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My Path To Success
- Thread starter Lucias
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I've deposited an additional $1,000 into my account because I do not want to get into the mindset of "getting back to break even". This brings my account balance up to $3,496.80.
I feel that I probably can do a 2x or 3x return. I feel I can do that several times. I do not believe that I could do that over an extended period of time. But, I feel anybody can do it then I can.
I feel over the long term that I need to be able to withstand 12 losses in a row. Any loss will hurt me. But, I can take 3-4 losses in a row and that is normal business. But, more losses then that may be significant. may not be. Sometimes I say a market move is meaningful and sometimes I say it is noise. Sometimes I say my record means nothing and sometimes I feel it means a lot. I feel this dynamic argument helps me to maintain balance.
One good thing about NADEX is that if I were to have 12 losses in a row then I'd only need to come up with enough to play the next trade versus in futures I'd have to maintain 5k to trade overnight.
I win all the time. I always win. But, that is what it takes to do what I do. I have to win all the time. So, part of me never feels comfortable because being great is being great every single day. It is winning every day. It is not about you did the past. I win everyday, and I'm expected to win everyday.
I'm playing with a few ideas. One of them is I've always looked for someone to back me because when I started, I had a guarantee backing that never materialized. And, so there some division inside myself to where the executive decision part of my brain has given the money to the part of me that has proven it can win.
I'm very risk averse. And I'm very risk aggressive. I listen to both sides to see what they have to offer. I listen to my body. I probably should have recognized that price was cutting through levels like a knife through butter and that the market profile was classic and that the pros were playing bring-it-to-me.
What next? Well the FTSE has been stronger then the S&P 500. If I traded anything but the S&P 500, and I were to go long then I'd go long the FTSE or technology. The price action of the S&P 500 was rather weak. I never had the chance to add to my positions, which is not always the wisest to do when leveraged.
Shorting on a retrace: I've tried many times and it is very dangerous to short off a bottom. I don't like that setup. I don't believe much in traditional technical analysis. But, I have seen when price is slicing through levels like butter that it is very hard to pick a bottom or a top. Unless things setup really good to the short side, I'll probably prefer longs because of a few factors. I'm not able to scalp a measured move and also shorts tend to be lower probability. But, I'll keep an open mind.
I haven't predicted the market yet. So, I don't really have any good plays. I wanted to see XOM gaining strength and the oil declining. XOM did not inspire confidence. So, either that trade idea was not well formed or the market isn't supporting that hypothesis.
I may also take a break. I don't have any pressing need to prove myself. As part of developing balance, it might be the right thing to do to take a break.
As for risk, I want to keep my risk at 10% or less unless I'm extremely confident. I need a better plan for managing risk. But, that's part of the uncertainty. In general, I'd like to risk 10% of my account or less. But I'm willing to take what I feel is a small probability of loss with maybe even 20% to 30% of my initial starting capital.
There are probabilities of risk. I'm willing to accept level of risk if it is a low probability. A good example would be a 30 point loss in the S&P 500 on any given day is a very low probability. I'm willing to accept losing more money on one of those days. If I were to trade every single day like it was 30 point loss day then it wouldn't work. However, I'm not willing to blow out on one of those days because it will eventually happen and tends to happen more then I'd have imagined.
I feel that I probably can do a 2x or 3x return. I feel I can do that several times. I do not believe that I could do that over an extended period of time. But, I feel anybody can do it then I can.
I feel over the long term that I need to be able to withstand 12 losses in a row. Any loss will hurt me. But, I can take 3-4 losses in a row and that is normal business. But, more losses then that may be significant. may not be. Sometimes I say a market move is meaningful and sometimes I say it is noise. Sometimes I say my record means nothing and sometimes I feel it means a lot. I feel this dynamic argument helps me to maintain balance.
One good thing about NADEX is that if I were to have 12 losses in a row then I'd only need to come up with enough to play the next trade versus in futures I'd have to maintain 5k to trade overnight.
I win all the time. I always win. But, that is what it takes to do what I do. I have to win all the time. So, part of me never feels comfortable because being great is being great every single day. It is winning every day. It is not about you did the past. I win everyday, and I'm expected to win everyday.
I'm playing with a few ideas. One of them is I've always looked for someone to back me because when I started, I had a guarantee backing that never materialized. And, so there some division inside myself to where the executive decision part of my brain has given the money to the part of me that has proven it can win.
I'm very risk averse. And I'm very risk aggressive. I listen to both sides to see what they have to offer. I listen to my body. I probably should have recognized that price was cutting through levels like a knife through butter and that the market profile was classic and that the pros were playing bring-it-to-me.
What next? Well the FTSE has been stronger then the S&P 500. If I traded anything but the S&P 500, and I were to go long then I'd go long the FTSE or technology. The price action of the S&P 500 was rather weak. I never had the chance to add to my positions, which is not always the wisest to do when leveraged.
Shorting on a retrace: I've tried many times and it is very dangerous to short off a bottom. I don't like that setup. I don't believe much in traditional technical analysis. But, I have seen when price is slicing through levels like butter that it is very hard to pick a bottom or a top. Unless things setup really good to the short side, I'll probably prefer longs because of a few factors. I'm not able to scalp a measured move and also shorts tend to be lower probability. But, I'll keep an open mind.
I haven't predicted the market yet. So, I don't really have any good plays. I wanted to see XOM gaining strength and the oil declining. XOM did not inspire confidence. So, either that trade idea was not well formed or the market isn't supporting that hypothesis.
I may also take a break. I don't have any pressing need to prove myself. As part of developing balance, it might be the right thing to do to take a break.
As for risk, I want to keep my risk at 10% or less unless I'm extremely confident. I need a better plan for managing risk. But, that's part of the uncertainty. In general, I'd like to risk 10% of my account or less. But I'm willing to take what I feel is a small probability of loss with maybe even 20% to 30% of my initial starting capital.
There are probabilities of risk. I'm willing to accept level of risk if it is a low probability. A good example would be a 30 point loss in the S&P 500 on any given day is a very low probability. I'm willing to accept losing more money on one of those days. If I were to trade every single day like it was 30 point loss day then it wouldn't work. However, I'm not willing to blow out on one of those days because it will eventually happen and tends to happen more then I'd have imagined.
While I don't see many similarities between poker and trading because poker has known odds (at least that can be known after the fact), the market is uncertain. I'm playing with this idea of "extreme leverage". I wonder if there is a place for a new type of aggressiveness in the market.
I mean that, my idea of extreme leverage. It means that there is absolutely no meaning to the notional value of a position. It means that leverage has no meaning. Only the dollar won and lost per trade. I'm considering if I can develop this idea into a concept that may give me new insight.
As I've considered, while starting capital is critical. If we take the idea of extreme leverage, it becomes less important especially when I combine it with the idea of cash flow.
To demonstrate, if I have a 100k account and want to lose a max of 3% per month or 3k then that means I only need 3k to do those same trades provided I can get any leverage I need. And, if one believes they can say make 3k per month (1/1 bet) more often then not then why would they want to wait several years to get the starting capital? I guess it is kinda like borrowing against the future. I don't make that kind of money but I do make enough to start trading today.
I guess I'm thinking about this idea that starting capital is not all that meaningful. What is more meaningful is cash flow and growth rate. Of course, path dependency and uncertainty makes extreme leverage an extremely risk proposition on one hand.
As a percentage of your available capital, yes it is risky but provided one can replenish and keep trading then it is no different then what you'd intend to do by saving all that capital. You are not taking any more risk.
What is the lesson? If you want to be a successful trader, get a job making a lot of money. Whatever, you do don't go try to day trade for a living unless you do it on someone else' dime.
I mean that, my idea of extreme leverage. It means that there is absolutely no meaning to the notional value of a position. It means that leverage has no meaning. Only the dollar won and lost per trade. I'm considering if I can develop this idea into a concept that may give me new insight.
As I've considered, while starting capital is critical. If we take the idea of extreme leverage, it becomes less important especially when I combine it with the idea of cash flow.
To demonstrate, if I have a 100k account and want to lose a max of 3% per month or 3k then that means I only need 3k to do those same trades provided I can get any leverage I need. And, if one believes they can say make 3k per month (1/1 bet) more often then not then why would they want to wait several years to get the starting capital? I guess it is kinda like borrowing against the future. I don't make that kind of money but I do make enough to start trading today.
I guess I'm thinking about this idea that starting capital is not all that meaningful. What is more meaningful is cash flow and growth rate. Of course, path dependency and uncertainty makes extreme leverage an extremely risk proposition on one hand.
As a percentage of your available capital, yes it is risky but provided one can replenish and keep trading then it is no different then what you'd intend to do by saving all that capital. You are not taking any more risk.
What is the lesson? If you want to be a successful trader, get a job making a lot of money. Whatever, you do don't go try to day trade for a living unless you do it on someone else' dime.
Of course, it doesn't matter how aggressive you are in the market unless you can affect it. If the market is functioning properly, not cornered, then the concept of aggressiveness for aggressiveness sake is unlikely to be worthwhile.
However, the concept of certainty, probability of risk, confidence, and extreme leverage are still relevant and worthwhile.
What does it really mean to be over leveraged? I guess it be used to refer to more then one scenario. It may mean that one has too much leverage to withstand the path the move takes (end-point thinking). It may also mean that one has too much risk for their account size. Both concepts are interesting and distinct.
If I were very certain that the S&P 500 would be higher then a given level in a week then how I might I bet on it? Let's say, I don't know the path the market will take though. I might use a binary option. I did a write up at my blog themarketpredictor (links aren't allowed here) on NADEX spreads vs ES E-mini recently. I haven't used the binaries much because I'm not convinced I have enough edge to profit from them. They do seem interesting though in certain cases. However, I did a rather extensive comparison between the spreads and futures.
Some people say don't risk more then 2% on any trade but look at successful investors and many successful traders and they risk a lot more. Why can investors risk so much and still win? They hold onto their losers until they become winners. They aren't leveraged. Someone like Buffet doesn't assume much about the path but does figure the market will be higher in several years. He has a certain type of confidence. He is very confident that he will make money in the long run.
However, the concept of certainty, probability of risk, confidence, and extreme leverage are still relevant and worthwhile.
What does it really mean to be over leveraged? I guess it be used to refer to more then one scenario. It may mean that one has too much leverage to withstand the path the move takes (end-point thinking). It may also mean that one has too much risk for their account size. Both concepts are interesting and distinct.
If I were very certain that the S&P 500 would be higher then a given level in a week then how I might I bet on it? Let's say, I don't know the path the market will take though. I might use a binary option. I did a write up at my blog themarketpredictor (links aren't allowed here) on NADEX spreads vs ES E-mini recently. I haven't used the binaries much because I'm not convinced I have enough edge to profit from them. They do seem interesting though in certain cases. However, I did a rather extensive comparison between the spreads and futures.
Some people say don't risk more then 2% on any trade but look at successful investors and many successful traders and they risk a lot more. Why can investors risk so much and still win? They hold onto their losers until they become winners. They aren't leveraged. Someone like Buffet doesn't assume much about the path but does figure the market will be higher in several years. He has a certain type of confidence. He is very confident that he will make money in the long run.
Quote from Lucias:
Some people say don't risk more then 2% on any trade but look at successful investors and many successful traders and they risk a lot more. Why can investors risk so much and still win? They hold onto their losers until they become winners. They aren't leveraged. Someone like Buffet doesn't assume much about the path but does figure the market will be higher in several years. He has a certain type of confidence. He is very confident that he will make money in the long run.
You can risk 25% of your capital on any given trade while risking only 2% of your overall capital on the trade. You can take large concentrated positions that way and still manage your risk well.
Holding on to your losers until they become winners? This is going to be an entertaining journal.
Electric, I'm not recommending holding onto losers until they become winners. What I'm exploring with myself is that notional value has no meaning.
I mean that a broker says here I'll give you margin of 100k on your 25k. It makes it sound like one is trading a lot of money. However, if that same trader is in Europe and says hey I'll bet you $500 today that stock XYZ will rally. There is only $500 at stake which is agreed upon. The whole idea of going and borrowing a ton of money, the more I think about it, the more ridiculous it seems. The trader only needs an agreement, a contract.
Okay so when we talk about over leveraged. It is important to make that distinction between path dependency over-leveraging versus account over leveraging. If I want to risk X$ per month trading and I can make x$ then it doesn't matter what my account is.
When I think about the number of traders who failed with tiny accounts, one thing has struck me which is that they tried to trade those accounts without cash flow. In other words, the tiny account was coupled with low cash flow or even worse trying to make a living from a small account. If we decouple those variables and view them in matrix form I arrive a new synthesis that is personally compelling.
If notional has no meaning and if we accept that we can trade to our cash flow potential then we still have this concept of over leveraging to path dependency. It has also been referred to as end point or jump thinking. It means that one is over leveraged to hold onto a position that will turn out profitable. What I find compelling about bull spreads is that they overcome that to a large degree. Thinking in terms of a definite risk/reward is not really accurate with reality which is that there is a range of probability of that risk to reward.
Why Buffet? Why should a trader not be willing to risk a large amount of their account when the best investors do. More over, why doesn't Buffet day trade? The reason is this concept of uncertainty and time. Basically, Buffet doesn't believe he can predict where the market will be on the short time frame.
What I want to express is this, if you have 100k and can consistently make 3k per month from short-term trading. And if you can do that by risking 3k per month then essentially and what I'm getting is that you could do that with 3k only provided you had the leverage and could replenish. Most people can't do that by their trading prowess with 100k!
It is this idea that if you have an edge, then you'd win eventually so it doesn't matter. If you have a big enough edge. Truth is that most people making good returns may have some edge but not very much and trading becomes a cost and not a benefit.
Thinking myself about trying to double account, makes me think about how little edge traders actually have in the market because if one had a large edge then it would be rather trivial. It makes me feel that most hedge funds don't really have any significant edge. And the best traders know that which is why don't use leverage.
If you just want just to place bets and you can make the return by placing bets then we can arrive at this deduction I've made. However, if your edge is the result of the time value of money and not very specific then one can't as Hershey has implied trade on the smaller fractals because the uncertainty is so great.
Fortunately for me, I am one of the best at predicting those 1 to 3 day moves. I don't have time to trade on a smaller wavelength, at any rate.
When we talk about uncertainty then what we are talking about? As in Hitchhikers Guide to galaxy, if we could measure our uncertainty we might could compensate for it. Some people will say, "the market can do anything." And, that may be true but how likely is it really to drop 20% in a day? I'd say that is very near to impossible. We can reason from that that we can estimate to some degree what the market will do.
Most traders are overconfident. Getting to know and accepting ones uncertainty is important. Buffet has learned he is absolutely uncertain about where the market is going in the short term but more certain in the long time frame. In essence, his edge is not fractal.
I mean that a broker says here I'll give you margin of 100k on your 25k. It makes it sound like one is trading a lot of money. However, if that same trader is in Europe and says hey I'll bet you $500 today that stock XYZ will rally. There is only $500 at stake which is agreed upon. The whole idea of going and borrowing a ton of money, the more I think about it, the more ridiculous it seems. The trader only needs an agreement, a contract.
Okay so when we talk about over leveraged. It is important to make that distinction between path dependency over-leveraging versus account over leveraging. If I want to risk X$ per month trading and I can make x$ then it doesn't matter what my account is.
When I think about the number of traders who failed with tiny accounts, one thing has struck me which is that they tried to trade those accounts without cash flow. In other words, the tiny account was coupled with low cash flow or even worse trying to make a living from a small account. If we decouple those variables and view them in matrix form I arrive a new synthesis that is personally compelling.
If notional has no meaning and if we accept that we can trade to our cash flow potential then we still have this concept of over leveraging to path dependency. It has also been referred to as end point or jump thinking. It means that one is over leveraged to hold onto a position that will turn out profitable. What I find compelling about bull spreads is that they overcome that to a large degree. Thinking in terms of a definite risk/reward is not really accurate with reality which is that there is a range of probability of that risk to reward.
Why Buffet? Why should a trader not be willing to risk a large amount of their account when the best investors do. More over, why doesn't Buffet day trade? The reason is this concept of uncertainty and time. Basically, Buffet doesn't believe he can predict where the market will be on the short time frame.
What I want to express is this, if you have 100k and can consistently make 3k per month from short-term trading. And if you can do that by risking 3k per month then essentially and what I'm getting is that you could do that with 3k only provided you had the leverage and could replenish. Most people can't do that by their trading prowess with 100k!
It is this idea that if you have an edge, then you'd win eventually so it doesn't matter. If you have a big enough edge. Truth is that most people making good returns may have some edge but not very much and trading becomes a cost and not a benefit.
Thinking myself about trying to double account, makes me think about how little edge traders actually have in the market because if one had a large edge then it would be rather trivial. It makes me feel that most hedge funds don't really have any significant edge. And the best traders know that which is why don't use leverage.
If you just want just to place bets and you can make the return by placing bets then we can arrive at this deduction I've made. However, if your edge is the result of the time value of money and not very specific then one can't as Hershey has implied trade on the smaller fractals because the uncertainty is so great.
Fortunately for me, I am one of the best at predicting those 1 to 3 day moves. I don't have time to trade on a smaller wavelength, at any rate.
When we talk about uncertainty then what we are talking about? As in Hitchhikers Guide to galaxy, if we could measure our uncertainty we might could compensate for it. Some people will say, "the market can do anything." And, that may be true but how likely is it really to drop 20% in a day? I'd say that is very near to impossible. We can reason from that that we can estimate to some degree what the market will do.
Most traders are overconfident. Getting to know and accepting ones uncertainty is important. Buffet has learned he is absolutely uncertain about where the market is going in the short term but more certain in the long time frame. In essence, his edge is not fractal.
Quote from Lucias:
Electric, I'm not recommending holding onto losers until they become winners. What I'm exploring with myself is that notional value has no meaning.
I mean that a broker says here I'll give you margin of 100k on your 25k. It makes it sound like one is trading a lot of money. However, if that same trader is in Europe and says hey I'll bet you $500 today that stock XYZ will rally. There is only $500 at stake which is agreed upon. The whole idea of going and borrowing a ton of money, the more I think about it, the more ridiculous it seems. The trader only needs an agreement, a contract.
Okay so when we talk about over leveraged. It is important to make that distinction between path dependency over-leveraging versus account over leveraging. If I want to risk X$ per month trading and I can make x$ then it doesn't matter what my account is.
When I think about the number of traders who failed with tiny accounts, one thing has struck me which is that they tried to trade those accounts without cash flow. In other words, the tiny account was coupled with low cash flow or even worse trying to make a living from a small account. If we decouple those variables and view them in matrix form I arrive a new synthesis that is personally compelling.
If notional has no meaning and if we accept that we can trade to our cash flow potential then we still have this concept of over leveraging to path dependency. It has also been referred to as end point or jump thinking. It means that one is over leveraged to hold onto a position that will turn out profitable. What I find compelling about bull spreads is that they overcome that to a large degree. Thinking in terms of a definite risk/reward is not really accurate with reality which is that there is a range of probability of that risk to reward.
Why Buffet? Why should a trader not be willing to risk a large amount of their account when the best investors do. More over, why doesn't Buffet day trade? The reason is this concept of uncertainty and time. Basically, Buffet doesn't believe he can predict where the market will be on the short time frame.
What I want to express is this, if you have 100k and can consistently make 3k per month from short-term trading. And if you can do that by risking 3k per month then essentially and what I'm getting is that you could do that with 3k only provided you had the leverage and could replenish. Most people can't do that by their trading prowess with 100k!
It is this idea that if you have an edge, then you'd win eventually so it doesn't matter. If you have a big enough edge. Truth is that most people making good returns may have some edge but not very much and trading becomes a cost and not a benefit.
Thinking myself about trying to double account, makes me think about how little edge traders actually have in the market because if one had a large edge then it would be rather trivial. It makes me feel that most hedge funds don't really have any significant edge. And the best traders know that which is why don't use leverage.
If you just want just to place bets and you can make the return by placing bets then we can arrive at this deduction I've made. However, if your edge is the result of the time value of money and not very specific then one can't as Hershey has implied trade on the smaller fractals because the uncertainty is so great.
Fortunately for me, I am one of the best at predicting those 1 to 3 day moves. I don't have time to trade on a smaller wavelength, at any rate.
When we talk about uncertainty then what we are talking about? As in Hitchhikers Guide to galaxy, if we could measure our uncertainty we might could compensate for it. Some people will say, "the market can do anything." And, that may be true but how likely is it really to drop 20% in a day? I'd say that is very near to impossible. We can reason from that that we can estimate to some degree what the market will do.
Most traders are overconfident. Getting to know and accepting ones uncertainty is important. Buffet has learned he is absolutely uncertain about where the market is going in the short term but more certain in the long time frame. In essence, his edge is not fractal.
There is no uncertainty on any fractal. This means that all fractals have no uncertainty.
I would say most people do not deal in sufficiency at the proper limit as exhibited by the total absense of nose and anomalies.
This is what stablishes risk or, actually, lack of risk.
Update:
I've been trading the binaries and making some small profits this week. At first, I didn't see a use for the binaries but after some consideration, I do like both the binaries and spreads.
I feel that both products are better then the futures for my primary styles of trading. I will have an update later. with the volatility this week.. anything can happen.
But, yes I would highly recommend NADEX. They've been very professional and I like their products. Hopefully as more people hear about them they will become even more competitive. You can get started trading the binaries for as little as about $50/trade.
I've been trading the binaries and making some small profits this week. At first, I didn't see a use for the binaries but after some consideration, I do like both the binaries and spreads.
I feel that both products are better then the futures for my primary styles of trading. I will have an update later. with the volatility this week.. anything can happen.
But, yes I would highly recommend NADEX. They've been very professional and I like their products. Hopefully as more people hear about them they will become even more competitive. You can get started trading the binaries for as little as about $50/trade.
I've made about $150 the last 2 days trading the binaries with small position. However, as fate would have it, it called for me to placing a big bet. I'm risking $405 with a potential payout of $2045.
I'm honestly not very confident. But, I'm highly trained and just do what I'm trained to do. At least one good thing is if I lose I'll only lose $150 of my base capital this week. So, that's a plus.
Well that's enough for now. I've assumed my maximum risk. I'll not be adding any more position and may take some off if things go badly for me. My plan is to hold until the expiry though.
I'm honestly not very confident. But, I'm highly trained and just do what I'm trained to do. At least one good thing is if I lose I'll only lose $150 of my base capital this week. So, that's a plus.
Well that's enough for now. I've assumed my maximum risk. I'll not be adding any more position and may take some off if things go badly for me. My plan is to hold until the expiry though.
Available Capital: $3,744.80
Rather tired.. I may put a few trades on tonight but today was rather emotion filled. I think I may scale back on trying to double/triple my account as fast as possible and just work on consistently making money.
I had quite a bit of risk today and things didn't go as well as I had hoped. I was able to do okay and ended up doing okay because I traded well but I feel I did assume too much risk for my level of real money experience.
Rather tired.. I may put a few trades on tonight but today was rather emotion filled. I think I may scale back on trying to double/triple my account as fast as possible and just work on consistently making money.
I had quite a bit of risk today and things didn't go as well as I had hoped. I was able to do okay and ended up doing okay because I traded well but I feel I did assume too much risk for my level of real money experience.
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