I never understood this. If its possible to be a profitable independent day trader, and we know it is because many are, then it should be possible to code the rules you follow and become a profitable algo trader.
> If its possible to be a profitable independent day trader, and we know it is because many are, then it should be possible to code the rules you follow and become a profitable algo trader.
There's actually a logical error here: if trading results were essentially random, a certain subset of traders (including day traders) would, at any given time, have profitable records. But you would not be able to derive (and, therefore, implement in code) any set of rules which would make automated trading profitable. You would just either be lucky, or not, as an algorithmic traders just as you would as any other kind of trader.
Now, I'm not saying that trading profits are random, but the existence of some profitable traders does not mean that there are rules you can deduce from their behavior that will guarantee profitable trading when implemented by someone else (either in an automated system or otherwise.)
Agreed. Probably a large fraction of 'profitable independent day traders' mention by parent depend on luck. It's one thing to post a profitable month/year, whole different thing is a profitable decade.
It's relatively easy to have a profitable period on a strongly bull market. But it's irrelevant if any 'unexpected' (people call such events unexpected despite the fact that they tend to happen regularly over time) event such as 2008 crisis will completely wipe you out.
> If its possible to be a profitable independent day trader, and we know it is because many are
You're forgetting about the many that aren't profitable. You're also forgetting about the majority that are less profitable than the market average. The latter is probably the easiest to overlook. Yes, they are technically profitable, but so are packaged portfolios of stock held for long periods of time. If you can't be more profitable than someone who puts in zero effort, then whats the point of putting in more work?
A lot of day trading is done based on intuition, which is difficult to translate to code. Also, keep in mind your survivorship bias... Most "day traders" lose money and quit the game.
There are lots of successful software developers too, but writing out a series of rules to automate writing code is not going to happen soon. Unless day trading is substantially easier than programming, an autonomous robotrader that can make money seems unlikely.
Leaving aside the question of how many profitable day traders there actually are, there are profitable professional poker players out there but no bot can compete with them. Now scale up the complexity of poker by at least an order of magnitude and you end up with the financial markets.
Sure, it is possible to to program very niche behaviour, but we are nowhere near any sort of program that can act as general "day trader".
The comments here are interesting...Looking at your question from a different angle, yes, of course it's possible to be a profitable algo trader - set your first investment to buy("SPY") and do nothing else for 20 years. What you are asking though depends entirely on your risk tolerance and what you are benchmarking your strategy against.
You vastly underestimate the complexity of a discretionary trader's intuition and experience. You cannot just replicate years of human experience with computer code so easily.
This statement is too general. You could of said the same thing about chess, there are chess Grandmasters who devote their lives to studying the game yet computers play chess at a much higher level than any human.
Chess is rational, following a easily understood set of rules, and both players have perfect information. The big problem has always been analysing all future possibilities.
The stock markets are very far from a rational, perfect information game with simple rules.
If you honestly think that living a real human life, with all the concurrent decisions that are simultaneously and relentlessly made on a micro and macro level throughout every second, every day is the same as a single game of chess, then by all means, go trade the stock market and show us how it's done.
An organisation at the scale of IBM was able to create, after many attempts, and vast investment, a computer that can beat Grandmasters. That insight isn't useful to an individual trying to do the same.
There are many strategies that are difficult to encode into an algorithm. When I briefly did day trading independently, my most profitable strategies played on public perception and (over)reactions to news. Those things are very, very difficult to properly automate (though many companies try, with varying degrees of success).
Its not as simple as converting rules followed by independent day trader into algorithms - most of them just do not rely on just technical analysis but also on fundamentals which is hard problem to decipher with all the hype around any stocks in the news and analyst of institutional investors influencing with the media news through various sources.
The best for you to start learning - would be to get a start on how the market works - my suggestion would be - https://www.amazon.com/dp/B000THOD1G/
It's a slightly different thing though, being an independent trader isn't the same as becoming an independent trader.
A trader that is independent may still have advantages that prevent some random programmer from bootstrapping his/her way to also being an independent trader.
Just thinking out loud though, I'm not a trader of any sort.
