You're missing that he is going to lose not because he is long or short. And simply going long when he goes short will only produce a mirror long loser instead of a short loser.
Question for those who believe everything is 50/50 always...
- Thread starter CyJackX
- Start date
Wrong. His odds of success would be 50% despite how many losing years he had prior. Vegas would love to have you come for a visit. LOL.
Don't see why Vegas would care if I came or you came, if the odds are the same for them to win vs us both. I don't see how that's a valid comparison or point.
Also, how are his odds 50%? There's clearly things you can do in the stock market to get a pretty strong edge, that's why there are people that have made it a career for decades.
Likewise if he is losing and blowing up accounts that consistently, he likely has some type of emotional response in his trading which would be the exact opposite of an edge therefore putting his chances below 50%.
Sorry if I am just dumb, but I truly don't understand either comment, if you have time to explain I'd appreciate it.
You are way overthinking this. There is no such thing as an opposite edge. LOL. If there were, like you said, it would simply be an edge. A trader either has an edge or they don't. If they don't, their expected return is random. They are equally like to make money then not. Emotions have nothing to do with it. I mentioned Vegas because they really like guys like you who mistake randomness for edge. They have built very nice hotels off the backs of guys who confuse the two hence why I said they would appreciate your visit.
There are no guys who blow up consistently. There are guys who are undercapitalized. There are guys who are over leveraged. But that has nothing to do with edge. Yes, there are guys with $300 FX accounts who blow through that in a day using 50 to 1 leverage. But in reality, if I backed that guy "secretly" with 100k, I would not risk my 100k next to his $300. I would have a 100k account positioned to make a mere $300 or less then 1% on his blowup. I could just as easily lose $300 and he would be celebrating that he doubled his account. There is no way to normalize the risk.
I use to run a prop firm office in Chicago where pretty much everyone blew out. But not because they had "negative edge" but because they churned their account to zero between commissions and the bid-offer spread.
Try the stocktwits stream.
No such thing as negative edge. If there was such a thing, those that had it could simply reverse it and make billions.
Three traders.
Trader #1 has an edge and uses it to make profits nearly everyday net positive.
Trader #2 Is just trading the markets long or short, doesn't really know why just does what he feels like. Kind of care free.
Trader #3 Very fearful of losing money, hates to take a loss, will double, triple even quadruple down just pleading for break even, despite how far market keeps moving against him.
I mean what can I use to describe trader 3 if there is no such thing as a negative edge? Clearly his mental state is going to give him less of a chance to make make a profit than trader #2 are you disagreeing with that?
No. So here's the truth and I've seen this time and time again. Trader 3 IS ET. These guys can do very well and ironically can go long stretches where they do very well. I liken them to option premium sellers since in many cases they are one and the same. The guys that avg down can actually make very nice size until 2008 or 2011 rolls along. But good lord man, if you had to fade them you could go years losing money waiting for a 2008. Averaging down and refusing to take losses DOES work most of the time. It's not an edge or negative edge, it's just has a definite path to ruin that only time can deliver. Same as with blindly selling options. For sure that will work for long periods of time, in some cases years. But when it doesn't, it's all over.