[ale] [OT based on] Open-Source program(s) for Stock Trading ?

William Fragakis william at fragakis.com
Mon Jun 8 10:56:52 EDT 2009


I'm a bit more familiar with this arena than Linux so you get my $ .02
for free.

- There's a difference between investing and trading, imho. Investing is
trying to find long term value (or lack thereof if you want to play the
short side). Trading is profiting from shorter term fluctuations in
price without regard to value. It's easy and costly to confuse the two.

- The key to trading is "money management", the rules you use to limit
loses and allow gains to accumulate. You can be right only 30% of the
time and still make money. You can be right 90% and go bankrupt. It's
all about your rules. Professional traders have even developed totally
random investing rules that actually work - as long as the rules are in
place. 

- You have to be totally agnostic to be a trader. It doesn't matter if
you think you are right. The market is always right. Trying to prove it
wrong can be very expensive. Along that line, check your ego at the
door. It, too, gets expensive.

- A trader a long time ago said that people get what they want out of
the market. If you want excitement, you'll get it. If you want to make
money, you can do that, too. Too often, people want the thrill or rush
more than they want to make money which can often be tedious and
boring. 

- Know that the big boys get the news before you do. You are just a flea
on the dog's tail. You won't read anything in the paper that the big
boys didn't find out about yesterday. Same thing with what your "broker"
tells you. Fidelity heard about it yesterday and you are buying the
scraps. In fact, expectations of the news are already built into the
market. An old saw says, "Buy the rumor, sell the news." The smart guys
are selling to you and taking profits if you buy something after the
news comes out.  Same thing with "systems". Houses on the Street and the
big hedge funds spend an obscene amount of money on intellect and
hardware. Be wary of someone who will sell you a system at a seminar.
The guys with the real systems are usually comfortably in their home in
Jackson Hole and not schlepping around to Holiday Inns selling stuff.

- Realize that even Nobel Laureates and some of the smartest people you
will ever meet have hit the wall. It's most often in the "this will
never happen" scenario. Stay humble and never, ever fail to enforce your
rules of money management. 

- Finally, imho, day trading for 98% of the world is a chump's game. If
you are "making money" in a long term bull market as a lot of people did
in the late 90's, you really aren't doing anything special. Even a
monkey could go long and make money. When the market turns, these guys
get killed because they were never trading but riding a trend without
realizing it. It's a lot like Vegas. The brokers love day traders
because they make a spread and/or commissions. Guys on the Street don't
"day trade" but tend to take longer term positions based sometimes on
fundamentals, sometimes on supply and demand that they see from
customers and other traders. Probably the purest of day traders are the
guys in the pit in Chicago but their world is different because they can
actually see the flow of buyers and sellers which you can't do watching
a screen. 

 
There are plenty of good books out there. To beat the guys who've spent
years in business school and working on Wall Street, you have to be
good, patient and willing to work. Otherwise, you'll be better off in
the long run buying a decent mutual fund and using  your time to do what
you do best. 

Good luck,
wf


On Mon, 2009-06-08 at 10:00 -0400, Ed Cashin wrote:
> On Mon, Jun 8, 2009 at 9:23 AM, Marc Ferguson<marcferguson at gmail.com> wrote:
> > Hey Folks,
> >
> > Courtney mentioned stock software and that triggered a question I've been
> > meaning to ask.  Since you guys are like my "advisers" besides Linux I'll
> > ask you all.
> >
> > I would like to get into the stock market, but I don't really know how to
> > start.  My only inclination of the market are http://www.simustock.com/ and
> > http://www.google.com/finance.  Unfortunately; I don't really know how to
> > read the market that well. It's just a bunch of numbers to me, at this
> > point. I've chosen the typical companies (AAPL, GOOG, MA, MSFT, NTDOF, RHT,
> > etc) to put in my portofilio, but what to do with the news and blah blah
> > blah. Thanks.
> 
> I do think that for most people it's important to understand as much
> as possible about markets and economics, including some financial
> news, but it's [again, for most people] a mistake to try to make trading
> decisions based on news.
> 
> There are a lot of books out there about short and intermediate term
> trading.  If you really want to try to make money based on news, I'd
> say try to read as many of them as you can and then find a place where
> you can "paper trade" online to test out your ideas without losing all
> your money in real life.  Investing a year or two in educating yourself
> is probably less painful than financial disaster.
> 
> If you decide against trying to profit from day-to-day developments
> (as I did eventually)
> you might consider using ETFs with a wide basis as described in my
> Buy-Only Rebalancing article mentioned earlier.  (In fact, it mentions
> ways to leverage personal insights, but those are based more on
> expertise and observations rather than stuff like chart patterns or
> trading the news.)
> 



More information about the Ale mailing list