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Does anyone really make money trading futures?


Does anyone really make money trading futures?

I am just wondering.

I know I don't. I have tried all the indicators and the chat room gurus, and none of them make money.

I have a suspicion that a lot of the chat rooms for emini trading are just for hobbyists and market enthusiasts and not for serious traders trying to make a business out of trading.

For any new traders out there please be very cautious of paying anyone to mentor you or signing up for training or a chat room. From what I have seen the only people making money in these deals is the mentor, the chat room owner or the author of the training manual.

I would love to hear from you if you are a successful trader making 20% off your account or better over the past year. I know only 5 to 10 percent of traders are supposed to be successful, but I am beginning to think that zero percent of traders are successful over the long haul. Certainly anyone can have a streak of luck and rack up a few good months where they dramatically increase their account size, but these people are normally big risk takers and eventually they blow out their accounts by taking the exact same risks that help double their accounts in the first place.

Thanks in advance for any response.
Expected value matters only if the number of iterations (ie trades) approaches a large number.

For individual trades, you're back to the context of chance.

quote:
Originally posted by bakrob99

quote:
Originally posted by mmartinez


I'm saying that a positive expected value occurs only in arbitrage situations.


This statement I disagree with.

For example: Gap Fill Traders have a positive expectancy over time if they play with a set of rules and adhere to them. Is this likely to disappear becuase of arbitrage. No. Never.

2. Fading Tests of Highs and Lows on narrow range day. Certainly a profitable strategy again if played according to a set of rules which are clearly defining all the aspects needed to determine day type etc.

3. 30 or 60 minute Ranges: High and Lows - going with or fading depending upon day type definition.

4. Trend days: Happens 20% of the time. Easy to define with market internals and opening outside of Value acceptance. Get in early. Add to position. Exit at close. Absolutely profitable stragey well in excess oof RR2:1. Not even hard to define. Just harder to have the discipline to avoid taking early profits.

5. Time Of Day Trades: Open, Afternoon you name it ... many time of days show consistently similar behaviour day after day, week after week.

6 to 100+ There are 100's of ways of being consistently profitable.

You would have to have you head in the sand not to see this.

The only way to determine whether a trading method works is to test it with a very large number of iterations (ie. round trip trades.)

Most people who trade don't come close to approaching a number of trades that would be meaningful. Even 1000 trades won't tell you whether your results deviate from chance. Since most traders fall below this number in any given year or several year period, they draw incorrect conclusions about their trading method, when in fact no conclusion is possible.

In order to draw meaningful conclusions, you must perform a lot of real time trades (difficult). Or you must back test your method (not difficult if you have the tools).

quote:
Originally posted by jimkane

quote:
Originally posted by mmartinez

Jim this is very misleading. In the markets, anything where you win $2 - lose $1 is the result of arbitrage, and as soon as people notice this, they pounce on it. Very quickly the market gets back in balance and the arbitrage doesn't exist anymore.

The only people in a position to notice arbitrage are market makers. Regular traders like you and me are never in a position to know that it exists much less take advantage of it.



There's nothing more I can say here than I disagree 100%. As a trend trader, I look in the 3-5 to 1 reward/risk area, and for some trend trades it can be as high as 10 to 1 or even higher. These trades have nothing to do with arbitrage at all. I have studied the charts in developing my particular variation of trading going back over 100 years (and with a limited selection quite a bit further back). The same setups have been present since then, through the development of computerized trading, with program trading getting up to about 80% of all volume, and nothing has changed in the setups or how they play out that I can see. I can show a setup that plays out almost daily that set up the 1987 crash, that can be found in 1929, and all the years in between, that played out over and over this week. It has always been there, and there is no reason to think it won't always be there. And if it isn't one day (which I doubt, because human nature drives it, and humans write all the programs), then so be it, but as long as it is there, I will attempt to use it.

That's from the random walk studies.

quote:
Originally posted by jimkane

quote:
Originally posted by mmartinez

...I'm saying that a positive expected value occurs only in arbitrage situations...
What is your evidence of this statement? I don't see how you can say that. Yes, a postive expected value can be obtained from some arbitrage situations, but it can also be obtained in a slew of other ways. A statement like that would need some solid evidence, and not simply the statement from a Wall Street brokerage firm that it is so. What is the solid evidence that all opportunities must be from arbitrage?

Yes, but random walk studies have been completely refuted by the Andrew Lo studies done at MIT, hence the random walk isn't support for your statement. But I'm sure you'll say that the MIT studies are contested by others (of course they are), and so on. But the bottom line is this. If some small traders can make money year in and year out, ten, twenty years running (I know of traders who trade 100-200, even 500 round turns a day, so for ten years they may have 1.25 million trades, which, I think, may be statistically significant?), and they see no reason to stop doing this, why argue how stupid they are being because what they are doing is luck, or random, or not sustainable, or whatever.

Let's say someone is consistent for twenty years, and for this example, makes $500K a year. They are now up $10 mil over the twenty years. They decide to run a 'trailing stop' on their trading business. A one or two million dollar drawdown (which let's say is far, far higher than anything they have exerienced to date), and they 'retire'. Then they are guaranteed to keep at least $8 million no matter what. So, they will keep going until they get stopped out, or their life plays out in old age. I can't see how someone would argue they should stop now. No matter how they got there, they seem to be better off continuing. And they will never give it all back. So, for those that find themselves 'totally lucky' to be on a streak, I can see why they plan to continue, no matter how silly that seems to random walkers.

There is no more point to this discussion for me, so I will spend my time on other threads, this will be my last post on this 'you can't make money trading' concept. I'm not even sure what mmartinez goal here could possibly be, to convince newly aspiring traders that it is futile to try, it is a hopeless endeavor? I just don't know what good that does this forum. I believe in showing a balanced view, that's why I make some of the semi-crazy posts that I do, to provide some balance. But this thread just seems to be a total waste of time at this point.
well, the thread is titled " does anyone really make money trading futures" ...

Basically it's like this:

Any trading method should be tested through a large number of trading iterations on real price data. This can be done in a straightforward manner with software tools and data sets. By large number I don't mean 100 or 500. I mean several tens of thousand. The result will undoubtedly suprise most traders: The more trade iterations you pump through, the more you see your P/L drop. Kick off a good stress test and you realize you're not making any money. Adjust your trading method, try again, same results.

This is something any and all traders or aspiring traders can and should do. It takes some money to purchase the tools, it takes time and expertise to define and program your trading method (or pay a programmer to do it). But it's absolutely crucial. If you don't, you're throwing caution to the wind. You're just gambling. And your results will be a gambler's results.

quote:
Originally posted by jimkane

Yes, but random walk studies have been completely refuted by the Andrew Lo studies done at MIT, hence the random walk isn't support for your statement. But I'm sure you'll say that the MIT studies are contested by others (of course they are), and so on. But the bottom line is this. If some small traders can make money year in and year out, ten, twenty years running (I know of traders who trade 100-200, even 500 round turns a day, so for ten years they may have 1.25 million trades, which, I think, may be statistically significant?), and they see no reason to stop doing this, why argue how stupid they are being because what they are doing is luck, or random, or not sustainable, or whatever.

Let's say someone is consistent for twenty years, and for this example, makes $500K a year. They are now up $10 mil over the twenty years. They decide to run a 'trailing stop' on their trading business. A one or two million dollar drawdown (which let's say is far, far higher than anything they have exerienced to date), and they 'retire'. Then they are guaranteed to keep at least $8 million no matter what. So, they will keep going until they get stopped out, or their life plays out in old age. I can't see how someone would argue they should stop now. No matter how they got there, they seem to be better off continuing. And they will never give it all back. So, for those that find themselves 'totally lucky' to be on a streak, I can see why they plan to continue, no matter how silly that seems to random walkers.

There is no more point to this discussion for me, so I will spend my time on other threads, this will be my last post on this 'you can't make money trading' concept. I'm not even sure what mmartinez goal here could possibly be, to convince newly aspiring traders that it is futile to try, it is a hopeless endeavor? I just don't know what good that does this forum. I believe in showing a balanced view, that's why I make some of the semi-crazy posts that I do, to provide some balance. But this thread just seems to be a total waste of time at this point.

Well, what you say may be correct for system trading, but my style is completely discretionary (albeit within the defined parameters of a fully comprehensive methodology), and can not be back-tested under any circumstances. A lot of input is in the 'read' of the price action as it evolves towards a setup and as things unfold, and this is based on over 32,000 screen hours of experience in my case, and a lot more for some traders I know.

I have watched other traders trade, ones who say they are less discretionary that I am, for example, and they still use a lot of feel and experience to pull an order if they don't like what it is doing at the last minute, take a trade off if it acts certain ways, close one out early if it isn't acting 'right', and so on. So, to me, they are way more discretionary than they themselves realize. Of all the really 'great' traders I have seen over the long haul, say ones that have ten or so years of full-time successful trading, every last one used feel in this manner to apply discretion. This is totally uncodeable and untestable. And every trader I have seen that was making really high rates of returns consistently was not a systems trader, or one that traded with something that could be back-tested.

Here's the bottom line. I doubt myself, or a single one of the traders I am thinking about above would change what they do based on any data or argument that anyone could present. We have our beliefs based on years and years and years of firsthand experience. We will all likely continue to do just what we do. If the 'streaks' of the above traders go 20 years, 30 years, and then their trading 'stops working', I bet every last one of them will stick with it, seeking to make adjustments. So be it. I don't see it happening, but I don't see them saying '30 years without a losing year (let's say some of them had that for this example) but I better quit now while I'm still lucky'.

As far as trading a system, something I would never be interested in myself (I have often said if you can code it, I have zero interest in it), I agree with you, it should be tested as thoroughly as possible. I've just never believed any system could beat the market by more than a fraction (with short-term exceptions), and maybe not for long. In that regard, I tend to agree with most of what you have said. I feel only the human brain can beat the market substantially, and I believe that because very few have the time, energy, brainpower, and mostly personal discipline to do what it takes, hence, the market has little need to defend against them (to find ways to defend against these types of individual, high-skill attacks would take more 'energy' than what it stops, in my opinion, so it is 'easier' and more 'cost effective' to just ignore it), seeing how each is unique in their approach and so few are successfully attacking the market. The market is designed to stop system traders, and in that regard I think it does a superb job.
Love this stuff as I find it fascinating....and it takes a long time for my simple mind to digest it.........Nice to see you being active here again Jim....
Great post Jim
Thanks for that. A lot of wisdom there..

All the Best
John
quote:
Originally posted by mmartinez

you know I think that's where people get mixed up. They wrongly assume hard work will remove randomness.

I don't blame other people for my trading failure. I don't blame anything. I say that it's impossible for anyone to not fail. There's no way to beat randomness.




I do not assume hard work will remove randomness. I know consistent profitability requires hard work, a lot more work and discipline than new traders expect or realize. Success in this business requires perseverance and a lot (thousands) of hours of hard work. The hard work is required because the learning curve is very steep and high. Would anyone argue the fact that the process to achieve board certification as a neurosurgeon will require a lot of hours of hard work and perseverance ?

I do not try to remove or overcome randomness, in fact the randomness you refer to is what I try to consistently exploit. I view each market day and experience as unique, much as each snow flake is unique. No two trading days or snowflakes are exactly the same.

In my opinion, the market is made up by individual traders whom collectively acts like a school of fish. A school of fish has two primary driving forces: to find food to eat (greed) while at the same time not inadvertently becoming the next meal of a bigger fish (fear). This is called survival in the wild. In watching a school of fish, would you say their behavior is random ? No, we see their behavior is anything but random. For example, if they see a predator, they turn and go the other way. Nothing random about that, they reacted as a group to avoid the immediate danger of being eaten alive. When a predator sees a school of fish it likes to feed on, it blasts straight into the middle of the pod and feeds on the little fish. Is this random behavior ? No, its instinctive behavior to feed itself. This interaction between predator and prey plays out every day in the wild. There are elements of randomness involved, but the behavior has repeated in the same way every single day over thousands and thousands of years. Likewise, the interaction between the different sub-groups of traders (institutions, big specs, floor traders and on down the food chain to the little 1 lotters) plays out in the same way each trading day. Remember what I said earlier, each trading day and experience is unique, but at the same time the reactive and initiative behaviors of the sub-groups of traders is consistent.

There is one constant in the market: human nature never changes.

quote:
I say that it's impossible for anyone to not fail. There's no way to beat randomness.


Your word "impossible" and the phrase "no way" implies a 100% failure rate.

Since you like large sample sizes and random outcomes, lets do a simple test of 1,000,000 coin tosses. Starting with $1,000, for each head that appears give yourself $3 and for each tail that appears remove $1. If at any time your balance falls to zero you lose. Repeat this test 1,000,000 times. What is your probability of failure ?
PT,

That's a great analogy with nature and the fish. I have a strong wildlife biology background, and had made that connection myself awhile back. Just because one can't predict with exact certainty the behavior of an entire school of fish at all times doesn't mean one couldn't catch some fish. I also have found one other analogy that is just as close, in my opinion.

When I was in college way back in another life, we had to do a traffic study. This required us to stand on a street corner and collect data, and then do various assessments. When I started with the trading, I recalled back to that study, and something that we have all experienced when driving, I'm pretty sure. You (you in this discussion meaning all the readers) ever notice when traffic is all clogged up how as soon as you change lanes that lane stops, and the other lane starts to move? Why is that? I think it is because you are reacting, not anticipating. You finally can't take it any more, sitting there watching the other lane move, so you go for it. That's about the time that lane has filled all its gaps and has 'done its thing' for now. The lane you were in now has built up some gaps and such, cleared out a bit, and starts to move. So, after awhile you kick yourself, and move back, and of course just then it stops.

Now, think about the early days of trading. Something is moving and moving and you missed it, so finally you can't take it any more, and you buy, and as soon as you do, it rolls over for a checkback. You get frustrated as heck, move your stop over and over, and when you finally can't take it, you close out and say, well, if it wants to go down, so be it, and you get short. And, of course, like they rang a bell, it starts up. Lather, rinse, repeat, you are stuck in an an endless loop of being a rookie. Reacting, not anticipating. Not saying when it gets here I'm a buyer, but instead seeing it make a big move, then making the play. This is herd mentality.

It is no surprise traffic is like it is, because that is human nature, and it is no surprise the market acts like it does, it is 'driving in traffic' with a mouse or phone in your hand. I actually took an entire day way back after I thought about this and stood on a street corner, and just watched and made notes. I also watched as I drove and saw many other situations that are directly analogous to the market. If a rookie trader came to me now and asked what he or she should study if he or she was to study only one thing, I'd tell him or her 'traffic'. When you understand traffic, you are ready to start your technical market studies, and not before that. It's amazing how consistent the majority of human and animal behavior is, and how the same things play out on many various stages. Great post, PT.
Originally posted by Bennie_aguilar

Futures trading provide a great earning opportunity but it requires great speculative skill to predict future moves. Experience matters in Future trading.

I too agree. It is like a two sided blade. Need to handle with care.