thoughts of experience trader on all income trading strategies

[DGH]

AndrewS definitely has the right idea in terms of picking a strategy that you can live with and sticking to it until proven wrong. However, I would suggest that the game is not simple. If it were I would be hobnobbing with Bill Gates and Warren Buffet instead of trudging along in the trenches with other retail traders trying to make a buck...and I have been doing this for 23 years. And, I would pose this question (which I saw on a cartoon picture in my best friend's Dad's office when I was 10 years old) to self-styled mathematical gurus, "expert" chart readers, market timers, tea leaf readers, and TV "gurus": If you're so damn smart, why ain't you rich?

 

[GH13]

However, I would suggest that the game is not simple.

As I have learned the hard way, simple doesn't mean easy.

 

[AndrewS]

Yes, as Trader G noted, never confuse simple with easy. All trading can be condensed to this: 1) Identify a statistically significant edge in the markets. 2) Consistently apply that edge. 3) Monitor the edge to confirm its continued validity. Very simple but incredibly difficult.

 

[15070p3]

The Market is a dangerous place, there are hidden dangers every where. History has shown that there are always operators who try to subvert the system and pass on hidden risks to other participants who follow the rules. As speculators, we try to earn our profits by bearing others' undesirable risks (albeit we often under-estimate these risks and may deserve some losses). The ultimate innocent victims are always the tax payers because many big players game the system to their advantage and pass on most of their risks to the un-informed general public. A sample of the Permanent Subcommittee on Investigation offers a glimpse of what is going on in the Market: https://goo.gl/rz3eNr
Black swans don't appear to be wild. Rather they are bred and raised on farms.

 

[gariki]

The game we play is really very simple. 1) Create a structure that generates profits from time decay. 2) Place that structure somewhere, usually below the market to some degree. 3) Hedge off any undesired risk, usually to the upside. 4) wait for time to work, 5) If the market moves then make adjustments to restore the desired position or exit. 6) Harvest profits or take the loss. 7) Repeat. There are MANY ways to play out this game depending on how much experience, available time, risk tolerance and capital you have. The best thing to do is look at a bunch of them, back test a few and pick the one that seems best fitted to your circumstances. Start live trading with a very small position, perhaps using IWM or SPY just to gain experience before moving to the RUT or SPX. Stay away from the NDX unless you really like living on the edge.

Beautifully said. As you are gaining experience keep an eye towards learning how to build positions, money management and then keep polishing execution - and more important probably peeling them off.

 

[Bsp]

AndrewS definitely has the right idea in terms of picking a strategy that you can live with and sticking to it until proven wrong. However, I would suggest that the game is not simple. If it were I would be hobnobbing with Bill Gates and Warren Buffet instead of trudging along in the trenches with other retail traders trying to make a buck...and I have been doing this for 23 years. And, I would pose this question (which I saw on a cartoon picture in my best friend's Dad's office when I was 10 years old) to self-styled mathematical gurus, "expert" chart readers, market timers, tea leaf readers, and TV "gurus": If you're so damn smart, why ain't you rich?

Dan, I know it's not easy but it's still hard for me to believe that I can make extra 20k-30k trading options and using few applications like trading platform and analysis software. Few years ago I was making this extra income working over time and physical hard work. I am really thankful to all the members of aeromir for helping me one way or other. .. now I can spend extra time with my family which I was using for over time work.

 

[DGH]

Thanks, Bsp. It's always good to know that we are helping people make some extra money. That's our ultimate purpose.

 

[Donald]

The Market is a dangerous place, there are hidden dangers every where. History has shown that there are always operators who try to subvert the system and pass on hidden risks to other participants who follow the rules. As speculators, we try to earn our profits by bearing others' undesirable risks (albeit we often under-estimate these risks and may deserve some losses). The ultimate innocent victims are always the tax payers because many big players game the system to their advantage and pass on most of their risks to the un-informed general public. A sample of the Permanent Subcommittee on Investigation offers a glimpse of what is going on in the Market: https://goo.gl/rz3eNr
Black swans don't appear to be wild. Rather they are bred and raised on farms.

15070p3, there is some amazing stuff buried amongst that link of yours....the SCALE of RenTec is mind blowing....for example:

High Volume Trading. Trading records and other evidence indicate that RenTec used
its discretion over the basket option accounts to conduct millions of high-volume trades for
years. In response to a Subcommittee inquiry, RenTec estimated that the company conducted
from 100,000 to 150,000 trades per day with each bank.

Those estimates of the daily trading activities at each bank yield a combined estimated average of 26-39 million trades per year
through the option accounts. 287 Still another document, prepared by Barclays, described the
trading activity of the Medallion Fund, the entity Renaissance used to implement the basket
option transactions, as “very high frequency trader.”

source: http://www.hsgac.senate.gov/downloa...et-options-to-avoid-taxes-and-leverage-limits

Amazing frequency stats! Thanks for the link.

 

[tom]

First of all full credit to Dan for teaching the SODOTO principle in options trading. Thanks!

Have a look at this link and think about how to become a trader: http://www.huffingtonpost.com/jeff-degraff/sodoto-see-one-do-one-teach-one_b_4372803.html

Disclosure: I do not know the author of this book neither purchased it; just stumbled by chance over this summary and thought it might be an appropriate reflection for this forum.

Posted by Peter M Klatt

 

[DGH]

Thanks for the SOSOTO post, Peter. Obviously medicine is not the only field to have incorporated that simple principle of on-the-job training.

 

[Steph]

Hi everyone
I'm new to the community and for me the most difficult thing is to find a trade that match the trader's personality but also the trader account size.
For me even if I think my personality can match with trades like RTT, Rhino and Fruit fly for example, my account size is not able to follow the requested capital allocation.
This is a real struglle for smaller account and perhaps I have found a compromise with the work from Ali Pashaei, the weekly SPY trades.
I have also began to try live a Bearish Butterfly using IWM.
This is how I will begin this long but very motivating trading journey.
Thank you all for the very high quality of the informations provided on this forum, and like Greenzone said on a old post, I will try not to be shy and participate as a much as I can even as a newbee.
Steph

 

[DGH]

Hi Steph. Welcome! I appreciate your dilemma. You might also consider the RTT Service trading ES which uses SPAN margin. Much less capital required, but has consistent positive returns with an excellent equity curve, very low draw downs, and great performance metrics such as Sortino ratio, profit factor, and CAGR. Just food for thought. Trading a bearish butter with IWM will help you "get your feet wet", but you will probably find that the returns may not justify the commissions.

 

[Marcas]

Bonjour Steph.
Aeromir really is exceptional. I advise you to what you probably already know - just pick some simple and proven trade and stick with it for some time. You don't have to master it right away just stay aloft. If you start with small account your goal should be not to loose money (maybe it will became a habit later). Not to loose money - and nothing else. As you try to accomplish this you will keep learning. Begin with simple trade: put it on, watch it, take it of. Set max loss appropriate for strategy and , more important, appropriate for you and keep it no matter what. Do you hear me? No matter what. After few, let's say 10 cycles, try to apply some adjustments. What DGH said: Sortino, CGAR, probably don't mean much to you. Don't worry about that.

I don't know much about Ali Pashaei trades (I just forgot : ) I assume his trades are ok but I wouldn't go with any service, paid or free, unless your goal is to follow somebody for longer time. Try to work for yourself and later, much later, consider some service to see what you can learn from it on top what you already know, then you recognize what resonates with you and what not. RTT seems to be pretty good trade to start. Dan and Tom posted here a lot of material use it. Tim Pierson lately did a good starting presentation - that is all you need.
And don't jump from one strategy to another in search for easy money. Trade your trade later you may add another - you will know when.

I don't know what size you are planning to use but you can start very small. You don't have to (you must not!) put your all your $ at risk, but don't start with $1000 account. Tim said that single tranche of RTT require 3K if so you need 5K. And remember that you will be trading with goal to keep all, or most of your money for yourself, not to earn anything.

I will be there too to get portion of your account for myself with all other members of Aeromir as well. So be careful.

 

[tom]

I personally admire traders who are psychologically tough to withstand large drawdowns and long periods under the water and who still end up making money because they know and trust in that numbers and time are on their side. For most of us, including myself, this type of strategies with a low win rate and a positive expectancy because of some occasional home runs may be quite frustrating and tend to make you lose confidence, tweak a winning strategy until it stops working, abandon and hop to the next strategy etc. etc. The Road Trip Trade may not be the most sexy strategy if you look for spectacular returns and boosts of adrenalin, but it may be one of the most robust income trading strategies out there that combines a high win rate with consistent returns that help to build confidence and become a skillful options trader without the need to spend your day in front of the screen. And it is fully scaleable, in particular if you use ES futures options. The weekly reviews of the RTT alert service are tremendously instructive and, within a few months, provided me with some kind of knowledge-based gut feeling of how to manage the trade. A great learning experience I cannot recommend enough and would have liked to go through before all the mostly painful and frustrating attempts to trade options with other strategies.

Posted by Peter M Klatt

 

[GH13]

The Road Trip Trade may not be the most sexy strategy if you look for spectacular returns and boosts of adrenalin, but it may be one of the most robust income trading strategies out there that combines a high win rate with consistent returns that help to build confidence and become a skillful options trader without the need to spend your day in front of the screen.

Not to sound like an infomercial but I was about to post pretty much the same sentiments regarding the Road Trip Trade. If I was starting over again, I would sign up for the Road Trip service to follow along with Dan and Tom and really learn the ins and outs of this trade. As you progress, this trade can become the backbone for you to adapt the trade to suit your needs. Tim Pierson has some fantastic presentations in the library about the Road Trip that is a good resource as well.

 

[Donald]

Hi Steph

I agree with DGH, Marcas and PK...very wise advice from them.

Remember - the markets are not structured like a sports league. There are no beginner, intermediate or professional competitions. It's as if you turned up to play a friendly round of golf and find yourself paired off with Dustin Johnson or Sergio Garcia.

In our game, you are up against some pretty skilled traders. So, take the advice of DGH, Marcas and PK as gospel. They are offering mucho wisdom

 

[Luke]

I will be there too to get portion of your account for myself with all other members of Aeromir as well. So be careful.

Haha, that puts it in perspective!

 

[Steph]

Thank you for all those good advices and support.
As far as I understand, for me the RTT needed at least 4 lots to allows easier adjustments. So with a 3k to 5k per lot that represents 20k.
I currently have a 10k account. Also statting with RUT or SPX is quite intimidating for me (because I would like to keep a 2% max loss per trade or $200). I would prefer to start with SPY / IWM in order to start small and keep my risk under control (I aggree with Marcas on most points) Also I can't replicate RTT with SPY because the commission costs tend to neutralize the gains. Finally I'm not (yet) sure If I'm ready to paid right now for a service before getting accustomed to trade a smaller capital strategy by myself before.
My dream would be to gain those first $1000 by myself in order to pay one year of RTT service.

 

[aiti]

Thank you for all those good advices and support.
As far as I understand, for me the RTT needed at least 4 lots to allows easier adjustments. So with a 3k to 5k per lot that represents 20k.
I currently have a 10k account. Also statting with RUT or SPX is quite intimidating for me (because I would like to keep a 2% max loss per trade or $200). I would prefer to start with SPY / IWM in order to start small and keep my risk under control (I aggree with Marcas on most points) Also I can't replicate RTT with SPY because the commission costs tend to neutralize the gains. Finally I'm not (yet) sure If I'm ready to paid right now for a service before getting accustomed to trade a smaller capital strategy by myself before.
My dream would be to gain those first $1000 by myself in order to pay one year of RTT service.

Hi Steph,
I do my RTT-trades in ES-Options. They are the half of SPX Options and margin is much lower. So I can follow the trades Dan and Tom show in the class with the same number of contracts with lower capital requirements. The commision at IB is 1,42 $ per contract.
aiti

 

[Steph]

Hi aiti, Dan also mentioned that, trading with ES options. For you what is the allocated capital you use to follow the RTT trade with ES options? My account is with Tradestation and I'm not sure I have access to future options. Also Dan mentioned SPAN margin but I dont know what does that mean. I have a margin account but that's all I know.