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Prosper,
I am a firm believer that two things are required to make money trading: an
edge, and the knowledge of how put that edge to work.
Let's look at floor trading for a moment. One of the keys to success in the
bond pit is an understanding of what today's edge is. Maybe its oil. Some
days, every time the crude takes an uptick, the bonds go offered within a
minute. There is the edge for the time being. I know that if I am short
and the oil ticks higher, I should stay at my bid as prices are likely to
come my way. If I'm long, its time to bail -- no questions asked! Now,
there are guys that can turn this strategy into millions just as the trader
standing next to them goes broke.
I learned this business in the spring wheat pit at the Minneapolis Grain
Exchange, one of three wheat pits in the U.S. Most of the time Minneapolis
follows Chicago or Kansas City; occasionally it leads. The successful
traders in Minneapolis were the ones who were able to figure out what was
driving our pit and use it as an edge in Minneapolis. Even with such a
simple strategy, two thirds of our new traders tapped out within six months.
They had the edge handed to them (unless they were both blind and deaf) yet
they couldn't put it to use.
The same logic can be applied to position traders as well. Different edges
for different timeframes.
The universal thread is risk. The understanding and proper employment of
it. No two traders think alike but losers and winners think more
differently than any two winners.
Sean
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