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.
And if you do have a set value of what the price should be... and get caught up with the noise, that's fine. Don't expect trading PnL to be linear.
Nice post! Mind if I ask whether you work at a trading shop, hf or a bank?
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.
Then you can stay with the other 90% of the traders, my friend. I'm literally throwing you a gift and telling you no legit traders or PMs from hedge fund uses triangle formations or BIASED technical indicators and you're saying I'm wrong for stating the fact, lol. I'm telling the new traders to throw whatever they learned from youtube and instagram out the window cause I was in the same position 10 years ago.
10 years ago, I was so into trading but I wanted to learn. I went into trading academy, and mind you, these guys are total scammers, anyhow... I met a guy, he used to be a market maker for scott trade. He is a Korean guy like me. He didn't teach the group anything. He was just selling the course but one thing that did stick out to me was when he said "trading should be systematic"... I didn't know what he meant by this but now i do.
There should be absolutely NO REASON why anyone should draw anything on the charts. Leave it the way it is and keep it systematic.
I work for on an option MM desk, and no we also don't look at technical indicators. but it seems like you missed my entire point.
All I am trying to say is, if you see a bad player at the poker table making a definitive mistake, are you going to tell them to play like you? I also doubt most winning poker players go on forums and berate other players' actions.
May I ask then how do you suggest to people that want to be professional traders to learn/study? I agree with what you say but I haven't found the correct path. Thank you
The technical trading strategies you're talking about are scams 99.9% of the time. Trying to sell some kind of trading strategy to the mom and pop retail investor talking about the head shoulder knees and toes formation. Personally don't see any problem bashing that.
I also wanted to add another insight on top of my original post. As I clearly mentioned, it's not how I trade. First off, I don't touch spot currency. Anyway, I'm not saying trade during times of dried of liquidity. You can trade during times of market turbulence when the volume is high because in that case, the price will tend to deviate and over exaggerate from influx of inefficient flows causing distortion. That's another opportunity. There are so many variations and it's your job to find these.
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.
You’re definitely on the outside of the industry looking in, that’s one thing I can tell for sure. I understand I’m in the minority here, but I do personally find value in some indicators, but the catch is that you have to use them in an entirely unique way—easier said than done. All these “strategies in a can” are a waste of time however
To be frank, who cares.
Sometimes when I read OPs jargon heavy posts/ rants, I think he might be austistc?
Cause you don't know trading jargon. That's your fault.
can’t fix stupidity but you can fix ignorance
No, I understand jargon. I just don't think you understand subtext.
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.
how did you get into trading? When did you realize it was for you and what steps did you take to get ready for a career
What is this post? Traders at banks just trade flow now. There is no directional risk taking. Anyone who says otherwise is lying or misinformed.
That's a lie. When I was at a Canadian bank in NYC, commodities guys were taking directional risk. Credit desk here puts on RV trades.
Inflation desk here trades the curve. what are you talking about?
And second, who said I'm talking about anything related to the flow desk. I'm talking about retail traders
Nothing I'm talking about has any regards to what you can or cannot do on the flow. What I'm telling retail traders is stop relying too much BIASED technical analysis because no professional traders use them.
Not one PM or trader at any reputable firm will put on trades based on trend lines, candlestick analysis or triangle formations.
This has to be the dumbest thing I've ever seen. I literally roll my eyes when I see shit like this on instagram or youtube
Retail traders should put on trades systematically, not based on their biased view
Any one who trades, like literally trades trades, such as faceslappingcompilation nattyphizz Martinghoul etc will agree with me on this
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."
The concept of support and resistance is absolutely used by the most elite professional traders. Technical analysis can be used to better understand those levels.
I agree - I use support and resistance and I actually made money off of it when the market was volatile and was selling off at one point but that's NOT **biased ** technical analysis. That encounters a real tangible price with a fundamental meaning. It was selling off heavy and the price was very much skewed and distorted and was testing a support, so I bought and made money. I was NOT just using the support as baseline to put on a trade
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?
looking at this CAD chart posted by mswoonc, i see an interesting setup that i trade often.
After the triangle, price tests the high point of the triangle, at 1.24005 That is a good over/under point...from this formation (the entire formation...the triangle, plus the upper rejection at 1.24570 from before the triangle), i would always sell that 1.24005 (with a tight stop...maybe 10 pips) Then, price tests the low of the triangle, just below 1.23160...another good over/.under. Then price retraces 50% to the middle and finds resistance there (this is the signal that the larger breakdown is coming, and shorting 1.2355, with a stop at 1.24005 offers good risk/reward)....and THEN, finally, price breaks down and exits the triangle area.
This is my type of "technical analysis". No Bollinger Band, moving average, stochastics, RSI or anything like that....just noticing how price reacts to certain significant levels. Local highs and lows, and 50% retrace levels. You could construct a trading strategy using just these simple ideas...and do very well.
Dalton describes all this is his market profile video course (tho, he makes it difficult to understand)
can’t put on because it's relative*
I have a feeling the series you showed me is kind of outdated. I'm watching this and I highly highly advise anyone who wants to the learn the auction market, No... I'm not talking about lines and triangles... I'm talking legit auction market.. Watch this. If you go any hedge fund, prop firm... They don't talk about triangles. They will talk in price. Price is everything.
Four and half bid @ five. 26 and half. Mine. Yours. Lift the offer. It's auction market. Learn it. You go to a prop firm and you actually legit talk triangles, you're going to look like an idiot. THERE IS A REASON WHY THESES MARKET MAKING FIRMS STILL DO MOCK TRADING PIT STYLE
https://www.youtube.com/ watch?v=XZEBz01t5vg
https://www.youtube.com/ watch?v=UzXlVTZB_4I
After settlements, you better know where the market settled. You ask a legit trader, he will tell you right away... Jan settled 13 cents... Feb 1120... Mar 1130... How has the price been moving during settlements? Which contract moved more? Why? Whats the open interest now
Non-trader here, read through the entire thread and super intrigued altough didn't understand most of it because I'm not familiar with the jargon. What are some good resources to learn more about this stuff? Trying to avoid the "wanna-be trader" stuff completely per OP.
you don't need to learn that stuff, trust me
how do you like the JimDalton MarketProfile Seminar?
I haven't watched the series but I asked my vendor to provide me access with a month trial of market profile. Which will cost me $75 a month. I'm still learning the nooks of it. Really down to the basic. Point of control, etc, etc. I actually been using volume profile more as opposed to market profile from Dalton because it shows me the bid / ask ratiodifference or the bid / ask delta and the levels of POC. I'm using this on top of what I look at it and seeing if I can increase my edge.
Just to confirm... to really source this to it's full advantage, I assume the profile is generally used for intra day purposes?
market profile itself is just another chart type...it does not contain a trading strategy. Dalton even says this himself....he's not a profile trader...he's a trader, and market profile is one of many tools he uses to recognize certain patterns in the market. The value of the market profile chart is that it helps you to organize the data...and makes certain levels easy to identify...but that is not enough to create a trading strategy...you must understand which chart patterns lead to which trading strategies.
i had to watch his LiveMarketsSeminar 2-3 times to get the full benefit...but i realized that there are a few patterns in markets that are the "best" for me...have the highest % win rate combined with the very good risk vs reward payout structures
essentially, there are 3 types of patterns -mean reverting -attempt to breakout and fail -breakout and succeed
Since the market is a continuous auction process, with different participants operating on multiple timeframes, we can never really be sure which pattern we are in....but we can have a statistical bias....maybe 70% probability that today is a mean reverting day...or a 65% probability that a given breakout will succeed. However, if we are right 65% of the time with good risk vs reward....we'll be net profitable.
Then within each of these, there are ways to identify them, and ways to identify good risk vs reward trade setups. We can never be 100% certain that we have identified the market into one of these categories until well after the fact....a successful breakout can become a failed breakout...a mean reverting market can become a breakout...so after identifying a likely pattern, we need to identify "good" trade location where the statistics work in our favor. sometimes that means you miss the trade entry and just become a bystander.
The most important thing he teaches is how to identify your stop (which implies modifying your position size for a certain $$ risk)....you must know where you'll get out if you are wrong before you enter a trade. It took me about 2 weeks to watch the full course...i can't pay attention for more than 1-2 hour...and then afterwards another 2 weeks to watch it again. I picked up stuff the 2nd time that i missed the 1st time...so it was worth the time.
The actual seminar can be found for free online...i didn't pay anything...but i might send Jim a check just because i got so much value from it.
For traders, in my opinions, a fast and astute mind is the utmost importance, regardless of their positions. Strategies are merely the outcomes of a series of complicated thinking processes with which people came up in the past and therefore would not garantee to work in the presence. Being able to learn the pasts, understand the presence and evolve accordingly is critical for any trader, given the ever turbulent world. BTW, I have been closely monitoring the coronavirus-related data from WHO and China for the past three weeks and I kinda knew that the new virus is difficult to be contained literally like one week ago. Somehow I sat on my chair and sucked on my thumb. Shud acted on these effects on equities and commodities much more earlier.
I highly highly recommend going on this to sharpen your mind
I actually play this all the time.. Top 10 in CT lol. Not that impressive. Anyway the site i
https :// www. mathtrainer . org/
I was thinking of why prop firms ask you quick brain teaser math questions... Because let's say you're looking at a spread... and you're trying to leg it in instead... You look at one leg and the other leg on two separate depth of market, you need to know how to leg in quickly and synthetically what price are you getting into the spread.
Em.....that's not what I am trying to say....but thx anyway.
Trading is all about strategy and systematical work that will take you a lot of time, but in the end you will be able to make some huge money if you will understand how's that working. To cut it short you will have to learn a lot and to start from the bottom, you will lose very much time, so don't think you will make your first million dollars over the night. You have to start easily, also you have to make your own strategy of trading on different markets such as metals, energy or ETF's. Also, you have to pick a good trading platform, I think you could use Fondex Forex Trading platform, this is the best one, and very beginner friendly. Using features like copy strategy, you will be able to copy a couple of strategies, and to make your own basing on previous experience. So you have to start and to try, wish you luck
nope, coronavirus only stimulates the recession and the increase of market so this is the best time to start trading
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