How to trade for a living and actually Profit
There are many pitfalls to trading and quite frankly, a lot of people jump into it and make the same mistakes over and over again and never make it past a few hurtles that almost everyone stumbles over. Before I go into what actually works, I would like to go into what doesn't work:
Day trading your money full time at your computer in your robe
Well, actually you don't have to be in your robe. A lot of people figure that they are going to save up some money, quiet their job and scrape together 25,000, 75,000, or even 100,000-300,000 and sit down at their computer and trade in and out tick by tick scalping for quarter points. A lot of people tried this in the late 90s and early 2000s with the advent of online trading platforms. Lets take a look at a few story headlines.
Many Day Traders Are Born To Lose
Day Trading is a wild ride. Look out.
http://articles.orlandosentinel.com/keyword/day-trading
Day Trading hits Investor Wall
A Day Trader's Advice: `Don't Quit Your Day Job'
Over the last 17 or so years, there is an article in the newspaper where there will be a sad or grim looking woman or man that lost all their money trying to day trade. Whats going on here? Why is it so stacked against the common person? Why cant the average Joe who knows about technical analysis and indicators and computer trading get in and make money?
The reason is because of the Gatekeepers. The Market Makers.
In the 1960s and 1970s the Market Makers had the run of the place. Market Makers are like bookies. They take bets and balance those bets with other bets, and take the difference as profit for themselves. The trading public at this time did not have personal computers. When you wanted to purchase some stock to buy, chances are you were going to hold it for a year or longer in your portfolio, so you called up your broker and purchased 100 shares of xwz. Some people would purchase stock and hold it for 50 years or longer and give it to their children. The broker placed the order and it went to the trading floor where the market makers would execute the order. And the person that purchased the stock would hold it for quite a while going for long term growth.
Suddenly, the Internet happened in the early to mid 90s and everyone got an online trading account. Then people started buying and selling trying to scalp eighths and sixteenths of a point. Which directly interfered with the Market Makers business. That's how the Market Maker makes his money..matching buyers and sellers. Suddenly everyone was a bookie, trying to do the same thing. Spreads suddenly narrowed. And the market makers suddenly noticed that money was being taken out of their pockets by the trading public basically doing the same thing they did. So they declared war.
Market Makers destroy the day traders
Imagine playing a game of tennis against your opponent and suddenly you realize that you cant hit the ball for shit. You keep missing the ball in the air. Here comes the ball, another wiff, the ball sails right on by you. Steadily your tennis opponent keeps winning. You guys are betting on games and you keep losing your money. Aggravated, you put more money up with the intent on finally winning some money. You lose that too. Everytime you try to hit the ball, you can't. Wait, did that ball just go around your racket IN THE AIR?
You then realize that your opponent has the ability to control the ball in the air. They can stop the ball dead and hang it in the air, it can make unnatural right turns and go right around your racket, basically like a remote control drone ball. Your opponent is cheating.
This is what its like trying to day trade. The Market Makers can manipulate the price of the stock. They can make the stock price start moving up if they start filling a whole ton of market orders on their screen. They can make the price of the stock drop by beginning to sell blocks of orders on their screen.
When a market maker during the course of the day identifies a trader going through his exchange camping out buying and selling all day long scalping fractions of a point, he will start to fuck with this person for example: He sees a trader buying 10,000 shares of QQQ at 107. Then at 107.25 the trader puts up that same block to sell. The market maker will then leave his sell order sitting there and will start to execute other piles of sell orders, making the stock price start to drop. The stock price now drops down to 106.50. This freaks out the daytrader and he panic sells at 106.50 at market price as he fears further loss. Then the Market Maker then starts to execute buy orders and drives the price right back up to 107. The Market Maker is in business matching buyers with sellers making fractions of a point. He doesn't want to share these fractions with other daytraders.
The Market Maker has successfully shook the trader right out. He made the stock dive, the trader panic sells, and he brings the price right back up. Hopefully the Market Maker thinks, the trader will lick his wounds and go away. And stop trying to scalp the bid and the ask, which the Market Maker feels is his. And guess what: it is.
Day trading tick by tick doesn't work. The Market Makers will see what you are doing and shake you right out. You will lose all your money if you keep trying.
You cant make any money trading tick by tick online. You will have more success in other exchanges, but its still tough. I recommend you not try it. Stay away from inter-day in and out trading.
Tradinginsider
.png "English"){kind=small}
0 comments:
Post a Comment