Quote from mokwit:
Dramatically skewed risk:reward profiles or you won't survive.
Trading actually is a very poor business model in that you have to increase your risk to increase your winnings.
I mean total risk has to be increased. This is different to a brokerage business where your overhead is inelastic to relative changes in revenue.
For instance consider a mortgage broker. He rents a office and he closed 10 loans last month and 30 loans this month. Rents(risk) stays the same but his revenue goes up by a factor of 3.
Compare this to a "trader". Regardless of his risk to reward ratio he would have to increase his risk by a factor of 3 to increase his winnings by a factor of 3.
Another problem with trading is you don't learn as much through experience as you would think. This is because the market is not random. Charts don't mean as much as one would expect. Indicators are worthless and anything can happen anytime. Things that worked last time maybe not work this time.
Compare this build up of resdiual value to that in a Medical practice. The more patients a Doctor sees the more he learns. The better doctor he becomes. The more loans a broker does the more referrals he gets, the more experience he gains and the easier it becomes to generate more revenue without increasing his risk.
The market is sort of like a video arcade. A video arcade exists only because someone invested in machines and rented space to put them in order to charge people to use them. The video arcade owner doesn't care whether of not you win or lose. Only that you pay to play.
This is similar to wall street. They make their money off of inside information and off of charging for order flow. Wall street has no vested interest in anyone making money other then their clients.
In other word, the market doesn't exist for money to be made by non professional traders, it exists only for them to pay to play.
John
