First off, at that spot is an underlying message you'll remove heed from every furu: trading markets is actually easier than yous think. Why is this the meta-message? Because the furu needs to appeal to the quick coin crowd. There's no sexy message if yous say people that trading is difficult; that fifty-fifty the Blue Planet shape traders guide maintain losing periods; that it takes years to principal whatsoever craft. So the furu goes afterward the people who *don't* desire to run for a living. After all, what to a greater extent than alluring message to post than, "it's actually easy...all yous demand to focus on is X."
Well, it's non tardily as well as there's i major argue for why markets are therefore hard to trade: they are e'er changing. The marketplace position yous traded 2 weeks agone is non the marketplace position that traded for the by 2 days.
Above is a nautical chart where each information indicate represents 50,000 ES contracts. It covers the menstruation from 7/1/15 to the present. Note how the rules that would guide maintain made yous coin really early on inward the menstruation are dissimilar from the ones that succeeded inward the middle of the menstruation as well as extremely dissimilar from what has succeeded almost recently.
I laid upwards quantitative models of the ES market. The backtests for those short-term models guide maintain gone dorsum to 2014, every bit this has been a relatively stable (stationary) authorities (i.e., a stable laid of rules has been predictive of frontwards cost movement). As nosotros went from trading Th to Friday, it became clear that the models (which to a greater extent than frequently than non set yous long inward oversold, higher volatility environments as well as curt inward overbought, lower volatility periods) were non working. They were non working because the cost activeness inward the marketplace position was non typical of the cost activeness from which the models had been derived. Only the Oct 2014 menstruation was similar, simply fifty-fifty at that spot of import differences were present.
(Parenthetically, nosotros unopen Fri amongst fewer than 5% of SPX shares trading inward a higher house their three- as well as five-day moving averages as well as fewer than 10% trading inward a higher house their 10-day moving average, amongst VIX having soared to 28. That cost activeness is much to a greater extent than similar to 2010 as well as 2011 atmospheric condition than 2014-2015 ones).
So I disregarded the model output as well as instead turned to my inquiry that identifies when nosotros guide maintain a probable tendency day. The persistent hitting of bids on expanded book was indeed introduce as well as led to a proficient afternoon curt trade. If anything, the models would guide maintain had me hunting for bottoms.
I did non follow my procedure because I guide maintain a meta-process for adapting my process. In other words, I am constantly scanning to come across if this fourth dimension actually is dissimilar therefore that I tin suit to changing atmospheric condition every bit chop-chop every bit possible. I don't desire to hold upwards trading mean-reversion (which worked good through much of the menstruation of the nautical chart above) when we're straightaway inward a trend/momentum environment.
This is why trading is therefore difficult. In almost functioning fields, nosotros tin count on stability: the pitching mound does non become from xc feet from the plate to lx as well as therefore 120. The basketball game hoop does non become from 10 feet high to 12 as well as therefore 8-1/2. The rules of chess are constant throughout tournaments; the rules of markets tin alter over the course of written report of a week.
Success tin come upwards from faithfully next your trading process. Ongoing success comes from chop-chop recognizing when that procedure needs to adapt.
Further Reading: Trading Coaches every bit Whores
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