57 replies to this topic

[IndexTrader]

Index Trader, we are talking about Average Joe traders here, not market wizards such as Schwartz who at one time or another held a seat on the exchange.

As usual you know not of what you are talking about.  Frankie Joe had a real simple technique, he sold rallies and bought dips.  Then along came the greatest bull of all time and there were no dips to cover on the rallies he sold.  According to his friend Larry Williams, he became so frustrated with losses he apparently  committed suicide.  It's all in one of Larry's books.

As for the trading contests, had you ever spoken with Norm Zadeh the sponsor, he would inform you that in the futures division, 99% were net losers overall.  In any one year, it was something like 90% as reported by the WSJ.  And these weren't average Joes, but newsletter writers, brokers, and other assorted gurus.

First Gary, you're the guy who brought up the term "Average Joe trader". Originally we were discussing how large an account size might be possible to make a living trading. At that point you jumped in with your stories about con men, CFTC, course sellers, newsletter writers, etc etc. Helpful information, but not pertinent to the topic at hand.

I don't know how many traders trade for a living, whether they fit whatever your particular definition of "average Joe trader" is or not. And more to the point...neither do you. Because no one took up your offer to show you their account statements, you ASSUME there are none. Hardly up to even your own standard of proof.

I simply provided some names of people who have records that have been publicized. One would hardly expect your "average Joe trader" to have a public record now would they? So it seems we are in a quandry here, caught between your need to see a public record, and whether a public record would ever be possessed by some you call "average Joe trader".

If you will reread my post, you will find that I did not attempt to make any assumptions about the results of the traders as a whole. I made comments about a few traders specifically. I am unaware of the suicide you claim re: Frankie Joe, or the alleged cause of it, nor whether Larry Williams is an unimpeachable source for this information (there are those who would argue this point alone). I believe I recollect reading in Barrons about the death, and what I recall is that it was due to a heart attack. Perhaps Barrons didn't know the information what you are in possession of, or perhaps my memory is faulty, or perhaps you are in receipt of bogus information. We can all run into markets that don't fit our particular style. And if your information is factual then it may be that it happened with Frankie Joe. I might add, it could happen to those who are momentum buyers like yourself.

The point remains that there are those who trade for a living. I gave a few examples. JB mentioned a few.

IndexTrader

[outsider]

Sentient wrote: The fact that someone has a good long run making money trading DOES NOT PROVE SKILL. Which is why I think it behoves all of us to always take care. NOt to freeze on the trigger like a deer caught in the head light but to take care. Such as, using stops, risk management, diversification, whatever. I like those words you wrote implying keeping humility in your perspective. Big lottery winners can make a living on a one time win, but what does that say about their skill about picking numbers? Also don't some professional gamblers that make a living at their craft? Until they don't, or they HAPPEN to stop at the right time. ---Out

[*JB*]

Sentient wrote:
Such as, using stops, risk management, diversification, whatever.

I like those words you wrote implying keeping humility in your perspective. Big lottery winners can make a living on a one time win, but what does that say about their skill about picking numbers? Also don't some professional gamblers that make a living at their craft? Until they don't, or they HAPPEN to stop at the right time.

---Out

Money management is the absolute key to not blowing out ones trading account and it is the least discussed issue (past references to stops) on this or any other trading/investment board.

One of the folks in Schwager's first book Market Wizards -- the only non-trader -- was Dr. Van Tharp. His field is trader psychology and trader development -- he calls himself a "traders performance coach" or something similar. He does some extensive (ongoing) research focused on just money and risk management techniques. I think it is worth looking at his work in particular -- his books on system and risk managment are sold at Amazon and his specific studies on JUST money/risk management at his own web site.

http://www.iitm.com/...books/rptmm.htm

Money/risk management is the least sexy, and the most boring, thing to talk about -- but without it, any risk venture is gambling in the worst sense of the word. With Money Management -- and other risk management -- techniques, even craps/poker/blackjack players can make a living...if they have the disipline to "play" as though they are in a business.

[sweet1516]

I have traded in the OEX options pit and the SP futures pit and know alot of good traders who have been able to make money in the indexes while trading from the FLOOR --- I have always believed that trading indexes off the floor to be the hardest trade of them all. I am sure that some people can do it successfully but I find it alot easier to profitably trade individual stocks. The one ingredient needed to be successful over the long haul is HARD WORK and constantly thinking of new ways to beat the market ---- if you do not get BETTER as a trader every year then the game will pass you by. I enjoy reading all the thoughts of everyone on this board and find it to be by far the best forum on TECHNICAL trading advice on the web. I find it very interesting that IYB is probing for a short trade and fading the trend. Good luck to all.

[Dex]

Let me tell you two stories of people who day traded - one I personally knew and one who I read about in the news. The first is a person who grew up poor but his father worked hard and amassed a good amount of money that he left for his son and family. So this person let's call him Bill, had a wife who was given about $1m by his father, the two children had a college fund and Bill had a couple of million from his father and more money from being a arbitrage broker. Bill retired at 40 and dabbled in small businesses investing. Bill got involved in day trading and had a mentor to teach him. You gussed it. Bill lost all his money, the wife's money, and the childrens college funds. The wife now house sits homes that are for sale and is back at work. The children are getting financial aid. Bill began taking drugs and drinking too much, he is now in prision - not related to day trading. This is a true story. The other story was in the news about a person who worked all his life - amassed $100,000 and began day tading at one of those firms specializing in day trading. He lost it all and went back and started shooting. I think he killed at least 2 people. Talking about the stars of day trading and thinking that the masses of average people can do it is like pointing to the NBA stars and telling an average getto kid he can be an NBA star.

[Sentient Being]

JB, Thanks for the info. I once sat down and tried to find a book on money management for traders and could find none. I thin took all my trading books and stacked them on a table, dug throught them to see what I could learn on the subject. The material was in there, here and there...but limited. I'll check this guys stuff out.

[Sentient Being]

DEX, I can't say anything to take away from what you have put forward. But I do have a thought. Making a living playing basketball is very difficult. There are very few positions open. Hundreds of millions of people in this country and how many positions that pay a living wage to play basket ball? 1000 maybe? You have to be the best of the best to even play pro for a few years. Or at least appear to be the best of the best. Now, how many people can make a living wage trading the marekts? I suspect that more could make a living trading the market because the money is there for them to 'take'. But, do more people make a living trading their own money than make a living playing basketball? I honestly don't know. My goal at this time is a bit lower. I simply want to outperform the market. I have no set percentage. I simply want to trade wisely and outperform a buy and hold approach. How much room is there in the market to allow people to do better than buy and hold. I guess what I'm getting at is....I don't believe that a capable trader need be better than the best of the best. He need not run down the floor and try to take the ball away from Michael Jordan. All he has to do is take the ball away from some overly emotional trader who has no clue as to what he is doing? But of course, there are a lot of people reaching for that ball so a certain level of skill must be obtained?

[IndexTrader]

Talking about the stars of day trading and thinking that the masses of average people can do it is like pointing to the NBA stars and telling an average getto kid he can be an NBA star.

I would liken day trading, or for that matter, any trading, to a spectrum. At one end of the spectrum are stories of the type you just told. At the other end of the spectrum are the super stars of trading. In between are wide ranges of different sets of circumstances. I doubt that we could point at EITHER end and claim that that is the common experience. Further, I would say that the spectrum is skewed toward the failure side....meaning most people probably fall somewhere along the spectrum where they either lose money, or they make so little it is not worth the time investment that they are making.

No one said that the "masses" could trade. In fact, we know they can't. We also know that the small majority in society make most of the money at literally anything. So there's nothing new here at all. The point is that it is possible to trade for a living given sufficient knowledge and skills. The majority will never put in the effort required for that type of success.

IndexTrader

[Dex]

IndexTrader & Sentient Being, Thanks for the replies. First I like to say this is the only board I read for three reasons. First, is that reading too many boards can influence my view of the markets, two the majority of people treat eachother with respect and people provide good insights to the markets. Your points on day trading are well taken. The intent of my simile about the NBA & getto kid is that we tend to identify with the winner - even against outragous odds rather than the looser. And that we need to have reasonable expectations of what can be accomplished (your points) In Elders' "Trading for a Living" that he mentioned on page 35: "Brokerage recods indicate that 90 out of 100 people trading today will probably be gone from the markets a year from now." Another good quote is on page 37 Elder says that every morning before he trades he says "Good morning, my name is Alex, and I am a loser. I have it in me to do serious financial damage to my account."

[Hawk]

JB-- "What success I have found daytrading came when I shifted to one who did it as a business, looking to make 1-10 points consistently and repetively" You hit the nail on the head with that statement. It took me a very long time to come to that same conclusion. And, even longer to find a way to do it. If a trader waits for a month for a profitable trade to come to fruitation he/she is missing the boat, unless it's a hell of a payday. If that trade turns out to be a loser, or breakeven, there goes a whole month with no income! Profits must be made & brought home on a regular basis. The shorter the time horizon the better. Lately, I've been trading with options catching one to three day moves, as well as riding trends such as the current SnP. This has given me much better success rates then when I used options to try catch the big moves (home runs). I like the comfort and low stress of trading options but it's rather tricky to say the least. Anyway, thanks for sharing. Your recent posts show me that you definitely know what you are doing and helps confirm certain thoughts & ideas I have. I appreciate the input. If you ever want to share what you are doing in your emini daytrades I'm all ears! I used to daytrade the emini daily but never did find a system or the right indicators to do it successfully. I'm new to this board and am way out of my league here as far as T/A goes, but hope to learn as much as possible to add to my trading arsenal. I have traded daily for 10 years now, and even though I don't have the capacity or ability to do much of the analysis available (yet)..... I hope over time I can offer everyone a different perspective from my own personal experience that is of some value.