Stock Market - Making REAL money. A plan.

[Peterw]

Originally Posted by SnerpGoodWord

Because I have enough background in trading to know at least in broad strokes the strategies employed by all the long-run profitable desks and funds. And none of them care one bit about support and resistance. The ones which have a technical bias use primarily the methods I listed earlier.

Simply put, "support and resistance" is a strategy sold by trading educators who can't trade to the ignorant. I realize it may seem kind of insulting for me to say that, but that's the way it works. Trading educators sell it because it gives hope to the people with no trading skills - since anyone can draw lines on a chart, if it's possible to make money drawing lines then ANYBODY could make money (including the would-be buyer of trading education). That's very seductive - and also very false.

Again this is just your belief it's not actually how it is. It's certainly not the reality that I see day in day out, week in week out, month in month out.

Numbers don't lie which is what I love about this business. I also know for a fact that institutions pay attention to key pivot levels - how do they know where to puch the market to when they're stop hunting?

People - including myself do make money with this method.

Anyway - we're still going in circles, you'll keep saying that your experience supports your beliefs and I'll keep saying that what works for me works for me and a lot of other people out there.

Lets just agree to disagree and make money?

[SnerpGoodWord]

Originally Posted by Peterw

Again this is just your belief it's not actually how it is.

It's not just a belief - it's a fact. If drawing lines on charts made money, there would be massive financial enterprises devoted to drawing lines on charts. Goldman is aware of the existence of lines. Trust me - EVERYONE has tried it. NO ONE profitable trades it. Why? Because it doesn't work.

I don't mean this to be insulting, but I believe you've said your trading experience consists of a brief period of trading on very small capital after taking a Tharp course. Consider that the collective experience of an industry of very intelligent, competitive and hard working people who have spent decades of 12 hour days studying these things may trump that.

[Peterw]

Originally Posted by SnerpGoodWord

It's not just a belief - it's a fact. If drawing lines on charts made money, there would be massive financial enterprises devoted to drawing lines on charts. Goldman is aware of the existence of lines. Trust me - EVERYONE has tried it. NO ONE profitable trades it. Why? Because it doesn't work.

I don't mean this to be insulting, but I believe you've said your trading experience consists of a brief period of trading on very small capital after taking a Tharp course. Consider that the collective experience of an industry of very intelligent, competitive and hard working people who have spent decades of 12 hour days studying these things may trump that.

I don't believe that institutional traders are actually that efficient. Yeah they've got all the money and get the info before anyone else but that doesn't actually make them any good. The instutution I work in (one of the big ones) has just announced they're slashing 2000 jobs due to poor performance in the IB section. These guys crashed the financial system and still pay themselves bonuses while strutting around the place like they're better than everyone else.

My experience is a couple of years now learning price action + support/resistance from people making fantastic money as retail traders using it. It now works for me like it's working for so many other retail traders who I interact with every day. However we only account for 5% of the retail trading population.

A simple price action + support/resistance trade I took this morning is already up 1R with the stop at breakeven with a view to bagging at least 3-4 x risk by the end of the week.

I'm not going to argue with you any more as it doesn't serve my purpose to reinforce a need to be right. I'll just keep on doing what I'm doing and building my business

Just out of interest - what method do you recommend a retail trader use?

[SnerpGoodWord]

Originally Posted by Peterw

I don't believe that institutional traders are actually that efficient. Yeah they've got all the money...

Consider how they got it. They

1) Won it trading
and
2) Attracted it as investment by providing audited track records proving they were long term winners.

Ask yourself this question: have any of the people you think are making money trading support & resistance out of a retail account ever shown you an audited statement proving their claim? If not, what makes you think they're winners?

[SnerpGoodWord]

Originally Posted by Peterw

Just out of interest - what method do you recommend a retail trader use?

That's a broad question, but I would suggest several strategies and associated instruments and time frames:

- beta neutral spreads and pairs trades in equities (1 week bars)
- trend following on the S&P 500 (1 week bars) - one of the only places trend following works. It's low return, but co-exists nicely with spreads in the same account
- trades in FX expecting the carry trade to close entered into during financial crisis (no charting required, but multi-month horizon)
- order flow and book analysis (1-5 min bars or equivalent constant volume bars) in markets that are liquid and not arbitrage driven (CL, ES, GC etc.)

[Peterw]

Originally Posted by SnerpGoodWord

Consider how they got it. They

1) Won it trading
and
2) Attracted it as investment by providing audited track records proving they were long term winners.

Ask yourself this question: have any of the people you think are making money trading support & resistance out of a retail account ever shown you an audited statement proving their claim? If not, what makes you think they're winners?

Don't they make most of their money from comissions and churning?

I'll admit they do have a huge advantage in terms of capitol, information and infrastructure.

I don't need any proof from the good retailers, the trades they discuss speak for themselves. I see the buy and sell lines on the charts.

Anyway this is a pointless argument. You are not going to convince me that what I see every day and makes me money every month does not exist.

Likewise you won't be convinced that it does. I'm still curious as to what does work for a retail trader though?

[SnerpGoodWord]

Originally Posted by Peterw

Don't they make most of their money from comissions and churning?

You're confusing a broker (who makes money on commission) with a prop desk or hedge fund. Part of the confusion may be that some independent prop desks are essentially brokers in funny hats - those are not the sort of prop desks I'm talking about.

I don't need any proof from the good retailers...

You're making a HUGE mistake here. Audited proof of profitability should be an ironclad requirement before exchanging any money for access to any trading system.

[Peterw]

Originally Posted by SnerpGoodWord

You're confusing a broker (who makes money on commission) with a prop desk or hedge fund. Part of the confusion may be that some independent prop desks are essentially brokers in funny hats - those are not the sort of prop desks I'm talking about.



You're making a HUGE mistake here. Audited proof of profitability should be an ironclad requirement before exchanging any money for access to any trading system.

I'm not paying a penny

[SnerpGoodWord]

Originally Posted by Peterw

I'm not paying a penny

That Tharp course was free?

[Peterw]

Originally Posted by SnerpGoodWord

That Tharp course was free?

No that one was quite pricey- but for the actual trading method I haven't bought any systems. Didn't buy Tharpe for methods just the self control/NLP and business side of things.

[Peterw]

Here is a trade I took today with no lines on the chart apart form the buy and sell lines. The green line is the entry I bought at and the red lines are the stop and target.

Does it look evident from looking at the chart why I bought where I did?

Daily chart:



4 hour chart:

[SnerpGoodWord]

Originally Posted by Peterw

No that one was quite pricey- but for the actual trading method I haven't bought any systems. Didn't buy Tharpe for methods just the self control/NLP and business side of things.

OK. I realize you think your current system works. It's possible you're right. I think it's highly unlikely because of the kind of system it is, but let's say for sake of argument it's possible. Since the interbank FX market has massive liquidity (one of the 3 biggest markets in the world), if you are right it should be no problem to take 10s if not 100s of millions or even billions out of the market over 5-10 years. And if you achieve that, good for you. But if your method works so well, why didn't the people who taught it to you take that money out of the market? Why are they spending their time peddling their method to retail punters when there's millions to be made?

Now, on the flip side you have to acknowledge that there's a very real chance that your limited good results thus far are dependent on either randomness or simply temporarily favorable market conditions that won't continue when you put real money on the line. We can argue about the likelihood that's the case, but you have to accept for sake of argument that there's some chance it's true. Now, if things do turn bad for you like I expect they will, I strongly suggest you consider the idea that you were trading methods that weren't profitable in the first place.

Basically I think you're headed for some expensive tuition. You think you're headed for profits. One of us will be right. I realize I'm not going to convince you right now, but if/when things go bad you ought to do yourself a favor and re-visit the issue.

As to the charts, I'm not following what they're supposed to show ie. when the trade was entered/existed etc. So I don't have any comments on that.

[Bradman]

Anyone have a plan for making money for when the government can no longer pay it's debt? Everyone is saying gold. Any other ideas?

[pjhaggerty]

Originally Posted by Jiggy

Hi everyone,

My name is Jiggy and my associates name is Shayan. Here is our situation, we are best friends and yes people say don't go into business with your friends but the situation is hard to explain. We both have the same goals in life and desires. A couple of months ago we decided that we were not going to live a normal life style and really excel with the tools we've been given, in other words get rich haha. We are normal teenagers, 17 & 16 years old.

We currently have saved up $15,000 and by march we project to have $30,000 in total by next year. My associate will be studying finance at the University of Waterloo and I will be going into psychology as well at the University of Waterloo then continue into law. We have 1 more year until we have to start university.

The reason we started to save up money is for the stock market. For the past few months I have been reading books, studying charts and learning stock screening tools. I do not know that much but in about 8-9 months I plan on have a good grasp of the market. I have also been playing with "virtual stocks" and have made $4500 in about 1 month, 1 week.

Our goal is to make 6-7 million and then invest more. My question is, what do I invest in? I've seen the market and I understand how to make money but what do we have to do to get into that millions range, I have the research ability, understand the market, listen to the news, read reports, analyze companies but I do not know what that final step is, what I have to do to make millions.

Most people invest too late in their lives, we believe we have a chance of getting to our dreams of millions, we have the research abilities, put in the time and make the effort and it has been showing.

Please I need your help. I am still learning and I will continue to work hard, I believe we can do this, and for those who say we can't I say bring it on, no one ever got anywhere in life by giving up and we won't until the end.

Thank you for your time and I appreciate all responses.

P.S: The income we expect to make is not overnight, we are looking at a range of 10-12 years or even more.

Would seem to me that if you hope to make such gains you will need high leverage. This would make me recommend leveraged investments such as forex, stock options, perhaps futures, where such gains are possible. Stocks are likely not going to do it, unless you focus on penny stocks. Quite simply there isn't enough movement in blue chip 'regular' stocks to create the gains you are looking for, you will need something more volatile.

[Bradman]

Would seem to me that if you hope to make such gains you will need high leverage. This would make me recommend leveraged investments such as forex, stock options, perhaps futures, where such gains are possible. Stocks are likely not going to do it, unless you focus on penny stocks. Quite simply there isn't enough movement in blue chip 'regular' stocks to create the gains you are looking for, you will need something more volatile.

It depends, some blue chips went up 10x or even 30x from the recession to recent highs. Also depends on time frame, if you kept investing substantial gains into the right stocks, over time you may build great wealth. Small caps are another vehicle that can be very volitile. Options are about as insane to trade as penny stocks. (even though I do gamble on penny stocks with a percentage of my portfolio)

Right now I believe one should hold some small cap oil for the long term, it's only a matter of time before oil demand starts outstripping supply. The bank sector looks weak to me right now. Some gold good to have too.

[pjhaggerty]

Originally Posted by Bradman

It depends, some blue chips went up 10x or even 30x from the recession to recent highs. Also depends on time frame, if you kept investing substantial gains into the right stocks, over time you may build great wealth. Small caps are another vehicle that can be very volitile. Options are about as insane to trade as penny stocks. (even though I do gamble on penny stocks with a percentage of my portfolio)

Right now I believe one should hold some small cap oil for the long term, it's only a matter of time before oil demand starts outstripping supply. The bank sector looks weak to me right now. Some gold good to have too.

Of course some did. But that's a small minority. And for what these guys want to do, they'd have to repeat that trick 20 or 30 times successfully.

Why do you say options are insane to trade? My understanding is that depending on how you structure your trade options can provide more or less flexibility and can be invested with more or less risk. There are very conservative options trades (calendars, spreads) and there are more risky options trades (buying single options, selling unprotected options). It's just a leveraged instrument which is actually very flexible and can be used to create the kind of bet/trade you want with the right risk/reward profile.

[Bradman]

Originally Posted by pjhaggerty

Of course some did. But that's a small minority. And for what these guys want to do, they'd have to repeat that trick 20 or 30 times successfully.

Are you kidding? if you took a stock that made 5000% x 20 repeats with reinvesting, starting out with say $10,000, that's ummm, well I don't care to figure it out right now, but it would probably be in the billions. And it wasn't that rare, many, many stocks during the recession went up several hundred percent in the past couple years. I don't really know that much about options, but I have seen people lose thier shirts with them, I suppose it's like any other highly leveraged instrument...

[SnerpGoodWord]

Originally Posted by pjhaggerty

Of course some did. But that's a small minority. And for what these guys want to do, they'd have to repeat that trick 20 or 30 times successfully.

Why do you say options are insane to trade? My understanding is that depending on how you structure your trade options can provide more or less flexibility and can be invested with more or less risk. There are very conservative options trades (calendars, spreads) and there are more risky options trades (buying single options, selling unprotected options). It's just a leveraged instrument which is actually very flexible and can be used to create the kind of bet/trade you want with the right risk/reward profile.

Options can be very useful, but again they're an institutional game - not so good for retail. The typical options plays retail traders make (which amount to leveraged synthetic longs/shorts) are intentionally made over-expensive. The spreads in options are typically large, and exchange rules make it difficult not to pay the spread. Since many positions have multiple legs, you frequently pay the spread more than once. And since future volatility is more expensive than realized volatility would justify, you pay though the nose again for any position with bounded loss (which most "conservative" options positions are set up for).

On an institutional desk where you're a designated market maker and have a real chance of capturing the spread and are in the position of selling overpriced volatility, it's a different story. That's not to say that the delta/gamma hedging game is easy, but at least it's winnable.

[pjhaggerty]

Originally Posted by Bradman

Are you kidding? if you took a stock that made 5000% x 20 repeats with reinvesting, starting out with say $10,000, that's ummm, well I don't care to figure it out right now, but it would probably be in the billions. And it wasn't that rare, many, many stocks during the recession went up several hundred percent in the past couple years. I don't really know that much about options, but I have seen people lose thier shirts with them, I suppose it's like any other highly leveraged instrument...

How many blue chip stocks go up 5,000%? The stocks I can think of that did that would have been financial sector stocks where everybody thought they might fold but they didn't. Most stocks that put up those kinds of ridiculous percentage gains are small cap or smaller stocks. Blue chips don't have that much volatility, in general, which is what makes them blue chips. The recession was a flukey time that's not going to repeat in the near future, and even if it does you'll be unlikely to bet 10,000 dollars into a stock where the conventional wisdom is it might fold any day.

People have lost their shirts in every single type of investment out there.

[pjhaggerty]

Originally Posted by SnerpGoodWord

Options can be very useful, but again they're an institutional game - not so good for retail. The typical options plays retail traders make (which amount to leveraged synthetic longs/shorts) are intentionally made over-expensive. The spreads in options are typically large, and exchange rules make it difficult not to pay the spread. Since many positions have multiple legs, you frequently pay the spread more than once. And since future volatility is more expensive than realized volatility would justify, you pay though the nose again for any position with bounded loss (which most "conservative" options positions are set up for).

On an institutional desk where you're a designated market maker and have a real chance of capturing the spread and are in the position of selling overpriced volatility, it's a different story. That's not to say that the delta/gamma hedging game is easy, but at least it's winnable.

I'm not saying I would recommend options for most retail investors, and I agree with what you're saying about it being an institutional game. However, the original poster wanted to multiply their original investment many times over, and for that you need leveraged investments. Most leveraged investments are institutional games anyway. Most wall street investments in general are institutional games with different reasons why things are stacked against retail investors.

Of course playing the delta/gamma game is winnable, but the original poster didn't seem to be in a position to access that game- you don't become a market maker with 10,000 dollars in capital on your own.

I would recommend that a person build their wealth through their career not through options trading, because options are stacked against retail investors. Using options to conservatively invest what you've made or to protect your investments seems to me to be a good idea, as long as you understand what you're doing. For example, having a covered call or using a calendar to pay for long term protection on stock you own.

However, that is irrelevent because the OP wants to make money trading, and for the kind of money they want to make they need a leveraged investment, which options are, along with forex, futures, and penny stocks (which although not leveraged, have enough volatility for the gains the op wants).

[pjhaggerty]

When I get enough money to invest, I would use options to protect myself from capital volatility and to sell some of that volatility. I think that using the stock market to try and achieve capital gains is a guessing game stacked against retail investors. I would build my capital from my career and use options to protect it as it's invested in high dividend yield stocks, and hopefully sell some of that volatility as options to make more money. This would mean I'd buy long term puts and sell short term covered calls every 2 or 3 months to help pay for the puts, locking in my gains and losses to a narrow range and making money off of the calendar options and the dividends. This is of course a very conservative way of investing because it does not seek to make capital gains or even benefit from them, instead it seeks income. I would build my capital by saving income from a real job.

Of course, that is completely opposite to what the OP wants to do, but that's the perspective my options posts are coming from.

[Peterw]

Originally Posted by Bradman

Anyone have a plan for making money for when the government can no longer pay it's debt? Everyone is saying gold. Any other ideas?

Originally Posted by Bradman

Are you kidding? if you took a stock that made 5000% x 20 repeats with reinvesting, starting out with say $10,000, that's ummm, well I don't care to figure it out right now, but it would probably be in the billions. And it wasn't that rare, many, many stocks during the recession went up several hundred percent in the past couple years. I don't really know that much about options, but I have seen people lose thier shirts with them, I suppose it's like any other highly leveraged instrument...

You may have just answered your own question there

[SnerpGoodWord]

I guess my real point is that OP doesn't know what the hell he's doing. While it would actually be possible to do a quasi-decent job of selling volatility with a delta hedge out of a retail account, no one's going to learn how to do that trading retail. And of course you need the realized volatility model to tell you when it's time to sell, and very few retail traders would put in the work to develop that.

Which is why I suggested OP go institutional - so he can learn what he's doing and get the tools he doesn't have the knowledge or energy to create himself.

Just finding him a leveraged instrument does nothing good - it gives him the possibility of winning the amounts described, but the vast likelihood of losing the entire value of his account (or ending up with a debit balance). It's not enough to trade futures - he has to learn HOW to trade futures, and that's where retail has nothing to offer him.

[pjhaggerty]

Originally Posted by SnerpGoodWord

I guess my real point is that OP doesn't know what the hell he's doing. While it would actually be possible to do a quasi-decent job of selling volatility with a delta hedge out of a retail account, no one's going to learn how to do that trading retail. And of course you need the realized volatility model to tell you when it's time to sell, and very few retail traders would put in the work to develop that.

Which is why I suggested OP go institutional - so he can learn what he's doing and get the tools he doesn't have the knowledge or energy to create himself.

Just finding him a leveraged instrument does nothing good - it gives him the possibility of winning the amounts described, but the vast likelihood of losing the entire value of his account (or ending up with a debit balance). It's not enough to trade futures - he has to learn HOW to trade futures, and that's where retail has nothing to offer him.

of course. Then again, the OP seems to think he knows how to trade already. He wasn't asking 'how should I become a trader'. I would agree that anybody who wants to build a serious career as a financial trader needs to get institutional. But he didn't ask that. He asked 'what should we apply our awesome system too to make bango dollars', if I recall correctly. I also agree, he's likely to end up losing his shirt, but if I said that, he wouldn't have listened, and I doubt he's listening now. Then again, who knows? Maybe he does have a realized volatility model or something else equally applicable.

[SnerpGoodWord]

Originally Posted by pjhaggerty

of course. Then again, the OP seems to think he knows how to trade already.

Yeah, suffice to say I'm not convinced. And you're right - he's probably not listening. But I figured it was worth the try. Someone reading might listen...

[Jiggy]

Thank you for all the comments and feedback.

[Peterw]

This volatility is crazy. I'm losing track of who's defaulting, whether they are - or aren't, who needs a bail - out - oh hang on no they don't it's fine... erm actually they might..

I'm not taking any longer term trades while all this is going on - just quickie ins and outs at the first sign of trouble. I'm finding a lot better results by just setting profit targets than trying to catch runners..

[SnerpGoodWord]

Originally Posted by Peterw

This volatility is crazy. I'm losing track of who's defaulting, whether they are - or aren't, who needs a bail - out - oh hang on no they don't it's fine... erm actually they might..

I'm not taking any longer term trades while all this is going on - just quickie ins and outs at the first sign of trouble. I'm finding a lot better results by just setting profit targets than trying to catch runners..

Certainly if you're going to do anything that smacks of trend following (ie. some sort of trailing stop or reverse breakout exit strategy) in fast markets you need to use some sort of tick, constant bar or volume chart to make your chart speed up when the market does.

Of course, in bucketshop FX that's going to be hard since your tick and volume data (if any) is pretty much fiction created by your broker. Which gets back to the whole institutional advantage issue. If I'm sitting on the FX desk at Deutsche Bank I can see the FX volume on all the ECNs, plus whatever business is phoned into the desk (DB is the #1 FX dealer, so that's a lot). That's probably 70-80% of the total volume, which means my charts will more or less reflect reality.

Edge: institutional guy.

[Peterw]

I'm happy with my 6.5% this week

[SnerpGoodWord]

Originally Posted by Peterw

I'm happy with my 6.5% this week

While it's better to be making money than losing money, this view is incredibly myopic. Success or failure is proven over a multi-year window. What happened this week is irrelevant.

If you ever want to make more than pocket money from the markets, you'll have to change that view.