Do times like these breed better traders?

[MichaelD]

Most "traderz" get started when a bull market is in full swing. Their "skillz" rapidly become over-rated in their own minds, so they are completely unprepared for a bear market.

Their "skillz" include buying on dips and catching falling knifes.

After all, these "skillz" worked in the bull market.

Their "skillz" do not include playing the short side of the market.

But what about those that get started during a bear market? In my view, one of the very best things about a bear market is that incorrect trading behaviour very rapidly leads to negative consequences. This is not always the case in a bull market.

 

[jersey10]

Most "traderz" get started when a bull market is in full swing. Their "skillz" rapidly become over-rated in their own minds, so they are completely unprepared for a bear market.

Their "skillz" include buying on dips and catching falling knifes.

After all, these "skillz" worked in the bull market.

Their "skillz" do not include playing the short side of the market.

But what about those that get started during a bear market? In my view, one of the very best things about a bear market is that incorrect trading behaviour very rapidly leads to negative consequences. This is not always the case in a bull market.

Despite being interested in trading for a long time i didn't start looking at it seriously until January of this year. I didn't place my first 'real money' trade until a couple of months ago. In a weird way i see it as a blessing that i have started in this sort of market. As you say bad technique will lead to bad outcomes in a market of this nature.

I can't wait till the next bull market starts, surely i will make millions!
It's a shame i will probably be waiting for a year or two or five. Oh well, plenty of time to learn on the market of hard knocks

 

[tech/a]

In my view, one of the very best things about a bear market is that incorrect trading behaviour very rapidly leads to negative consequences.

So what in your view IS correct behaviour?

What in your view stack the odds in our favor for a positive outcome in these conditions?

AND importantly how should people handle their situation if in serious drawdown (Other than stopping trading).

 

[CanOz]

Most "traderz" get started when a bull market is in full swing. Their "skillz" rapidly become over-rated in their own minds, so they are completely unprepared for a bear market.

Their "skillz" include buying on dips and catching falling knifes.

After all, these "skillz" worked in the bull market.

Their "skillz" do not include playing the short side of the market.

But what about those that get started during a bear market? In my view, one of the very best things about a bear market is that incorrect trading behaviour very rapidly leads to negative consequences. This is not always the case in a bull market.

I agree that starting in a bear market or a choppy market will teach a person to survive longer. As you say with a higher proportion of winners to losers, the trader's not thinking about managing risk very well. They will however, be thinking about managing risk if they see their account disappearing.

I think this is an amazing time to be trading, even if its very few positions (0 for me after last night). The lessons that can be learned by watching the price action during this choppy period will definitely save me some money next time.

Cheers,


CanOz

 

[mazzatelli1000]

Most "traderz" get started when a bull market is in full swing. Their "skillz" rapidly become over-rated in their own minds, so they are completely unprepared for a bear market.

Their "skillz" include buying on dips and catching falling knifes.

After all, these "skillz" worked in the bull market.

Their "skillz" do not include playing the short side of the market.

But what about those that get started during a bear market? In my view, one of the very best things about a bear market is that incorrect trading behaviour very rapidly leads to negative consequences. This is not always the case in a bull market.

It definitely highlights that it's not all easy to make money in the share market and it keeps you honest and on your toes at all times, than if your were introduced to it in a bull market.

Alot of people I know who were using only covered call strategies in previous years (often combined with margin loans), are now bemoaning how hard it is to make money. Only now are they reading up on capital allocation and risk management.

 

[MichaelD]

So what in your view IS correct behaviour?

The core correct behaviour required is letting winners run and cutting losers short.

The rest of the game is window dressing.

 

[tech/a]

The core correct behaviour required is letting winners run and cutting losers short.

Often quoted rarely demonstrated beyond hindsite.
A useless statement to those who cant get themselves in a position to take advantage of this trueism.---There are many and they find out in markets like these.

The rest of the game is window dressing.

So how then do you place yourself in that position in choppy markets?
Perhaps some window dressing will draw some prospects?

I believe you dont have a shop(Trading methodology) without a decient window dressing.
You have yours---systems,which are simply conditions arranged in a manner which will over time return a positive expectancy when applied over and over and over---provided market conditions dont fall outside the boundaries of your testing. Hardly mind numbing analysis---not that its required (Mind numbing analysis).

Simplicity while great in theory isnt so simple in practice---for anyone.

 

[Wysiwyg]

Do times like these breed better traders?

This question could only be answered when the market turns bull again.
The bear cycle could breed risk averse traders.


p.s. that is if maximising profit is part of being a better trader.

 

[Sean K]

Oh, dear,

A thread started with the ultimate aim to say;

How good am I!!

Geeeesh!!

Michael, really....

Or, maybe Im really wrong and its a legit question...

 

[noirua]

Never mind when you start and if you worry about how good you are, then you have a problem.

If there is a crash or big slide, then many exit the market.
Not long after the next generation appears all enthusiastic, and they make money in the now bull market. They think they're clever in researching stocks and picking winners, but the basics still apply when the market turns, AND it always will.

It is never different, it is always the same. Traders are always the same.

 

[IFocus]

The market condition is unimportant IMHO

Extensive testing is the best method for development not market conditions. Testing will help bring or develop good trading behaviors.

From this hopefully the understanding of market conditions develops which is paramount so you can then deploy the appropriate tested method.

Market conditions possible help bring higher or lower numbers of neophytes for grist to feed the market.

 

[Timmy]

So, what is a 'better' trader?

Maybe this?
All else being equal a better trader:
Knows exactly what he or she wants to achieve;
Has lower drawdowns;
Makes more money (profit);
Uses less capital (see drawdowns);
Uses simpler methods (less to go wrong/be misinterpreted);
Has lower trading expenses;
Or all of the above.

I think I know what you saying Michael, but I would say even in 'easy' bull markets some traders are better than others because they achieve the points I have made above (which may be an incomplete list or maybe be wrong).

 

[MichaelD]

The bear cycle could breed risk averse traders.

It is never different, it is always the same. Traders are always the same.

Very good points.

The cycle will repeat next bull market, but perhaps those who have learned risk aversion will be those who are well placed to take advantage of the next bull market. Maybe it's just natural selection at work - the bad traders will always get slaughtered in the end, they just get slaughtered faster in bear market conditions, and the good traders will survive long enough to prosper from their behaviour.

 

[korrupt_1]

Asuming that a newbie has poor risk and capital management...

A newbie trader starting in a bull market, mistakes are more forgiving...

A newbie trader starting in a bear market, mistakes are costly....

 

[MichaelD]

A useless statement to those who cant get themselves in a position to take advantage of this trueism.

Hardly mind numbing analysis---not that its required (Mind numbing analysis).

Simplicity while great in theory isnt so simple in practice---for anyone.

Everyone can get themselves in a position to take advantage of this trueism. It's STAYING in that position that's the hard part.

 

[disarray]

i was one one of the figjam traders who jumped in head first in late 2006 without any understanding of position sizing or risk management and thinking i knew what i was on about so stops weren't necessary. the bull will run forever!

it took financial pain to make me re-evaluate and spend more time studying what others here have been saying (mostly learnt through their own figjam fkups) and so now the fundamental principles everyone keeps banging on about (sizing, stops, letting winners run etc.) have been taken on board and the lesson burnt in with financial punishment.

the great thing is as i learn more and access new markets i can take these principles with me so its like i've been given a market survivability toolkit by ASF, knowledge which should provide the foundation for a lifetimes worth of trading.

and one thing this curernt market has definately done for me is show me that TA > FA

 

[tech/a]

Everyone can get themselves in a position to take advantage of this trueism. It's STAYING in that position that's the hard part.

As I said

Simplicity while great in theory isnt so simple in practice---for anyone.

And I notice you are no different.
Over the last 10 weeks.

From the bottom pickers thread
Posted by Michael.

Bottom Picking:
57 open trades - 20 showing a profit, 37 showing a loss
1 closed trade
Total Open/Closed loss -11.7%

Mine:
14 now closed trades - total closed loss 4.0%
19 open trades - 7 showing a profit, 12 showing a loss - total open profit 4.0%

Thats zero growth in 10 weeks---better trading?

I still dont see any hints fr those interested in becoming a better trader in these conditions?

After all the topic is times like These!

Sorry Michael but I think its your Avatar that gets up my nose.
That snobbish air of Hitchcock.

 

[Sean K]

one thing this curernt market has definately done for me is show me that TA > FA

This is a really interesting point IMO, because ´traders ´ just trading off TA, miss the really undervalued stocks that were frequently identified by the likes of YT and get their few % gain here and there. I saw YT make quite a lot of money from picking undervalued stocks and then jumping out as they came close to his interpretation of fair value. Or a suitable gain, whatever that was. Perhapsd up to a FA or TA level. There is a case for picking fundamentally undervalued stocks and then playing them by TA, to make quite a good deal out of the market. But as MichaelD, tech, and others (sorry to leave a good trader out) keep telling us, it ´s the selling and money management that keeps you in the game, especially at a time like this. Selling is almost like putting in golf. Buy for show and sell for dough...

Sorry if that didn ´t make any sence...

 

[johenmo]

Disarray summed it up for me - I'm a couple of years behind him/her. And Kennas is right as well. To someone who's putting it all together I see a lot of TA vs FA opinions, with people claining success at all sorts of mixes of the two. My recent choices were basically FA influenced. Better FA would have kept me out of a couple, and better TA would have pulled me out of these.

Over the last 3 months I have seen a number of posts that infer that if you don't "trade", then don't get into the market.

Nothing makes you sit up and take notice like losing money. And I did paper trade for a while a couple of years back & had a couple of dabbles - came out ahead so thought it was easier than I had previously thought. WRONG! Which supports korrupt_1's comments.

What times like these have done is make me aware that I have to have a better than mediocre approach. It will scare off those who are timidly testing the water.

In a yes/no answer, I will (perhaps naively) say yes. Or to paraphrase via an old (sexist?) saying, it will "sort the men from the boys".

For people like me (new), unsubstantiated comments can only be a passing interest (opinion) - rather than useful information. Fortunately, there is still lots of useful info in ASF.

 

[MRC & Co]

Why do T/A and F/A always have to be used in isolation? Many intraday traders will watch fundamental news releases in comparison to the charts (DOM).

Guys like Kennas combine both for their long-term investments as I do myself (for better or for worse).

Do times like these breed better traders? Again, I don't want to get into sematics as many here have, but yes they do IMO. You have to find a robust trading plan and execute it to perfection or you will be eaten alive. In a bull market, you can be a gambler and still win if you simply take a long bias. Look at what happened to the bucket shops many decades ago when bull markets were seen, the average punter was closing them down!