Thread about #trading. Get a glass of mineral water (I stopped drinking coffee 20 years ago)
In last 10 years I've come across in twitter numerous overconfident TA traders using charts with lines and indicators on them. Most come and go. Many lose everything, some go passive.
In last 10 years I've come across in twitter numerous overconfident TA traders using charts with lines and indicators on them. Most come and go. Many lose everything, some go passive.
Trading is zero-sum game. Futures and forex are zero-sum by construction, stock #trading is zero-sum for intraday and short-term #traders. You need significant edge to survive in this game and it must be mathematical and robust.
I had this smart friend managing a fund during GFC. He faced liquidation and lost about $50M due to overleveraging and being to confident about his ability to forecast future prices. He ended up DJ in a club.
Then there is the sad story of this well-know trend-follower who blew up the only fund he was managing because in 2013 he shorted bonds thinking he was smarter than the Fed. There are quite a few similar stories.
Never try to fade the Fed and never try to outsmart market makers. They have a structural edge and your edge, if you have one, is small and fragile. You cannot outsmart the market. TA is a redistribution scheme that benefits market makers. You need something more advanced.
Programming skill is necessary but far from sufficient to have an edge. You need to understand how regimes change, the dynamics of price action and the market structure and that takes time. Looking at chart formations will get you a job in fast food industry at the end.
Quantopian collapse is a good example of how thousands of people with good programming skills cannot come up with an edge if they lack skin-in-the-game. They offered everything but the punters failed them.
If you hear anyone claiming trading is hard because of non-stationarity RUN. It is non-stationarity that provides the profits and what you have to deal with eventually yo succeed. So few understand this.
If you hear anyone talking about entropy, information, distributions, statistical analysis in general as a way to make it in trading RUN. Statistics are for estimating parameters of models, they are not the models. There are many BS vendors in that space.
If you hear anyone talking about Kelly investing RUN. You are probably dealing with a fool with little skin-in-the-game. It was probably Kelly that drove LTCM to failure. Kelly applies to bets with know and stable parameters, such as casino bets. It's dangerous to use in trading.
Instead of Kelly use what market wizards in the past recommended: your risk per trade should not exceed 2% of your bankroll. When I traded for a hedge fund, I used 0.5% for total portfolio heat. This saved me through the financial crisis.
If you hear anyone claiming they can teach you how to trade RUN and then RUN faster. You are probably dealing with a failed trader who is trying to recover losses by teaching poor souls failed techniques. Those who really know are busy trading and no time to teach.
Books on machine learning for trading won't help you probably if you are a struggling trader. Those are for a special audience and these methods end up being too esoteric due to many parameters. Sometimes it's like alchemy. read "simple" books.
I have a free introductory book on trading published by Wiley in 2008 that provides a foundation to build on. You can find the free book Profitability and Systematic Trading here: priceactionlab.com/Blog/article-s…
Finally, for the very few who want to develop trading strategies, I have a premium book "Fooled By Technical Analysis. (My plug goes here) priceactionlab.com/Blog/online-bo…
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