Death of Discretionary Traders??

[Soultrader 12]

Ive been spending the past 2 months going to various trading firms for interviews on a prop trading position. What I have learned is that pure discretionary traders are a rare breed. Most institutional trading is automated using statistical strategies, arbitrage, hedging, etc... (im still unfamiliar with all the different styles they have)

 

It seems as if technical trading frightens management because they have no clue what traders are actually doing. Hence, they prefer to train traders who come from a more mathematical background.

 

My question is this. Should discretionary traders be worried about the future of trading? Can discretionary retail traders compete with insitutions that pump millions designing automated systems, high tech platforms, top notch data feeds, etc... ?

 

It seems like traders can now profit through advanced systems without actually knowing how to trade. (without knowing technicals, trader psychology, etc..) Do we even need traders? In the near future, are we likely to see more systems and less traders?

[notouch 10]

For very short term traders it's difficult to find an edge against automated systems run by investment banks. I can't see how anyone could trade with a 10 or 20 point stop when it could just be triggered by a program. If you look at daily charts, on the other hand, they have exactly the same patterns that they had 20 years ago so nothing's changed. The same is probably true of hourly charts. I know currency traders in investment banks who trade using 4 hour moving average crossovers.

 

Also only a minority of trading activity is speculative. The recent move in treasuries, for example, was due to hedging and most forex volume is commercial in nature. A high percentage of stock trading is by mutual funds buying on behalf of the public. There are plenty of opportunities as long as you don't decide to compete against arbitrageurs and programs.

[Soultrader 12]

Thank you notouch. Some excellent points you bring. Very interesting how you mention that only a minority of trading activity is speculative. The reason I say this is because in my opinion, any type of trading is speculative in nature. Including commercial activity, hedging, arbitrage, etc.. Traders are all placing a bet to extract money. Maybe someone can add some better input for me.

 

Another thought that came up... can we expect to see a more trending market if more traders become automated? All the chop and noise is created by a battle of emotions imo. Or perhaps a 1minute chart will start to appear like a 3min, a 5min like a 15min, etc..?

[notouch 10]

I don't agree that any type of trading is speculative. Hedgers want to lock in profits by taking away the risk of price fluctuations. A corn farmer, for example, makes his money from selling corn and will enter the futures market to lock in profits of the corn he harvests. A Japanese exporter is an even clearer example. He has made profits by selling DVD players to Europe and now needs to change his Euros into Yen. He doesn't care what the exchange rate is, he simply needs to convert the money in time for end of quarter accounts.

[torero 10]

One thing we can be sure of is that with more automation, the possibility of time of day will be crucial. Say right on the dot at 2pm, you may notice a burst of volume. On the hour seems to be auto systems going off. I do believe that scalping and extreme short-term trading is very difficult against computerized trading, especially news trading in forex.

 

I think trends may happen but in bursts because as soon as a system becomes profitable, the market assimilates it and make it stop becoming profitable so there's constant optimizing and re-optimizing and new strategy out in the market.

 

It's true the patterns still exist even after the players have changed.

[notouch 10]

I think the short term charts will become more volatile, not more trend friendly, as one automated system triggers another sending prices fluctuating up and down. The longer term charts, on the other hand, will still reflect the positions of the same old long term players so will look the same as ever.

[TinGull 10]

the market assimilates it and make it stop becoming profitable so there's constant optimizing and re-optimizing and new strategy out in the market.

 

Exactly. There is always going to be a human mind behind any system. Wherever there's a human mind, there's always room for error, and where there's room for error, there's room for a discretionary trader to make money. There will always be a market for the discretionary trader. Greater volatility brings greater profits for the day trader, IMO.

[MrPaul 10]

Ive been spending the past 2 months going to various trading firms for interviews on a prop trading position. What I have learned is that pure discretionary traders are a rare breed. Most institutional trading is automated using statistical strategies, arbitrage, hedging, etc... (im still unfamiliar with all the different styles they have)

 

It seems as if technical trading frightens management because they have no clue what traders are actually doing. Hence, they prefer to train traders who come from a more mathematical background.

 

My question is this. Should discretionary traders be worried about the future of trading? Can discretionary retail traders compete with insitutions that pump millions designing automated systems, high tech platforms, top notch data feeds, etc... ?

 

It seems like traders can now profit through advanced systems without actually knowing how to trade. (without knowing technicals, trader psychology, etc..) Do we even need traders? In the near future, are we likely to see more systems and less traders?

 

Hmm, well I had written out a long winded post about the evolution of markets and my personal feelings about the future of professional speculation but I think I'd rather just sum it it because I'm sure most of you like me hate 3 page post responses.

 

In short I do not feel that the future of discretionary trading is in danger, the two things that never change, no matter who (or what) is behind the order is the footprint of how many shares/contracts were traded and at what price they were executed.

 

Do I think some markets like the S&P will become much more difficult to trade on an intra day basis with a small amount of capital? Yeah I do. But there will always be emerging markets, new products etc.

 

Also remember that markets evolve and change to shake the majority off it's back, it must to survive. Therefore programs and automated systems will have to be constantly readjusted. That is where the discretionary traders edge lies over the machine.

 

Programs are executing orders within the context of an explicit understanding, A human who is experienced in market structure etc. (a professional) is working from an implicit understanding. That is the key.

 

 

 

P.S Haven't any of you guys seen Terminator 3? lol

[Dogpile 10]

This is a highly interesting topic and subject of recent books.

 

To me, it is clear that program trading can dominate at times. If you do not remain flexible, you will get run over by these competing algorithms that are written by extremely smart people trying to take your money.

 

But there is a good argument to be made that all these competing algorithms actually make 'right-brain' synthesis of complex, dynamic information MORE important. If so much money has so much compute power running mathematical programs, then the market is saturated with 'left-brain' compute-intensive strategies.

 

From Daltons latest newsletter (May 2007);

 

Successful trading is for those individuals that can continually combine the left and right hemispheres of the brain to appreciate what is occurring in the markets.

 

From our bookshelf:

 

During our trip to Chicago last month, Jim and I were introduced to a book containing a significant amount of thought provoking information. Our thanks go to Linda Raschke who introducing it to us as a 'must read'. The book, 'A Whole New Mind' by Daniel Pink, focuses on the power of whole brain thinking and how the right-brain will play an important role in the future in ones success. Chapter 6, "Symphony", provides insight to Pink's thinking.

 

 

Chapter 6 - Symphony - In this chapter Pink demonstrates how there is far more than just focusing on the identifiable, mostly left hemisphere, facts. He discusses the importance of invention and conceptual big picture thinking.

 

If we were to relate Pink's chapter entitled "Symphony'; to trading we might experience:

 

 

The ability to create something new and / or different such as a new type of chart, or a way to display or interpret volume, or understand a new shape nuance in the Market Profile graphic.

 

The ability to create meaningful pre-session and post session narratives to better prepare yourself for the following trading session. (DLC's next educa-tional letter will expand on the narrative idea.)

 

The ability to synthesize, combine or correlate unrelated ideas or parts into something unique and beneficial such as synthesizing the relationships between different markets and understanding how the markets different timeframes, coexist, interact and merge.

 

The ability to observe, interpret and understand the subtleties and nuances of human behavior as reflected in the markets order flow by understanding inventory balances and imbalances.

 

 

Today, as you know, we live in the age of information overload. Facts are at our fingertips via search engines, the media, and dial-up information services actually make information less valuable while making its relevance, interpretation and understanding more valuable. In other words, it is our ability to think with our whole brain - not just left or right, that will separate us from our competition. It is this focus that makes this book a 'must read'.

 

This book challenges the reader to go beyond their conventional and structured ways of thinking that were developed by both upbringing and environment. In many ways it is in the same category as Malcolm Gladwell's 'Tipping Point' and 'Blink' in respects to looking at how we look and think about things. "

[brownsfan019 17]

Here's my 2 cents - the more things change, the more they stay the same. If you have an edge and can exploit it with consistency, you can/will make money whether discretionary or automated. I think more and more bots will enter the markets (and add more liquidity in the process) but there is one constant - a computer programmed software package will eventually fail. There are few (if any) computer programs that can survive up, down and sideways markets.

 

Point being that no matter what, it is human emotions that will drive the markets. Even if a computer program is calling the shots, a human has the ability to over ride the system and decide when to turn it off.

 

A good example I can think of is when online stock trading became mainstream (ETrade, Ameritrade, etc.) stockbrokers (like myself at the time) were being told that this was the death of that profession. Why should I pay hundreds of dollars per trade when an online broker will do the same for 10 bucks?!?!? Guess what? The full service firms are doing just fine and their businesses continue to grow. Having been in that business before I try to keep a close eye on how the brokers are doing and they are fine.

 

There's always going to be a reason why discretionary traders will die. And many will. And many will use that a reason for their failure. I saw it all the time at the brokerage firm with the failures - can't compete with online, can't compete with no load funds, can't compete with ETF's, etc.

 

As much as a cliche as it is, only the strong will survive and for those that do survive, the journey will be well worth it.

[Dogpile 10]

One thing big program trading firms can't do is carry positions with resting stops that get executed without slippage. I am talking about the big institutions here, not the nimble < $1B hedge fund.

 

To the extent that all trading involves probabilities, not certainty -- the use of stop-loss orders limits losses for all the times where you suffer 'variance' to the expected result. Especially in a world where the 'non-linear break' is always a risk due to growth of derivatives.

 

There is really only one good reason why a LTCM can blow up -- they could not get out of their positions. Being nimble is a real advantage.

[brownsfan019 17]

dog is right, being nimble has its advantages. I remember when I would visit mutual fund co's that were trying to get us to sell their funds and one of the biggest (American Funds) and one of the best would tell us that it takes MONTHS to build and MONTHS to unload a position. When you get so big, you have to enter positions in such a way as to not raise any flags which is easier said than done.

 

There's something to be said to be able to flip on a dime, but that also implies you are trading very little in the grand scheme of things. I'd like to think of myself as a nimble, bigger little guy.

[Dogpile 10]

A quote I liked from 'Mastering The Trade':

 

"Some of the best traders I know have been trading the same set-up on the same timeframe on the same market for 20 years." pg 31

[darthtrader 10]

i think its interesting if you look at the CTA's on autumn gold i would say probly 90% list themselves as systematic instead of discretionary. the funny thing is though the 10% with really great returns list themselves as discretionary.

i wouldnt doubt its something like a Rentech/Jim Simmons effect. With how good they have been doing now everyone wants to be like Jim Simmons and discretionary is a dirty word.

 

until we have computers as powerfull as the human brain i don't think we are in much trouble.

[ItalianSharp 10]

Big institutions use highly sophisticated automated programs for their trading; they have the best and fastest connections to the markets; they have the best trading platforms. All this makes it nearly impossible for a private trader to compete with them on the same ground. Basically, if you go for the automated stuff, you'll always be one step behind the institutionals.

 

However, I do believe private traders have a big edge over institutionals. This edge is CAPITAL and being able to liquidate positions at any given time with almost zero slippage.

 

Discretionary trading is the way to go if you want to compete against those monster funds, banks, bots, whatever you wanna call them.

 

You have to be good at it, but you can do it. And things will likely improve in the future because there will be more participants bringing more liquidity.

 

Last but not least, markets will always be driven by fundamentals. Although there is an increasing tendency to automize everything, there will always be the need for human flexibility and interpretation of market conditions.

 

IS

[ant 10]

A lot of excellent responses here, so I'll just add to some of the themes already mentioned. It is my opinion that to be a viable opponent in the markets, traders will have to rely on the abilities that make human beings superior to computers. We all know that the human brain cannot compete against a computer when it comes to routine, raw number-crunching, analytical, information-based tasks (i.e., purely left-brained abilities), and this applies to trading strategies that can be programmed and automated. We currently live in an information age where there is an abundance of information and incredibly fast computers. This sets the stage for efficient automation. Computers are significantly faster, they can process vast amounts of information in significantly less time than humans, they don't get tired like people do, and they don't make errors. Generally speaking, if you are an individual trader with a trading strategy that can be described in a finite number of steps, a computer will be able to trade it more easily and better than you. I agree with ItalianSharp when (s)he wrote:

 

Big institutions use highly sophisticated automated programs for their trading; they have the best and fastest connections to the markets; they have the best trading platforms. All this makes it nearly impossible for a private trader to compete with them on the same ground. Basically, if you go for the automated stuff, you'll always be one step behind the institutionals.

 

So in my opinion, very few automated, systems traders will be able to compete with institutions that have the best minds, deepest pockets, fastest computers, best automated trading systems; in short, the best, and most abundant, resources. So what type of trader do I think will be able to compete with the institutions? Discretionary Traders. Specifically, traders that combine the analytical, problem-solving skills found in the left hemisphere of the brain with the human abilities carried out by the right-side of the brain. These right-brain abilities include seeing relationships and integrating those relationships into the big picture, pattern recognition, focusing on context, creatively combining ideas, understanding what your competitors are doing and how they may be feeling, and looking at the markets in new and different ways. The list goes on, but these are all examples of areas where human beings excel over computers and the focus of most discretionary traders, I think. Traders that use a holistic approach, combining left and right brain abilities, will be able to continue to compete in the financial markets against institutions with vast computing resources. Anyway, this is my current belief which has shaped my trading style and methodology.

 

Soultrader, I think you started a thread on an important topic that will be discussed heavily by many traders as time goes on. I believe it's important to consider how we plan to adapt in a world that's becoming more and more automated.

 

Recommendation: Read "A Whole New Mind" by Daniel Pink, an easy, enlightening read that discusses this subject in more detail. Dogpile mentioned this book in one of his posts.

[ItalianSharp 10]

A lot of excellent responses here, so I'll just add to some of the themes already mentioned. It is my opinion that to be a viable opponent in the markets, traders will have to rely on the abilities that make human beings superior to computers. We all know that the human brain cannot compete against a computer when it comes to routine, raw number-crunching, analytical, information-based tasks (i.e., purely left-brained abilities), and this applies to trading strategies that can be programmed and automated. We currently live in an information age where there is an abundance of information and incredibly fast computers. This sets the stage for efficient automation. Computers are significantly faster, they can process vast amounts of information in significantly less time than humans, they don't get tired like people do, and they don't make errors. Generally speaking, if you are an individual trader with a trading strategy that can be described in a finite number of steps, a computer will be able to trade it more easily and better than you. I agree with ItalianSharp when (s)he wrote:

 

 

 

So in my opinion, very few automated, systems traders will be able to compete with institutions that have the best minds, deepest pockets, fastest computers, best automated trading systems; in short, the best, and most abundant, resources. So what type of trader do I think will be able to compete with the institutions? Discretionary Traders. Specifically, traders that combine the analytical, problem-solving skills found in the left hemisphere of the brain with the human abilities carried out by the right-side of the brain. These right-brain abilities include seeing relationships and integrating those relationships into the big picture, pattern recognition, focusing on context, creatively combining ideas, understanding what your competitors are doing and how they may be feeling, and looking at the markets in new and different ways. The list goes on, but these are all examples of areas where human beings excel over computers and the focus of most discretionary traders, I think. Traders that use a holistic approach, combining left and right brain abilities, will be able to continue to compete in the financial markets against institutions with vast computing resources. Anyway, this is my current belief which has shaped my trading style and methodology.

 

Soultrader, I think you started a thread on an important topic that will be discussed heavily by many traders as time goes on. I believe it's important to consider how we plan to adapt in a world that's becoming more and more automated.

 

Recommendation: Read "A Whole New Mind" by Daniel Pink, an easy, enlightening read that discusses this subject in more detail. Dogpile mentioned this book in one of his posts.

 

Thank you for expanding on my thoughts. You laid it out brilliantly.

 

IS

[Dogpile 10]

one of the original questions posed in this thread was:

 

"Do we even need [non-systems] traders? In the near future, are we likely to see more systems and less traders?"

 

The market, with so many participants, with differing timeframes, with differing strategies is clearly enormously dynamic and complex. With growth of derivatives and leverage, there is a good argument going on about how the market will become increasingly non-linear --more in line with 'Chaos theory'...

 

If this is true, 'chaos' plays against those who rely on raw compute-power. It will be increasingly difficult to 'model' (system trade) something that is increasingly chaotic and dynamic.

 

You might say, yah well how is anyone going to operate in this environment then?

 

From recent book I read by Hank Pruden ("The Three Skills of Top Traders"):

 

"But the true elegance of chaos theory lies in its correlation and compatibility with the qualities of the old-time technicians."

 

Dalton talked about how the human brain is not good at interpreting large amounts of complex information. But the brain is actually quite good at identifying well-structured visual objects (and 'patterns'). For example, looking at the equation for something like standard deviation takes a minute to go through and understand it. But looking at a bell-shaped histogram and marking off 1 standard deviation on either side is quite intuitive. Add multiple dimensions of complexity and then add in outside shocks like hurricanes, terrorism, political uncertainty that develops overnight etc... and it quickly gets overwhelmingly complex.

 

Savvy technical analysts appear to have the opportunity to benefit from all of this. If you can have the patience to wait for the times where price 'auctions too far' due to big clumsy institutions fighting with each other and can therefore identify short-term asymmetric reward:risk positions with regard to 'trade location' -- and you can combine this advantageous trade location with a good entry/exit technique -- and you can enter and exit quickly with reasonable risk and no slippage, you do possibly have a good advantage over institutions.

[darthtrader 10]

"But the brain is actually quite good at identifying well-structured visual objects (and 'patterns')"

 

there is some interesting videos on google video if you search for "singularity" as far as the current state of AI. Even beyond the brain being fantastic at pattern recognition, computers are still a joke there. I believe ive read its still impossible to have a computer learn a generalized rule for what a cat looks like where you could show a picture to any 6yo and they would instantly know if they are looking at a cat vs a dog.

 

I also read IBM's Bluegene super computer is the fastest in the world, has a whole 1/1000th of the brains computer power and they have almost simulated half a mouse brain with it....i'm sure it would be impossible to trade against a computer if it ever has the brains pattern recognition but that would seem to be ways off if ever.

 

i'll have to check out that The Three Skills of Top Trading book, looks quite interesting.

[Dogpile 10]

Actually, the book isn't all that good except to make some points about how classic technical analysis might be the best way to compete in a world saturated with computer algorithms competing with each other. But past that, the point is not all that well-developed in the book.

 

It seems to me this is a little like sitting in a poker game with a bunch of computers that are playing against each other with multi-billion dollar stacks. You have your little mini-stack and patiently wait for monster stack 1 to get out of line while going after monster stack 2. You take a little itsy bitsy piece out of stack 1 who at the same time takes a big chunk from stack 2.

 

Because one multi-billion dollar stack is competing for some meaningful amount, they can't possibly be nimble enough or even care for that matter to try to go after your little stack -- they are after the big bucks. You can sit at the table and make a living off the scraps that are left from the 'excess' created by the bigger (higher timeframe) war going on.

[rolange 10]

Actually, the book isn't all that good except to make some points about how classic technical analysis might be the best way to compete in a world saturated with computer algorithms competing with each other. But past that, the point is not all that well-developed in the book.

 

It seems to me this is a little like sitting in a poker game with a bunch of computers that are playing against each other with multi-billion dollar stacks. You have your little mini-stack and patiently wait for monster stack 1 to get out of line while going after monster stack 2. You take a little itsy bitsy piece out of stack 1 who at the same time takes a big chunk from stack 2.

 

Because one multi-billion dollar stack is competing for some meaningful amount, they can't possibly be nimble enough or even care for that matter to try to go after your little stack -- they are after the big bucks. You can sit at the table and make a living off the scraps that are left from the 'excess' created by the bigger (higher timeframe) war going on.

 

I agree. Us retail traders are best imitating those those tiny feeder fish grabbing little morsels here and there.

 

Although I enjoyed reading the euphoric Utopian vision of Kurzweil's 'The Singularity is Near' (he reckons 2030) but it seemed to sidestep the crucial questions. Human beings and traders are very good at lieing, subtefuge, duplicity, and most of all self sabotage. How can a computer ever be taught to think like this? In nature and crativity and genius the greatest things are achieved by mutation, the variations on a theme, the variation that could never be modeled or predicted mechanistically.

 

Intuition is a huge part of the equation because anyone who has developed this side of themselves will know that it opens up a whole new set of questions and the immutable conclusion that we will always be one step ahead of any computer system.

[Nick1984 10]

Personally I think that the more automated systems that come out the better cause of all the extra liquidity in the markets they'll bring. There will always be no shortage of discretionary traders. Imagine the data vending industry and the trading platform industry and how much they will continue to improve their product to allow us to remain competitive against automated systems, cause if we all go so will their businesses! Like rolange just said above me, a computer can never learn to act exactly like a human can. How will a computer cope if there is a large market crash like in 1929? I dont think discretinary trading will die any time soon.

 

But in James' scenario, ok discretionary traders may become extince in these prop trading firms and in large institution like banks etc, but the end result of that will be that they'll just keep on trading privately from home anyway. If you had a system which worked and you were consistently making profits on average, why would you want to go to a firm where they will take most of the profit?

[Soultrader 12]

Wow. Excellent post guys. Very interesting to compare both sides and its advantages vs disadvantages.

 

With instutional trading, I have learned that it costs approx $1million to hire a trader. This includes, platform/system fees, data fees, etc... Therefore $3-$5million seems to be a minimum quota for insititutional traders. A prop trader mentioned that discretionary traders have the potential to make over triple of what an automated system can make. Hence the reason why major banks are still interested in hiring discretionary traders due to one big reason. Discretionary traders understand speculation and trader pyschology.

 

As long as there is speculation, discretionary traders will be here to stay. This is where discretionary traders have the edge. But with the increase of automated systems, there is a need for discretionary traders to keep adjusting to the markets. I feel like discretionary traders are able to paint the markets freely using their hands and a brush while automated systems can only do so with adobe photoshop.

[Nick1984 10]

As long as there is speculation, discretionary traders will be here to stay. This is where discretionary traders have the edge. But with the increase of automated systems, there is a need for discretionary traders to keep adjusting to the markets. I feel like discretionary traders are able to paint the markets freely using their hands and a brush while automated systems can only do so with adobe photoshop.

 

This is the point exactly, specualtion. How can a computer speculate, its cant! Its actions are completely reactionary. I'm pretty sure computer systems dont start gigantic moves. Discretionary traders will always have an edge.

 

I like to use the analogy of car manufacturing: most car manufacturers have completely automated assembely lines and they can provide a high volume of cars for the markets. But the best cars are the ones that are still hand made! The Rolls, Aston Martins, Lambos, Elfin, Bentley etc... The hands on experience cannot compare in quality to the automated stuff. Some things computers can never do!

[Reaver 10]

A lot of excellent responses here, so I'll just add to some of the themes already mentioned. It is my opinion that to be a viable opponent in the markets, traders will have to rely on the abilities that make human beings superior to computers. We all know that the human brain cannot compete against a computer when it comes to routine, raw number-crunching, analytical, information-based tasks (i.e., purely left-brained abilities), and this applies to trading strategies that can be programmed and automated. We currently live in an information age where there is an abundance of information and incredibly fast computers. This sets the stage for efficient automation. Computers are significantly faster, they can process vast amounts of information in significantly less time than humans, they don't get tired like people do, and they don't make errors. Generally speaking, if you are an individual trader with a trading strategy that can be described in a finite number of steps, a computer will be able to trade it more easily and better than you. I agree with ItalianSharp when (s)he wrote:

 

 

 

So in my opinion, very few automated, systems traders will be able to compete with institutions that have the best minds, deepest pockets, fastest computers, best automated trading systems; in short, the best, and most abundant, resources. So what type of trader do I think will be able to compete with the institutions? Discretionary Traders. Specifically, traders that combine the analytical, problem-solving skills found in the left hemisphere of the brain with the human abilities carried out by the right-side of the brain. These right-brain abilities include seeing relationships and integrating those relationships into the big picture, pattern recognition, focusing on context, creatively combining ideas, understanding what your competitors are doing and how they may be feeling, and looking at the markets in new and different ways. The list goes on, but these are all examples of areas where human beings excel over computers and the focus of most discretionary traders, I think. Traders that use a holistic approach, combining left and right brain abilities, will be able to continue to compete in the financial markets against institutions with vast computing resources. Anyway, this is my current belief which has shaped my trading style and methodology.

 

Soultrader, I think you started a thread on an important topic that will be discussed heavily by many traders as time goes on. I believe it's important to consider how we plan to adapt in a world that's becoming more and more automated.

 

Recommendation: Read "A Whole New Mind" by Daniel Pink, an easy, enlightening read that discusses this subject in more detail. Dogpile mentioned this book in one of his posts.

 

Outstanding post, Ant.

 

This is also similar to another discretionary trader I highly respect, Finley "Chick" Goslin. He is old school and has been around the block on this stuff. He says that we simply cannot compete with the institutions or funds with their virtually limitless computer systems and supply/demand information. There is simply no way, and it is borderline clinically delusional to think otherwise. There are funds that have armies of traders and analysts and researchers....you have to break the game down to something you can have an edge on.

 

He uses a 3/10/16 MACD (actually the SMR proprietary indicators, pretty much the same thing) and to make a long story short, breaks trading into an up or down numbers game. Using price action and momentum, he shows that it can be done., and very very well at that.

 

We cannot compete in an an analyzing, number-crunching contest...but we can be very competitive in a SEEING contest.