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Trapped traders - a source of consistent profitability?
Got derailed many times by checking out so many crap put out there. When I put those stuff in action in real time and see them fail in front of my eyes.
Can you help answer these questions from other members on NexusFi?
Yes, it really is too bad that there are so many scammers out there. I actually attended a webinar a while back for the hell of it, and I couldn't believe what the guy was doing. He was selling this amazing "system", which he claimed that if you followed it would consistently return 100 pips per day. He claimed that a whole bunch of new traders had just started using his system, and that this one guy who had never traded before 3 weeks ago was now pulling thousands of dollars every day consistently. Because I have experience in trading, I KNEW for an absolute fact that this guy was lying through his teeth, and that the people giving testimonials were absolutely fake, i.e. paid shills. Unfortunately, this guy sounded absolutely confident, secure and knowledgeable in what he was saying, and it was easy to see how tons of less experienced traders would fall for his complete BS. (Sure enough, I went to Google afterwards and did a search on his name with the word "scam", and a bunch of results popped up. )
You have to use your brain here: if someone had a system that was consistently pulling out 100 pips a day, why would he selling it to you for $2000? 100 pips a day could net you hundreds of thousands of dollars every day on a liquid instrument, so why would anyone in their right mind sell that type of thing to their competition? He could make a lot more money just trading it himself instead of selling it to you.
The wonderful thing about the markets from the point of view of a scam artist, is that it's almost impossible to prove that they are scamming you... most regulators and law enforcement officials don't know nearly enough about how the markets work to actually prove an outright scam... and tons of newbies fall for it. Here is my advice: never, ever, EVER buy a system from some guy hawking it for a few thousand dollars. It almost certainly won't work, and even if it did, it's not your system, which means that you won't trust it and won't be able to execute it properly.
There really are no shortcuts, but I can tell you that after a few thousand hours of staring at the market, you can eventually begin to "get it". A funny thing happened to me when I hit the few thousand hour mark, and a whole bunch of stuff that was previously confusing about market movement all of a sudden started to make sense at that point. Just keep track of how your own understanding is progressing.... don't rely on other traders, and take every piece of advice with a huge grain of salt, because it very well might be wrong. Keep staring at the market with a fresh set of eyes (yours), and see what you can learn from it, because that is where all true knowledge will come from. Other traders and books can teach you certain techniques (market profile, VSA, whatever), but only you can combine them into something that is tradable by you, and makes sense to you.
In general, you should be feeling yourself getting more and more confident in reading the market as every month goes by... so if that is not happening after 6-12 months, it might be an indication that you should actually quit, because not everyone makes it. On the other hand, if you feel yourself making progress, then keep working at it, because at one point you will start to "get it", and from there it will all be a lot easier. Also, don't try to trade real money while you are doing this - you will not be able to really observe the market properly if you are in the middle of a trade and concentrating on not losing your shirt. All that you will do by trading with real money too early is cause yourself psychological damage which will have to be repaired later, not to mention reduce your available trading capital which will be needed once you do actually "get it". You might as well put in those thousands of hours for free, instead of paying the market some tuition on top of it. That's the best advice I can give you...
In my view markets only are tradable IF other traders are trapped.
Let's take for example you've correctly assesed the market is in an uptrend AND will continu to trend. You wait for a pullback ( in some form) and try to catch the continuation of the trend. The pullback would never exist if other traders wouldn't sell short or closed longpositions. Some traders will have to believe the market will turn down and therefore sell short causing the market to retrace. If nobody would sell short the market would only move up because there are simply no buyers.
One of my worst enemies are my own false assumptions
For every dollar earned by a trader, there is a loss that ocurrs, sometimes imperceptibly by some other agent in the system.
For equities, this concept may be nebulous. The price of an equity is largely based upon perception and valuation (which is obviously subjective). A trader who purchased Home Depot stock before the company's meteoric rise, will enjoy an increase in his wealth due to the company's performance (which places the losing party at the Home Depot Customer level) and by the perceived value of the company's stock (which might be best represented by a large ponzi scheme or game of musical chairs.....as long as the stock is rising, everyone wins except the last pour soul). The company's perceived future value places the losing party at the trader level (although the trader/investor himself is unaware of this "loss" because he was "losing" money during the entire time before he chose to buy the stock at an increased price, he just didn't realize it.
For currencies, the concept might be equally as nebulous. The poor soul that elects to go on an international vacation a week after his home currency plummets, has lined the pockets of some entity (bank, trader, foreign citizen) and once again, he's really unaware. He simply exchanges his duckets for mula and is unaware that had he done so a week earlier, he could have saved money.
In both instances, the winning party is largely a matter of rewarding the "first mover." He who buys stock before a company hits it big with a winning government contract, has again, not earned money through perceptible losses by another trader, but imperceptible losses the later trader ocurred by purchasing the stock after the company's new performance.
In the case of commodities, the losing party may indeed be mostly, partially or not at all a losing trader. Consider the price of oil when the value of the $USD falls, the price of the commodity goes up. Therefore, again, it's the average American citizen who bears the brunt of this second order cost by paying more for fuel, transportation, plastic, etc.
In some cases however, the gains by one trader are truly the loss of another trader. To what extent/degree and for which instrument/security/equity/physical good would be an interesting study.
"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
In this way, trading is not unlike other things in life. If you are a faster marathon runner, you will win the marathon. If you are a better race car driver, you will win the race.
Take the example of the race car driver. It is not just his personal experience that determines a win. It is his car, his team, his funding, his technology, and even beyond that - what others do around him on the track will directly effect his ability to win. For instance, if 10 other drivers on the track decide to all try to run the driver off the road, he will have a hard time.
Trading is similar. You need more experience, but you also need to be able to deal with the other drivers on the road.
running out of onion peeling ideas, but, for those who have worked the NT8 volume profile code to expose trapped trades ...
... is there much correlation between those values(L1) and the L2 values @ each respective price to see if/when, and how new & old blood influences MM.
Interesting watching the order numbers and ratio the MM permits to market.
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