Why Trading is So Hard

Anyone who’s traded for some time will quickly discover that trading is extremely difficult. Why is that?

Before I answer that, I need to prep you: Trading is a performance sport, especially for discretionary traders. Everyday, you have to perform. Trading also requires systematic traders to perform. After all, clicking buttons based on a pure mechanical approach isn’t as easy as one thinks. The psychological impact of taking back-to-back losses can derail a mechanical trader. You can also attempt the algorithmic pathway, which does remove you from making psychological fuck ups, however if the algorithm isn’t performing, you’re going to most likely adjust it from emotions. Also, the algorithm is only as good as you. In the end an algorithm still needs to perform in order to yield any form of alpha.

Lets imagine baseball for a moment. In baseball, there are many different leagues. There’s little leagues where kids of certain ages play against each other. It would be pretty unfair if the teenagers around 15 years old played against the 8 year olds. After all, they’re bigger, stronger, and have more experience than an 8 year old. However, the brain isn’t fully developed in an 8 year old, and neither in a 15 year old, but they’re more developed. As one moves up the ranks of baseball or any sport for that matter, like going through Kart racing, then F3, F2 and hopefully F1 – what we can take from any of these sports is there are different leagues where the field is more even. If you had a month of practice in an F1 simulator, would you even be competitive in the real car against drivers with tens of thousands of hours of more experience than you? No you wouldn’t – you would get slaughtered.

The problem with trading is there is no little league to cut your teeth in. You are immediately being thrown into an F1 style arena with algorithms that are faster than you, designed by teams of people who are a lot smarter than you, leveraging technology you simply don’t have as a retail trader.

This in itself is part of the brutality you experience in trading. There is no easy mode. It will take you tens of thousands of hours to even begin to stand a chance in these arenas.

Lets look at your competitors. You have high frequency trading bots that are just simply faster than you. You can not gain a speed advantage on them, no matter how much you pay for the highest speed data. You as a sole retail trader no matter how gifted you are in the realm of coding can’t compete against teams of PHD’s who have weapons grade technology. After all, the markets are a war zone.

Now, speed does matter and it’s still worth attempting to be fast, especially as a scalper. After all, you want as much edge as you can get in the form of marginal gains. There’s a chapter on marginal gains in a book called “Black Box Thinking” where the Mercedes F1 teams share all the little data points they collect in order to gain marginal gains which compounds into a team that dominated.

Next, you have the quants who aren’t necessarily trying to gain speed advantage. They find patterns in the market and exploit them very quickly. Again, players who are on a higher level than any retail traders and are by far more sophisticated. These HFT’s and Quants compete against each other. This alone makes the game much more difficult, as one firm will find patterns and another will see those patterns and erode them.

Modern markets suffer from pattern erosion very quickly. Patterns can disappear in a day or two sometimes hours. This is what will hurt the systematic and the algorithmic retail traders. Then we have the market makers. The guys who provide liquidity. They’re obligated to do it by the exchanges, and the exchanges want them to stimulate volume. How does one stimulate volume? Manipulation.

In 2024 – Keep in mind I’m writing this in 2025 – The NASDAQ exchanged paid a $22 million dollar fine to the CFTC which is the futures version of the SEC. $22 million is a slap on the wrist. What did they do? They incentivized certain market makers to stimulate volume with special perks. They didn’t report any of this to the CFTC which is illegal.

The exchanges want volume plain and simple. They’re like drug manufacturers, and the market makers are the drug dealers. They have a lot of lawyers on staff and they know how to ride a grey line. Even crossing it. Because if something is so complicated, the governing bodies won’t catch it. Jim Cramer said this in 2005 when he talked about market manipulation here:

The governing bodies are very slow to catch the shady shit that happens in the markets. Richard Ney in a book called The Wall Street Jungle 1970 even questioned the SEC in how the market makers would use short selling to manipulate markets. He called them the Wall Street Gang.

Market makers see the true liquidity and they use illegal tactics in a way that does not trigger any investigations. In fact, the HFT’s and Quants probably do the same. They find loop holes, and play the game “by the rules”, and if they get caught who cares? What they make is substantially more than the fines. The US government agencies are so slow to make any meaningful change and let so much shit fly under the radar.

Futures, especially the ES, is horribly manipulated. The entire book is wash traded so a lot of volume coming in is immediately coming out at the same price which is volume that cancels itself out. This is like driving past a carnival with all the lights on and the rides are moving and when you go in you’ll be surprised that virtually no one is there. Wash trading makes the markets look like they’re moving with artificial volume. Plus it hides the true market orders that are coming in by real participants, masking what’s real and what’s not.

The level 2 is also an illusion. You see resting bids and offers of a certain average size but often when the spread reaches a specific price there’s either spoofing, where the price moves on ¼ of the advertised liquidity or there’s reloading which in itself is manipulation. Hiding ones intentions so you’re not front ran by another trader. In fact, the market makers can reload to stop the market in order to trigger stops to fill the other side of their orders. They don’t care about price. They just want to balance their inventory.

The spoofing allows them to pull limits and cause hard moves on little volume which attracts more players, which in turn brings in more volume, thus allowing them to spoof the market direction into desired areas that help them balance their inventory. Manipulation, and speed is the name of the game. Yet, your VWAP strategy that’s mechanical is expected to work in this type of environment?

The average retail trader is too simple. Too narrow minded, to understand what’s really happening.

You’re competing in an arena that is much more sophisticated and much more predatory than you think. However, we are being fed bullshit in modern trading information. It’s all making things look simple. Easy. A-Z, black and white… If that was the case, the big players wouldn’t go to extreme lengths to extract alpha from the markets.

Sometimes your shit works well, however, most of the time you fall hard. This raises another point on trading. You have to perform 5 days a week year after year. Oh Fat Cat, that’s why I swing trade! This still requires performance. Day traders perform more than professional athletes. There’s virtually no down time to practice unlike professional athletes either. F1 drivers go into a sim. These multi million dollar sims in between races. You? Well, once you’re trading live typically that’s it. Traders just stick to it.

Quant firms run many simulations over testing probing to find alpha. You, you might do this. You may back test, but what happens when the setups erode? These quant firms can test quicker and implement sooner than you because of the size of their teams. Most of the big players are teams, not some lone wolf.

That’s my goal in trading, which is to build a team. And I am; as you spend more time here you will see how I’m achieving this and the progress we’re making. One of my tools is TradeCraft, as collecting data points is massively important for finding and maintaining edge.

Most retail traders don’t tag their trades to find data points to gain edge. Sure, you can back test but performance testing is just as important. That’s where tagging comes into play. You can make on the fly adjustments day by day. You know damn well the quants gather data. They gather more data than us. However, most of you gather zero data and you expect to compete at a fucking F1 level!? A game where you don’t have insider knowledge like the market makers who can see true supply and demand nor speed advantage like the HFTs?

This is why trading is so hard. Retail traders are essentially in a home made go-kart trying to compete against F1 cars with 300 sensors across the car gathering so much data, where you – most likely have nothing. However, raw experience is just as important. You need this to parse through data.

There’s a reason some of these firms hire discretionary traders. Having domain knowledge is very important. A retail trader attempting to build algos needs that experience to feed into the machine. Otherwise you have a very dumb machine that’s trading against super bots.

Here at Fat Cats of Wall Street, I understand the importance of team work. An F1 driver without other professionals in their corner will not stand a chance against a mediocre driver who has a professional team. You can’t compete at a gold medal level in the Olympics without coaches and psychologists. Even pro-gamers who compete have supporting staff and psychologists. Yet you need to be all of that for yourself. Your own accountability partner, your own risk manager, your own psychologist, your own analyst, your own, performance coach.

You truly are at a huge disadvantage. This is why trading is so fucking hard.

The beauty is if you seek, you shall receive. You do have a chance to be a part of what I’m building. I have a trader I’m training named Chronik. He’s got less than 2 years trading ES futures. However, he’s starting to out perform a lot of traders. Myself included for the last 2 weeks. I’ve raised and groomed him to become a machine, through hypnosis techniques, and rigorous training regimes.

He’s not paid me a penny. Our split is when he collects live money. It’s been about 8 months now of working with one trader. I do believe in my methodology and experience so much I’m willing to take up front risk. Once he gets through and is able to train someone, we will open up again. We are looking for talent in other avenues. Oftentimes the community is smart enough to offer up something that can aid what we’re doing. Stay tuned to read about his saga. How this came to be and what we are trying to achieve. You’re going to have a better chance fighting it out alongside a team.