[TheFinalEpic]

Read the Market Wizards series, there are many successful speculators.

[Peregrine]

(12-30-2016 11:58 AM)kavi Wrote:  

Agreed and infact that example did occur to me while I was writing but I didnt mention it.

Warren Buffet, as per my understanding is someone who invests long term in decent solid companies with large amounts of money. This was an especially good strategy when the markets are going up, as was the case when he made most his money.

Warren Buffett wants you to think he made billions as a value investor. This is patently untrue. He's filthy rich because he started what was basically the first hedge fund.

[Que enspastic]

People on here are talking about very different things as though they are the same

1. Currency trading
2. Hedge funds
3. Actively trading stocks and shares (NYSE, LSE, ASX etc). Buy and hold, quick in and out, shorting
4. Passive index tracker funds

These are completely different things. Maybe we need to split it out further into separate threads so the conversation makes more sense?

[TheFinalEpic]

^ I disagree, trading in and of itself, is the same thing. Most successful traders are completely agnostic to the instrument they are trading, when they see a set up, they get in with strong risk management. Warren Buffett is a value investor, not a trader, although he is dealing more in the derivatives markets as of recently. That's a distinction we can make, between trading and investing. They are not the same.

[Que enspastic]

It's just such a broad mix. I don't trade currencies or derivatives and many currency traders don't trade shares. I agree similar principles may apply but it's different products. My career is in trading clothes but someone who trades in food or barrels of petroleum may struggle not due to the underlying principles but the complexities specific to my area. I think people should identify what area they have experience in to make it clear where a guy from Roosh V with no prior experience could hope to enter into, learn and succeed, and how exactly.

[TheFinalEpic]

I think that this thread is meant to focus on the trading of financial instruments in the broader sense. Physical trading is a whole other can of worms I agree, and necessitates the in-depth understanding of whatever sector the trader focuses. Nat gas traders live and breathe natural gas (not literally), and would be hard pressed to trade in corn or cattle. But for the speculators (which I believe this thread is directed at) technical analysis will allow you to be profitable in multiple sectors.

[Que enspastic]

How would you cope if you lost £100k on a trade? Guy I know who is a specialist in Oil&Gas shares made a decent chunk on six shares this year. Very ballsy dude who didn't derisk his trade on LON:COPL, promised to be the biggest oil discovery of the year but hit a duster, SP tanked and he sold out at a loss.

This guy brushed it off as "a hard lesson to learn", didn't take it personally, still in the game and excited for 2017. This is like game. Abundance mentality comes with abundance, there's always another trade, money is like water, not a scarce resource. He also traded PANR from 16p to 150p (900%), 88E from 0.60 to 3p+ (400%+) and SOU from 16p to 59p (270%) this year.

[TheFinalEpic]

I think that's what separates the men from the boys in this world. Money has no real value to these guys that are making and losing hundreds of thousands if not millions per day. It is truly a game, and you can't be right without being wrong. That's why the best don't focus on how much they can make, they focus on how much they can lose; they mitigate this risk, and if they lose, it's no big deal.

Here's the thing, your friend is likely trading with 50-100x that amount. So his account is likely 5-10 million+. 100k to many is a lot of money. To these guys, it's a percentage of a percentage of a portfolio. The game is all about %, the money is just to keep score.

[rockoman]

Don't waste your time.

What value does one create by trading: stocks, bonds and currencies back and forth? None. Therefore, unless certain conditions - given below - are met, the average speculator will not make money.

Sure, there will always be some speculators who do very well. Nassim Taleb makes the point that the success of speculators will always be distributed around a certain average point. Those who do well - for a time - will think that they ae financial geniuses, when they are simply lucky - because someone has to be.

You can do very well in trading if:

1. You consistently have access to inside info ahead of the crowd - think Goldman Sachs.
or
2. You are tight with and have privileged access to policy-makers such as the Fed - think Goldman Sachs.

Since trading is a zero-sum activity and because those who satisfy one or both of the above conditions will accumulate trading profits over time, this implies that all other groups - in the net - will accumulate losses over time. Money is thus systematically redistributed to the pockets of the Insiders.

The mere fact that so many people currently think that they can make a living by trading financial securities is an indication of how far this financial bubble has gone - since the gold convertibilty of the dollar was suspended in 1971. Look at all financial manias of the past for a comparison.

The world in the long-run will not be fooled. If you cannot create value for others, then you will receive no value, unless you are either lucky or powerful.

[chakalaka]

(12-30-2016 11:58 AM)kavi Wrote:  

Agreed and infact that example did occur to me while I was writing but I didnt mention it.

Warren Buffet, as per my understanding is someone who invests long term in decent solid companies with large amounts of money. This was an especially good strategy when the markets are going up, as was the case when he made most his money.

Buffet started with todays equivalent to 900k and his father was an US senator. Later on he even had a partnership with his father clerk. He still has merit. But he was not an average person by no means.

Here´s Buffet first partnership structure if anyone´s interested:

https://www.scmessina.com/2015/03/what-w...d-in-1956/

The investors received 4% interest on their money from the partnership. After that threshold, Buffett got 50% of the gain and the limited partners got the other 50%. If there were a loss, Buffett took 25% of it himself. That means if he broke even, he lost money. His obligation to pay back losses was not limited to his capital; it was unlimited.

[jj90]

(12-31-2016 01:47 PM)rockoman Wrote:  

What value does one create by trading: stocks, bonds and currencies back and forth? None. Therefore, unless certain conditions - given below - are met, the average speculator will not make money.

Who cares what value those who trade add? If those traders can put money from someone else's pockets into theirs, more power to them.

(12-31-2016 01:47 PM)rockoman Wrote:  

Those who do well - for a time - will think that they ae financial geniuses, when they are simply lucky - because someone has to be.

Warren Buffett, Jim Simons. Explain them.

(12-31-2016 01:47 PM)rockoman Wrote:  

The mere fact that so many people currently think that they can make a living by trading financial securities is an indication of how far this financial bubble has gone - since the gold convertibilty of the dollar was suspended in 1971. Look at all financial manias of the past for a comparison.

You can stop with the pseudo intellectual bullshit conspiracy theory here. There were traders since the dawn of time I guarantee you that. Your words don't consider physical traders as well(Exxon/Cargill/Glencore).

(12-31-2016 01:47 PM)rockoman Wrote:  

The world in the long-run will not be fooled. If you cannot create value for others, then you will receive no value, unless you are either lucky or powerful.

See response 2 above re: Warren Buffett, Jim Simons.

You make far too many sweeping generalizations although I agree with the main premise of your post.

And yeah, chakalaka's right: Buffett started out trading before he went buy and hold.

[jj90]

(12-31-2016 11:52 AM)TheFinalEpic Wrote:  

I think that's what separates the men from the boys in this world. Money has no real value to these guys that are making and losing hundreds of thousands if not millions per day. It is truly a game, and you can't be right without being wrong. That's why the best don't focus on how much they can make, they focus on how much they can lose; they mitigate this risk, and if they lose, it's no big deal.

Here's the thing, your friend is likely trading with 50-100x that amount. So his account is likely 5-10 million+. 100k to many is a lot of money. To these guys, it's a percentage of a percentage of a portfolio. The game is all about %, the money is just to keep score.

They are not making/losing that much I can guarantee you that daily. Account sizes of that capital are able to push prices around. To be able to realize gains/losses of that amount, they would need to be trading highly liquid securities only, and there just aren't that many. There are many algos that can detect large buy/sell orders hitting the market. These guys would get raped on execution.

[booshala]

(12-25-2016 10:36 AM)iknowexactly Wrote:  

I ro do leveraged investing but i buybthe mist conservative hi yield socks i can find: nursing homes. OHI SNR CCP and the more conservative mreits like stwd

No ones getting younger in usa and with 25k
I can make about 300 dollars a month in dividends . I make a point to avoid market timing and buy on dips and basically never sell. Those reits are held by big pension funds ajd i dont want the headaches ajd trying to time. I think interactive brokers is essential because their margin rates are only about 1.6 right now and the stocks pay 7-9% so i pocket the difference without trading.

That's a really interesting arbitrage scenario... I can only think of two cons: 1st being that REIT dividends are taxed as earned income instead of at the lower qualified dividend rate. Second would be if the stock plunged and you got margin called. Usually doesn't happen in this field, although the for profit prison REITS like GEO really took a nosedive when news came out that the government wouldn't re-up on their contracts.

Can anyone else point out any additional downsides to a plan like this? And if not, why isn't everyone doing it? Seems too good to be true.

[jj90]

@booshala: I do the same thing. I borrow at 3-4% from the banks, and put it in a special tax free account buying REITS paying out 9-10% and collect the spread. Currently netting >$300 tax free monthly.

You can use margin, but you might get called. Using a LOC or a loan as long as the REIT doesn't go BK you will almost never be called.

Protip: get unsecured loan if possible for obvious reasons.

Many do do this, and many don't. Why don't they? Myriad of reasons: no financial knowledge, too much risk, not having the credit score available to get cheap money, etc etc.

[booshala]

(12-31-2016 09:48 PM)jj90 Wrote:  

@booshala: I do the same thing. I borrow at 3-4% from the banks, and put it in a special tax free account buying REITS paying out 9-10% and collect the spread. Currently netting >$300 tax free monthly.

You can use margin, but you might get called. Using a LOC or a loan as long as the REIT doesn't go BK you will almost never be called.

Protip: get unsecured loan if possible for obvious reasons.

Many do do this, and many don't. Why don't they? Myriad of reasons: no financial knowledge, too much risk, not having the credit score available to get cheap money, etc etc.

Great tips, makes a lot of sense.

To add to my previous "what else can go wrong" this author that I follow talks about several things such as interest rates rising (although I'd just as likely pay off the margin in that case) or a flash crash situation where the market goes haywire and you're margin called on everything: http://www.dividendgrowthinvestor.com/20...sting.html

[jj90]

(01-01-2017 12:59 AM)booshala Wrote:  

[Great tips, makes a lot of sense.

To add to my previous "what else can go wrong" this author that I follow talks about several things such as interest rates rising (although I'd just as likely pay off the margin in that case) or a flash crash situation where the market goes haywire and you're margin called on everything: http://www.dividendgrowthinvestor.com/20...sting.html

Rates aren't gonna rise overnight to that magnitude in the US to make this unprofitable overnight. And if it does, you can pay it off by liquidating the positions, and more importantly SHTF in the US. More realistically, there's a slow climb in rates but depending on what your positions are yielding, that rate rise could be ignored. I'd be more concerned about a rate rise on the price of REITS(should lower).

If you don't go on margin, cash only, you won't have an issue of a flash crash scenario. You could lever up by taking a loan from the banks and leveraging even more by using a margin account but then you are exposed to a margin call. Your decision to make.

All you are doing is collecting the spread. You are basically being a bank. You borrow low and lend high. As long as your positions are yielding a positive spread and the underlying asset is not at 0, you can hold thru a drawdown indefinitely. It's like having a cashflowing rental property.

[rockoman]

(12-31-2016 08:05 PM)jj90 Wrote:  

(12-31-2016 01:47 PM)rockoman Wrote:  

What value does one create by trading: stocks, bonds and currencies back and forth? None. Therefore, unless certain conditions - given below - are met, the average speculator will not make money.

Who cares what value those who trade add? If those traders can put money from someone else's pockets into theirs, more power to them.

(12-31-2016 01:47 PM)rockoman Wrote:  

Those who do well - for a time - will think that they ae financial geniuses, when they are simply lucky - because someone has to be.

Warren Buffett, Jim Simons. Explain them.

(12-31-2016 01:47 PM)rockoman Wrote:  

The mere fact that so many people currently think that they can make a living by trading financial securities is an indication of how far this financial bubble has gone - since the gold convertibilty of the dollar was suspended in 1971. Look at all financial manias of the past for a comparison.

You can stop with the pseudo intellectual bullshit conspiracy theory here. There were traders since the dawn of time I guarantee you that. Your words don't consider physical traders as well(Exxon/Cargill/Glencore).

(12-31-2016 01:47 PM)rockoman Wrote:  

The world in the long-run will not be fooled. If you cannot create value for others, then you will receive no value, unless you are either lucky or powerful.

See response 2 above re: Warren Buffett, Jim Simons.

You make far too many sweeping generalizations although I agree with the main premise of your post.

And yeah, chakalaka's right: Buffett started out trading before he went buy and hold.

My thoughts:

1. "Who cares what value those who trade add?"

You misunderstand me. I am not taking a moral line here. What I am saying is that there is no consistent way to get something for nothing in the world (exceptions are begging/asking and the use of force or fraud - in all other cases value is exchanged for value). when you say 'trader' what you really mean is 'speculator'.

2. "If those traders can put money from someone else's pockets into theirs, more power to them"

These 'traders' are taking money from the pockets of other 'traders'. Those who execute the trades make practically riskless profits skimming the top of each trade earning the bid/ask spread. It's gambling, which can of course be great fun, but to be a professional gambler - and pay your bills - you need an informational edge over the others. Have you got that?

3. Warren Buffett, Jim Simons. Explain them.

I don't need to explain them. Jim Simons is unfamiliar to me, but Buffett has grown richer with value-investing and buy-and-hold.

You can always quote me examples of successful speculators. This is meaningless argument by anecdote. Given a certain number of speculators over a time period, there will always be successful ones, who you will hear plenty about, and there will be unsuccessful ones, who you will hear very little about. This is the nature of randomness combined with survivorship bias. How many non-Buffetts sink into anonymity?

4. "You can stop with the pseudo intellectual bullshit conspiracy theory here"

It's not in dispute that since the end of dollar convertibilty in 1971 - a de facto default on it's debts by the United States - that debt/credit and money supply have grown explosively and exponentially. I am sure you are aware of that. This rising tide of debt is what has raised the boats of stock prices, real estate and all other assets. It has in fact been exceptionally easy for investors and speculators in this time period because every time something has gone wrong - 1994, 1998, 2000, 2008 - the central banks have turned on the money spigot to save speculators' asses. This process will continue until - it doesn't.

The sheer amount of debt created since 1971 has created a culture of financialization in the Anglosphere which mirrors the decline of the productive economy. This has led to the popularisation of the financial markets, with many 'everyday Joes' dreaming of turning themselves into the next successful speculator. The more people speculate, the more commision the market-makers earn.

5. Your words don't consider physical traders as well(Exxon/Cargill/Glencore).

Let's distinguish between your 'traders' who I call speculators and real traders (such as your examples) who have made a market, earned bid/ask spreads and provided other services - such as hedging physical production through the use of futures.

6. I am not taking a moral stance against 'evil speculators'. Far from it - I have done it myself. However, if you want to do it successfully and consistently you must have an informational edge.

7. I see many impressionable young men being seduced by the 'something for nothing' mentality. This will always be the case, as there is something in all of us which wishes it to be true. A number of popular movies have glamourised the Wall Steet image, reinforcing this. The alternative is of course the relatively difficult path of self-improvement focused on turning yourself into a high-value man.

[jj90]

(01-02-2017 05:48 AM)rockoman Wrote:  

These 'traders' are taking money from the pockets of other 'traders'. Those who execute the trades make practically riskless profits skimming the top of each trade earning the bid/ask spread.

1st off, I'd like to point out that if you hand out your execution to a desk to fill, you are either trading insane size, some arcane product, or just plain like to get raped in the ass. Virtually everyone these days
executes trades themselves from Joe Blow's Scottrade account to the big NY based hedge fund.

And you don't have to lose the bid/ask, you can add liquidity instead of taking it.

Lastly, firms who act as market makers do frequently hold inventory(in this case stocks) on their books. They are hedged, but not always and do get exposed to unforeseen events.

(01-02-2017 05:48 AM)rockoman Wrote:  

You can always quote me examples of successful speculators. This is meaningless argument by anecdote. Given a certain number of speculators over a time period, there will always be successful ones, who you will hear plenty about, and there will be unsuccessful ones, who you will hear very little about. This is the nature of randomness combined with survivorship bias. How many non-Buffetts sink into anonymity?

We will have to agree to disagree. My stance is Buffett is not the mere product of luck. He is far too successful to just be lucky. Who is lucky? A lottery winner with now a few more millions. Buffett doesn't just have a few millions. Buffett's track record across multiple decades in addition to the success of many of his disciples shows to me it is highly improbable to simply be pure randomness.

(01-02-2017 05:48 AM)rockoman Wrote:  

It has in fact been exceptionally easy for investors and speculators in this time period because every time something has gone wrong - 1994, 1998, 2000, 2008 - the central banks have turned on the money spigot to save speculators' asses. This process will continue until - it doesn't.

The sheer amount of debt created since 1971 has created a culture of financialization in the Anglosphere which mirrors the decline of the productive economy. This has led to the popularisation of the financial markets, with many 'everyday Joes' dreaming of turning themselves into the next successful speculator. The more people speculate, the more commision the market-makers earn.

You missed 1981, 1987, 1990, 2011.

To the point here, are you going to set global central bank policy? If not, while your points have merit, it screams "I am complaining".

(01-02-2017 05:48 AM)rockoman Wrote:  

7. I see many impressionable young men being seduced by the 'something for nothing' mentality. This will always be the case, as there is something in all of us which wishes it to be true. A number of popular movies have glamourised the Wall Steet image, reinforcing this. The alternative is of course the relatively difficult path of self-improvement focused on turning yourself into a high-value man.

This is the world we live in. Profit or not. Your choice.

[Travesty]

(12-31-2016 11:52 AM)TheFinalEpic Wrote:  

Here's the thing, your friend is likely trading with 50-100x that amount. So his account is likely 5-10 million+. 100k to many is a lot of money. To these guys, it's a percentage of a percentage of a portfolio. The game is all about %, the money is just to keep score.

It's funny the way he writes about trading is the way I play craps tables in casinos. I win about 75% of the time I play and usually almost double what I came with. Once I am winning over what I came with I am only willing to risk a percentage of my profits before I walk away from the table.

When I lose I usually only lose 25% or less of what I came with and walk away from the table.

I never think in terms of dollars, just that I will do anything I can to tip it so I walk away with more than I came with.

If I came up to the craps table with a pile 10x bigger I would just win 10x the money. Same strategy though.

[booshala]

(01-02-2017 05:12 PM)Travesty Wrote:  

(12-31-2016 11:52 AM)TheFinalEpic Wrote:  

Here's the thing, your friend is likely trading with 50-100x that amount. So his account is likely 5-10 million+. 100k to many is a lot of money. To these guys, it's a percentage of a percentage of a portfolio. The game is all about %, the money is just to keep score.

It's funny the way he writes about trading is the way I play craps tables in casinos. I win about 75% of the time I play and usually almost double what I came with. Once I am winning over what I came with I am only willing to risk a percentage of my profits before I walk away from the table.

When I lose I usually only lose 25% or less of what I came with and walk away from the table.

I never think in terms of dollars, just that I will do anything I can to tip it so I walk away with more than I came with.

If I came up to the craps table with a pile 10x bigger I would just win 10x the money. Same strategy though.

Hah, do you dice set? I tried that shit for years, never made any difference...

[TheFinalEpic]

(01-02-2017 05:12 PM)Travesty Wrote:  

(12-31-2016 11:52 AM)TheFinalEpic Wrote:  

Here's the thing, your friend is likely trading with 50-100x that amount. So his account is likely 5-10 million+. 100k to many is a lot of money. To these guys, it's a percentage of a percentage of a portfolio. The game is all about %, the money is just to keep score.

It's funny the way he writes about trading is the way I play craps tables in casinos. I win about 75% of the time I play and usually almost double what I came with. Once I am winning over what I came with I am only willing to risk a percentage of my profits before I walk away from the table.

When I lose I usually only lose 25% or less of what I came with and walk away from the table.

I never think in terms of dollars, just that I will do anything I can to tip it so I walk away with more than I came with.

If I came up to the craps table with a pile 10x bigger I would just win 10x the money. Same strategy though.

The part where most (90+%) fail is the emotion with larger amounts of money. If you can separate money and emotion, you may just do alright in this game called the markets.

[Que enspastic]

Most successful traders cut losses between 20-23% (need 25-30% to break even). Some traders may be willing to invest say £5000 into a volatile share but structure the investment over three trades whereby it would need to drop 44% to force the exit but still only take 22/23% of capital.

Unsuccessful traders will let emotions take over and see investments drop 50-80% before hitting sell - far too late.

Loss Gain to Break Even
5% 5.26%
10% 11%
20% 25%
30% 43%
40% 67%
50% 100%
60% 150%
70% 233%
80% 400%
90% 900%

[dongiovanni]

The market died for day trading around 2012. Very few survived after that

[Que enspastic]

Interesting too the comparison of trading to gambling. When I studied taxation law came across the curious treatment of gambling tax losses whereby the majority of gamblers had wins treated as "windfalls" while a small minority who gambled professionally had their wins treated as "earnings" that were taxable from an income perspective. The test was whether the professional applied a systematic and rigorous approach ("a system") that made it possible to win over a sustained period of time (at least several years but usually 5+)

[Razor Beast]

(12-28-2016 05:44 PM)rafal Wrote:  

(12-28-2016 02:16 AM)Razor Beast Wrote:  

Getting a seat on the exchange was essentially a license to print money back in the day. Sadly, those days have come and gone.

Razor, I agree with 99% of your post but the part above. These days are gone if you want to compete with the pros on their own field. But...

Peter Thiel says that competition is for losers. You just have to have open mind.

Examples?
Bitcoin and all cryptocurrencies - up until now - 0 competition - you were competing with early adopters nerds who have 0 knowledge about trading.
Counter Strike weapons - you were competing with 14yrs old kids and taking their daddies money like a candy.
Algorithmic trading in 2008 - simple statistical arbitrage between S&P and ES could have made you rich.
Puts on VIX ETFs in 2009 were free money for few days due to some technical nuances.
Machine Learning in Fantasy Football markets, etc.

I agree. It's short sighted to say money can't be made in business strategies similar to those used in trading. Principles learned from trading can be applied to any market or industry. That's what I'm trying to figure out right now. How can I apply my trading knowledge to transform an existing industry with huge untapped potential.