offer no information about the future. This does not stop a significant number of people, even some professional traders, from trying to puzzle out the next move of their security through obsessive chart analysis that includes voodoo terms such as "Bearish Engulfing Pattern," "Ascending Channel" and "Bullish Harami." These people have a religious faith in their charts and when they lose money, they tend to say that they just didn't see what the chart was telling them or that they should have trusted their charts. Simple truth is they are all wrong and persist in their belief through an extremely heavy doze of confirmation bias and discarding of all disconfirming evidence.

2. Short-term predictions for security moves are very hard to make without possessing some real gem of information. Since you deal with currencies, the chances of you knowing something like that are zero. Any success you have had, along with any failure is 100% luck. Traders who make bets operate on expected value, which resonates very well with poker. As you should know from poker, this means you need to know the inputs for your expected value calculation and the reasons behind those inputs being what they are. I doubt that you have that for currencies. To put this in perspective, for large highly liquid markets such as currencies and equities many trading operations actually cannot make money because they lack the expertise and proprietary tools to do so. Only some institutions are able to do trade those products and make money. A lot of others simply admit they cannot make a profit and only have those operations to minimize trading loss they would get by going through a broker (which is by the way, who you are relying on). And keep in mind, these guys have huge financial resources, a ton of people trying to figure this out, and get a huge discount on the fees they pay (think rakeback). So let me put it to you this way, if you see a game where a player who is better than you, has a bigger bankroll, pays lower rake (their bets are bigger compared to the fees than your bets) and training resources and gets rakeback, while you do not, cannot make money, would you sit down to play in that game? Because this is exactly what you are doing right now in your trading.

So yes, it is possible to make money trading if you focus on a product you understand extremely well that isn't super popular. You fail on all three counts, you don't have focus, your understanding of your products is far inferior to that of the people you trade against, and the products you trade are extremely liquid with enormous volume. The bottom line is, yes it is literally impossible for you to have a positive long-term expectation in the trading that you do and your should stop. As far as exploring the possibility of focusing on a smaller product, it is still very hard to do without very good training, which is unfortunately very hard to come by. If you truly think that this is something you want to do, you need to go work professionally in the field, at least at first to learn how to do it well. This means go to school and then network and recruit for the job while you are there. But above all, yes absolutely, positively, no doubt about it, stop whatever it is you are doing now.

Outside of that, a lower degree of difficulty would be long-term investing where you buy and hold securities for a long time. Even there, it's hard to beat simply buying an index ETF and forgetting about it. The truth is that for the vast majority of people who want to make money in the market, even professionals, more activity leads to lower profit.

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Phexac, a lot more than I expected, and I do appreciate your post, there are just a few small things I have a problem with.

What does going to school help you with? I've heard that getting an economics degree is just for show, to show that you are "dedicated", and not so much teaching you how to trade. Surely, knowing economics is helpful, but isn't that the fundamental side? Isn't fundamentals and technicals both looked down on?

I appreciate that you typed up who the players are, as I've been working on a poker table metaphor for trading. I put the retail traders UTG and early spots, but I'm not sure if I want them in the blinds. After that, you've got their brokers. I don't know if I want to put in central banks, but if I do, they are the button and the game host, while brokers also host their own tables. I'm not going much into that, because it's still preliminary, but if you could give a thought on that, it would be much appreciated.

Now, I understand that the big big buys spend millions to get the fastest execution, and I've even heard of people trying to break into the NSYE server system, the physical servers, to get the fastest speeds, or something along those lines. However, as a retail guy, I'm not worried about a pip slippage if I'm aiming at a couple hundred pips. I am fine with this as long it's very minute; having my spread initially go from 2.5 pips to 3.5 or 4 pips isn't too much of a deal with me. Sure, if I ever had the money to be considered a big guy, but not the biggest guys, I'd care, but it's retail trading. Hardly any money on the line, so hardly any worry.

I don't know if you think that I trade just because of the charts, but that's not what I do. I don't look at just the charts, look to see where subjective S/R or S/D areas lie, but I do look at them for references after deciding whether or not the fiscal cliff is real or not or something similar. If I think the USD is going to be getting stronger, it's not because I read the charts, but because of macro economic factors, such as the petro dollar and war and tech. I don't know if you read my thoughts on why the USD will be getting stronger, but I'd like your thoughts on that.

I know about the candle patterns, but I don't trade off them. I don't do "double bottoms" or "double tops" or whatever.

You are right, I don't know how to quantify expected value for currencies, but then again, can anyone? In poker, don't you have to consider your villains range to be able to get a proper EV? If this is the case, then the interbanks(this may be the wrong term) would be guessing the ranges of their villains, since they can't see each others order books?

To take your example, If I were to play poker with someone and I weren't allowed to make money, why would I do that? Your example seems a bit off, because If I could not make money, then that would mean the cards are rigged, no? Or that he could see my hole cards, but then, I'd still make money when he folds. However, that would assume that it's just us two playing, which isn't the case. That player is playing against other larger stacks, no?

What I'd like you to respond to:

Why exactly is going to school needed?
The poker table metaphor.
My response to your poker game scenario.
What you think of my thoughts on the USD.

Thanks.