So I'm sitting here at work on the trading desk and I wanted to share my experience because I see these youtube videos and Instagram postings from these wanna be traders talking about their strategy using trend lines, triangle formations, head and shoulders, candle formations... you fucking name it. Stop, throw it out the window. You don't think these market makers, hedge fund traders, etc know these strategies? Do you truly think professional traders make their money based on BIASED technical analysis? No they fuck don't. It's a fucking joke. If you see a wanna-be trader selling their strategy or signals, run the fuck away. Trading should be done systematically and I'm not talking about quant or algo trading. No one is going to trade based on your trend lines that you drew and say, "Guys, Joe-Schmo in Kansas just a drew a trend line and we're about to hit the top. Start selling!!!"
Throw it out the window
Listen, if you don't have information advantage, that's fine. But find your systematic edge. My edge? I trade dislocations. I don't want to go too much into detail but I'll give you an idea and just an FYI, this is not how I trade but... Let's say you're trading spot currency, a major pair. Compare the liquidity at 9pm relative to 10am New York time. It's significantly different. What does this mean? One, price can easily get distorted by ignorant players due to liquidity shock. Two, re balancing flows, even though re-balancing wouldn't happen during times of dried up liquidity. Three, government intervention causing apparent price value gaps.
This is your opportunity to trade these dislocations and these dislocations can remove itself quickly or slowly depending on your time frame.
My advice:
1) Have a baseline view what you think the value is, this could be a price reverting to a linear regression, price bar average, long term mean of some sort... Whatever. 2) You need to consistently price monitor. These are called dislocations of a reason and when the opportunity presents itself, act on it. This is why you should have a wide range of products to trade and not get honed into trading just the index. 3) Have superior financial product knowledge. There is nothing stupider than trading when you don't even know what the fuck it is... I see people talking about FX/Currency and don't why the fuck it's called spot. Or being trading 3x levered ETF and don't know the specs. Are you fucking kidding me? This is why shit load of people lost money on XIV. 4) Most important, you need to know how to handle a turbulent market.
Currently at a bank on their rates desk. Before I worked at a hedge fund, making markets on energy derivatives and before that, I was at a various banks and prop firms. What I mentioned is very vague. But most PMs I'm gonna guess take positions where they think they have an edge and I guarantee you, it's definitely not information flow as they're on the outside lol. They look at value relative to other value. If you look at a house, price it. How? You compare the price relative to other homes. Right? And this relativity is caused by dislocations. I was working for a senior trader once, he was actually pit trader, yes, the glory days... I remember he was trading widow maker and had on 500 fucking lots and it was moving 8c intra day and I remember him being down 50 grand in 2 minutes. Personally, I would have panic. I saw the look on his face, blank. I didn't want to ask him what his strategy was but he trades directionally. I thought this guy was a genius just because his net worth was probably 30mm and up but I thought it was the stupidest thing I've ever saw and the clearing firm got pissed
. Personally I don't trade delta and sit there for an hour and watching price swings. Fuck that. Unless I have a small size on, no way. Unless im absolutely sure something is gonna blow up, but even still I wouldn't sweep the market.
I usually trade points across the curve just because it has a more mean reverting factor, may take slower. Unless I'm trade front spreads which has a front beta correlation, I trade it kind of like the flat price. Don't get me wrong, I can trade directionally but only in the despotion that it got dislocated from algos, illiquidity, whatever the fuck it may be
But it’s very short term unless there’s no turbulence.
Although there are some interesting information from this post, it comes off as very unnecessary. There is no need to bash other trading strategies even though it's not encouraged at an institutional level. In fact, you'd actually want more people trading technicals in the markets. It's overall bad for the trading industry with this attitude.
Run a backtest and out of sample test on any of those bullshit strategies (if you can even quantify such subjective “patterns”) and let’s see what the results are. I think OP is right to bash on such blatant bullshit. Have fun drawing your fib lines and following rIcKeY gUiTTieRez
When I watched one of his videos talking about the natural gas market. I wanted rip my eyes out. He had NO FUCKING IDEA what he was talking about.
To be frank, who cares.
Sometimes when I read OPs jargon heavy posts/ rants, I think he might be austistc?
To be honest, OP you sound like someone who's finally had a couple of months of real experience on a trading desk and trying hard to throw out every bit of jargon you might have overheard from the senior traders, thinking you're the next George Soros. Judging from your past posts, you should barely qualify as a desk assistant with the Trading 101 questions you were throwing out just a couple of months ago. Learn to be a bit more humble if you actually want to last more than a year in your role this time.
Kind of agree he’s just jerking himself off here.
Everyone looks at technical analysis when they trade. He’s built a straw man and tore it down and thought he was a genius. Of course no one real pays attention to Instagram traders but everyone looks at charts.
There is a difference between technical indicators and biased technical analysis. And it appears you don't know the difference between two. I trade market distortion and use technical to help me pinpoint but my entry and exit. It appears you trade off candle sticks, so you do that.
This is what Martinhoul wrote in one of his post. He and I literally look at the same thing. It's sad, I try giving retail traders advises and blatantly ignore. No more talking from this guy
"So, based on the above, my edge is using distortions in the rates mkts (created by large, somewhat price-insensitive flows) to put on trades, which allow me to make bets on the future with favorable risk/reward characteristics. If you're careful and diligent and have some experience in these things, you could construct a "neutral" portfolio that should perform in a majority of future scenarios and, most importantly, will be relatively timing-insensitive. This, I guess, is sorta similar to the basic premise behind a typical long-short equity book. It's the "relative value" element, if you will. Furthermore, if you do feel the urge to actually bet on a particular future outcome and you have a selection of trades to play with, you can also adjust the relative weightings in your portfolio to "skew" it in your preferred direction."
I agree with what you're trying to say here. But you keep highlighting the word biased - care to explain what you mean in reference to technicals?
Slow day today on the desk. So if you look at the attachment, whoever drew this crap was using the whatever triangle formation. Yes, we've seen this before, towards the end of this consolidation, it should break out. But what if it doesn't? What if the price slightly breaks the line to the upside and you initially had a stop limit order and now it's selling off? What is your strategy now? Do the reverse? But what happen if it does it again? You're gambling at this point. Does the market really care about your triangle that you drew? Will the market rally once it breaks the line? No, that's your biased analysis. The market will not follow your biased technical analysis. You should have a strategy that follows the market. The market does not follow you. This is just one of many examples within biased technical analysis. Earlier, I mentioned about trading distortion. Why? Because distortion is real and there is a apparent price value gap with a true fundamental underlying reason This could be due to a arise from inefficient flows and it will prevail as long as a sizeable share of market participants is either unwilling or unable to respond to obvious dislocations. Guys like Euan Sinclair who trades IV mean reversion. He specifically said in one of his interviews, when he puts on a trade to take a view on IV and if it goes against him, he is ok with it. He may be losing money for the short term but that it will have a better probability for the price to revert back due to exaggeration. He has a baseline view on what the expected value should be relative to what the price is trading at. He trades across the volatility surface and not get honed into trading one thing day to day because when you see an opportunities no matter where it exist you take it. Let me ask you this... Pull up 20 stock charts, your found a cup and handle formation, you put on a trade? Do you feel confident? Do you feel good enough you can walk away with worrying the formation will decay on you? Do a back test on these formation and then use real money and let me know if you think you can money from it? This is why 90% of these wanna-be traders lose money because they don't have a valid strategy. If you went into a hedge fund and saw a PM draw triangles, how would portray him or her? Would you trust this person with your money? There is a reason why they don't trade like this so why should you?