Just gambling?
Sorry if this sounds like a simplistic question, but what makes trading different from just putting money on the horses? Well, apart from the fact it's other people's money of course.
I thinking here primarily of equities I suppose, but I'm not sure it's that different for other products.
I suppose my key question is, what is the human part of the trading job? Which bits just couldn't be automated? And are these bits no more than gambling?
Not trying to offend anyone here by the way!
Cheers, Rody
Well, modeling and pricing often can't be automated. A computer can spit back an R-squared and an F value, but it has no intuition of what the "right" model is. It doesn't have any intuition of human behavior, nor where a model might break down. Computers also can't develop creative new strategies.
I'm sure many traders out there, though, are just guessing. A lot of them aren't very good.
Okay I see what you mean about the developing strategies aspect.
I was talking to a friend who works as a market maker, and he said that a lot of prop traders do just seem to have a very strong intuition. But if you asked them to explain why a certain thing happened the way they said it would, either they wouldn't be able to explain (other than gut feeling, based on experience), or the explanation wouldn't be one technical enough that you could codify it as an algorithm.
I'm sure many traders out there, though, are just guessing. A lot of them aren't very good.
Well presumably the ones who aren't any good don't last very long? I guess a prop trader who can't beat the market isn't really much use, no?
Cheers, Rody
I trade my own account and can often do 10 - 15% in a week. There is a secret but to know you have to be an economist or a FreeMason.
I'm a FreeMason. What's the secret?
should read freemason and an economist.
when you gamble, the expected value is less than zero. when you trade, the expected value is greater than zero.
Not necessarily; in poker, if you're playing against equally skilled players it's zero EV (assuming no rake). But if you're better than the competition, it's positive EV (usually even with the rake).
i assumed by gambling he meant games of chance, but I agree with you completely on that assertion.
I dont believe trading is gambling, it all depends on the traders techniques. Making money from trading is certainty and not probability. I can tell you two trading strategies that can make you good money. Firstly, are you mathematically oriented? Secondly, how good are you in recognizing diagrams and can you memorize numbers?
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