Giving up the pipe dream of making a living in Forex

double_6 · November 1, 2014, 11:35pm

Daniel J Catlin you are an interminable tease so you are!

Question:
What is the most common mistake retail traders make & continue to repeat time & time again, even when prompted not to do so by seasoned traders (providing they’re lucky enough to rub shoulders with one or more of them) & their [U]broker reps[/U]?

Answer;
They think too much, they think too deep & they think far too often for their own good.
And as a consequence of all that thinking they over complicate that which is essentially uncomplicated.

That’s a ground shattering revelation don’t you think?

So if you slot that uncomplicated round peg into its perfectly shaped uncomplicated round hole, you’re off to the races yeah?
(d-pip probably knows the true meaning of that ground shattering revelation more than most on here, that is providing he hasn’t veered off & added any more layers of inconsequential nonsense to his docket in the meantime)

And to assist you along the way you’ll have your trusty 2 imperative questions shield just in case you require to swat away all the annoyingly irritating dorks, show ponies, empty vessels & timewasters.

As if by an amazing coincidence I spotted a post earlier submitted by sharebazar.
He didn’t compose it, the passage forms part of a book (some of which is published, some not) by a gentleman named Adam Grimes.
I thought it quite apt under the circumstances.

I’m not promoting or recommending Mr Grimes or his material in any way shape or form & I don’t necessarily share his view regarding the [B]time horizons[/B] in the passage [B]which I’ve highlighted in bold[/B], but I do feel he touches on a very important aspect & one which I’m sure will resonate with one or two smarter cookies amongst you.

Anyway, on we go. Time to grab the plonk & dial into another episode of parenthood!

Here's KIERAN!

"The argument of many academics is that you can’t make money trading; your best bet is to put your money in a diversified fund and reap the baseline drift compounded over many years. (For most investors, this is not a bad plan for at least a portion of their portfolios.)

Even large, professionally managed funds have a very difficult time beating the market, so why should you be able to do so, sitting at home or in your office without any competitive or informational advantage? You are certainly not the best-capitalized player in the arena, and, in a field that attracts some of the best and brightest minds in the world, you are unlikely to be the smartest. You also will not win by sheer force of will and determination. Even if you work harder than nearly anyone else, a well-capitalized firm could hire 20 of you and that is what you are competing against. What room is there for the small, individual trader to make profits in the market?

The answer, I think, is simple but profound: you can make money because you are not playing the same game as these other players.

One reason the very large funds have trouble beating the market is that they are so large that they are the market. Many of these firms are happy to scrape out a few incremental basis points on a relative basis, and they do so through a number of specialized strategies. This is probably not how you intend to trade.

You probably cannot compete with large institutions on fundamental work. You probably cannot compete with HFTs and automated trading programs on speed, nor can you compete with the quant firms that hire armies of Ph.D.s to scour every conceivable relationship between markets. This is all true, but you also do not have the same restrictions that many of these firms do: you are not mandated to have any exposures at any time.

If you are uncomfortable with the market environment, you can sit fully in cash for weeks at a time and no manager or investor is going to complain. In most markets, you will likely experience few, if any, liquidity or size issues; your orders will have a minimal (but still very real) impact on prices.

Most small traders can be opportunistic.
If you have the skills, you can move freely among currencies, equities, futures, and options, using outright or spread strategies as appropriate. Few institutional investors enjoy these freedoms.

Last, and perhaps most significantly, you are free to target a time frame that is not interesting to many institutions and not accessible to some.

One solution is to [B]focus on the three-day to two-week swings,[/B] as many swing traders do.
First, this steps up out of the noise created by the HFTs and algos. Why compete with a machine on its own terms? Similarly, many of the largest and best-capitalized funds actually cannot participate in this time frame because their position sizes are too large.
They may enter and exit positions over multiple weeks; your profits and losses over a few days are inconsequential to them. Rather than compete directly, play a different game.

As Sun Tzu wrote in the Art of War: “Tactics are like unto water; for water in its natural state runs away from high places and hastens downward … avoid what is strong and strike at what is weak.”
by Adam h Grimes