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Brent:
Thanks for the interesting read on Gary Smith. Gary made (some/lot?) of
money selling day trading systems and manuals on the S&P but TRADES
mostly MUTUAL FUNDS. Does he say that? I don't think so..........
Charles
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> From: BrentinUtahsDixie <brente@xxxxxxxxxxxx>
> To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
> Subject: Gen: Traders Story
> Date: Friday, January 08, 1999 12:19 PM
>
> Hi RT's,
>
> I got this story from a friend. It was posted to another list. I thought
it
> was
> good reading. It has some guideance for new traders. Enjoy.
>
> Brent
>
>
> Nice post by Gary Smith:
>
> What have I started below in the Arthur Field thread? Another fine mess.
> Sorry Arthur, you do have my apologies. You got caught in one of my bad
> trading moods today. Well, this post is a long one and most likely will
> draw even more flames, so here goes. It drives some of the vendors and
> others crazy when I toot my horn or talk as if I'm a professional trader.
I
> guess it isn't politically correct to boast about your trading exploits,
> just your hypothetical exploits. I struggled for so many years that I
will
> forever have this self image of myself as a small time break-even trader.
> I spent more years than I care to remember with an account that
fluctuated
> between $2000 and $4500. I traded stocks, I traded options, I traded
> warrants, and I traded futures. I went through the usual evolutionary
> process all traders must endure. Always thinking there was some magic
> formula, system, methodology, or better yet, some magical trader who had
> the answers.
>
> I wanted so badly to trade for a living. That was my dream, just as I
> suppose it is the dream of many who "hang out' in this newsgroup. But I
> stumbled blindly in pursuit of that dream because I never set any goals
on
> how to get there. That all changed in 1985. I began making money. Then
> each year a little more than the previous year. In late 1986, I began
> rolling my futures profits into trading mutual funds. Trading mutual
funds
> is no different than trading stock futures. Whether you are trading
> futures, options, stocks, or funds, you still have to buy as near the
lows
> as possible, ride the profits for as long as you can, then sell as near
the
> highs as possible. It's just a matter of personal choice which weapon
you
> choose.
>
> Finally, the snowball effect kicked in. The larger my capital base
became
> from my trading profits, the greater became those trading profits. Hope
> that makes sense. I never aspired to be like Larry Williams. (who
believe
> it or not I like and respect) Larry will be the first to admit he is a
> boom or bust trader. if I ever busted, I wouldn't be able to come back
> psychologically. I was more concerned with *never* having losing months.
> (I average about one losing month per 26 months) than how much I was
> making. I see, read, and hear of the hot-shot traders bragging about
their
> big trading scores but then I always see them give it back. And please,
I'm
> talking about home-based traders here. I'm not talking about the CTAs,
> hedge fund managers or Chicago and New York based traders.
>
> I remember when I was thrilled to make $10,000 annually. Then I was
> thrilled to make $18,000. In the mid-1990s, I got stuck for awhile in
the
> $40,000 to $50,000 range. I figured that was to be my destiny, which was
> fine enough for me. But I broke out in 1996 making $72,000. I cracked
> $100,000 in 1997 making $113,000. Last year I made $195,000. People say
> "sure, but how large is your trading account now?. My response is I had
> only $2200 and 13 cents in my account on March 13, 1985. That is forever
> posted on my refrigerator door.
>
> So what does it take to become a successful trader? *Extensive* academic
> knowledge (like in trading books) combined with *intensive* real time
> trading experiences (like in many years) Only then can you learn your
> strengths and weaknesses and find out what works and what doesn't for
you.
> Then you can go about the task of developing your own winning trading
> strategy. Yeah, you read that correctly. Developing your strategy comes
> last in the equation. (By the way, paper trading and simulated trading
is
> worthless. Don't waste your time)
>
> A lot of traders tell me they have spent a lifetime studying as well as
> trading, yet still can't beat the game. That's where the last piece of
the
> puzzle comes into play. *RISK* You have to be able to assume risk as
well
> as manage that risk. Most traders are either too risk averse to ever
> become consistent winners or conversely, they have too much of a gamblers
> mentality.
>
> I probably could be debated on this, but risk is a "childhood thing." It
> may even be an innate thing. Just as I possess no mathematical skills
and
> thus could never become a physicist or scientist, very few possess the
> proper risk skills to ever become successful traders. There are a lot of
> academics and vendors who have superb analytical trading minds, yet can't
> trade their way out of a paper bag. And that's not meant as a derogatory
> comment.
>
> As for my methodology, I have none. I trade pure price action. And no,
> that doesn't mean I'm simply a trend trader. Nothing wrong with trend
> trading except most trend followers get in too late and out too late.
That
> explains the mediocre performance of the CTAs and hedge fund managers
since
> 80% of them are trend traders.
>
> I've wondered long and hard why after so many years I suddenly began
making
> money so consistently. It's because I threw away the charts,
oscillators,
> gave up on the Gann, the cycles, the waves, Fibonnaci -everything. Now
I'm
> not suggesting there's anything wrong with those methodologies. They,
like
> me, look to trade price action. As Jack Schwager says, some of those
> methodologies are probably worthless, but they seem to work because the
> traders who use them have developed some sort of intuitive experience
about
> price. But they are looking at price through the tinted glasses of their
> particular methodology. I'm successful because I look at price in it
> purest form and without an intervening methodology as a go-between.
Does
> that make sense to anyone?
>
> So why do I hang out here and trash some people? Because I understand
> through a lot of years and hard work, the realities of successfully
trading
> for a living. Why shouldn't I offer my two cents worth when the
blowhards
> who are simply clueless start pontificating about what it takes to
succeed?
> Much of what I read here and places like Futures magazine and TASC about
> the trading game is pure myth. It boggles my mind to find so many with
no
> trading expertise claim they have the answers for the newbies. And for
> however much money, they will share those answers with you. And I'm not
> referring to Arthur here.
>
> One last point. I'm not marketing anything here. I've already gone on
> record as saying my trading book is getting outdated and no longer
reflects
> how I presently trade. If I ever return to Vendorville, it will be more
on
> the line of a $39 book. I have a New York publisher who wants me to do
> just that by detailing my trading more precisely. But here's something
you
> don't often read. The average trading book in its career sells between
> 5000 and 10,000 copies. Of course, a few can go as high as 50,000 while
> others only sell 2500. Authors get between 10% and 15% of the net price.
> The net price of a $39 book is roughly $20. So say I spend months
writing
> a book and sell 7000 copies. At $3 net to me, I earn all of $21,000. It
> doesn't compute when you consider last year I averaged over $16,000
monthly
> trading.
>
> Gary Smith
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