How should we define "Advanced Trading"?

Question

Based on Should questions about advanced stock and options-trading topics and strategies be allowed? I believe that the consensus on the site is that some trading topics are "advanced" and off topic for the site, but that there isn't consensus around what those are. So, what types of trading topics are "advanced"? I'll throw out some examples, but please include your own if you think they work better.

• Options
• Algorithmic trading
• Forex
• Usage of technical models
• Understanding the math of technical models
• Historical analysis

Moreover, is there some relatively clear line we can draw between the topics that are on topic and not?

_{If I'm wrong about the consensus just downvote this into oblivion, I'll get the picture.}

Answer 1

I only agree with Technical Models as being off topic here. Everything else, including commodities is totally on topic. We want to attract advanced money people here, and sticking to basic trades and topics (like I make) might not do the trick. I think a broker would be a great user, whereas an Quantitative analysis researcher is not.

So long as an individual can do the advanced trade legally, then the question is valid for personal finance.

Off topic questions would be

• Things people simply cannot do without being a large institution or regulated industry.
• Calculations that predict outcomes (or creating equations)

On topic questions could be

• Calculations that compare items (using equations)
• Any kind of trade that I can do with my broker.

I don't understand half of them, but the equation questions should stay.
(However since I don't understand the equations, I don't feel qualified to weigh in. Even historical analysis could be on topic. Again, I am assuming that we are using available and existing tools, not making new ones.)

On one hand some terrific bloggers provide awesome help with Excel, on the other I see equations meant to bend space and time.

Really anything that a common online broker interface lets you do should be good here. I am a Ronco style investor (set it and forget it) , but I know I can get an account for trade currency, so that is on topic. But the clever folks that can use tactics and tools to buy and sell are welcome and on topic.

Finally, we should dovetail our definition of on topic with the definition of off topic on the Quant site. That would make it clearer.

Answer 2

I think that for difficult issues like this we need to forget about trying to define "advanced trading."

The guiding princile should be: What is reasonable for an individual, interested in their finances, to want to ask on this site?

One should be able to ask for, at the very least, a definition of anything they hear in the financial news. They need to know if it has any bearing on them. In this case, it's generally a question of available/viable techniques.

If it's something they can't do as an individual, non-professional, investor it's probably off-topic. Otherwise, I'm hard pressed to say it's "advanced."

Algorithmic trading is the only real advanced topic listed. Historical analysis? Haven't I seen brokers advertising backtesting capabilities? Technical models? Pfft. The only advanced thing is the math. Forex/options? Topics too large for any one simple label.

Answer 3

My thoughts:

1. Generally, I'm OK with the following things you listed as being considered off-topic: algorithmic trading, technical models, math of technical models, and historical analysis. Of course, this is my opinion because I hardly practice any of those things. :)

2. I don't think we should say all options questions are off-topic. The subject should be sub-divided. I suggest that basic option trades like buying calls, buying puts, writing calls, and writing puts should be on-topic subject matter, because many individual investors employ such techniques, even if they're not 100% sure about how they work — and that's why we're here.

   For instance, the larger an individual's portfolio, the more likely such an investor may be using puts to protect against downside risk, and covered calls to generate premium income.

   We should also acknowledge the legions who sometimes speculate on individual stocks using call options for leverage. I know more than a few non-finance people who've bought AAPL CALL-100* contracts with hopes of riches.   *Substitute any popular stock-du-jour for AAPL.

3. Similarly, forex (for our purposes) ought to be clarified to mean investing or speculating directly in currencies or currency instruments (futures contracts or other derivatives) with a view to profit from any difference in currency prices.

   That is, I suggest we permit general questions about currency exchange from an online or cross-border consumer, traveler, or expat perspective. There will also be cases where currency is a concern within investing. Consider the common case of a Canadian purchasing U.S.-listed stock, or an American dealing on the LSE for a company that hasn't yet interlisted or issued ADRs.

4. You didn't mention commodities. e.g. trading futures in crude oil, wheat, lumber, pork bellies? On the surface I'm leaning towards off-topic, but then gold and silver come to mind and I'm not sure how we can draw a line for commodities. I'm interested in opinions on this one. e.g. Commodity ETFs OK, but future contracts, not?