Hi fellow traders. I’ve been thinking seriously about the markets and how some people with massive human, and computer support, who have PhDs all other advantages available to them have been unable to beat the market year in and year out (I’m talking about most fund managers), while others have made windfall fortunes within a relatively short period of time.
Right now I’m thinking about Richard Dennis who turned a few hundred dollars into roughly $200 million over many years, but he seemed to make it mostly during the inflationary markets of the 1970’s , during a period in which “anyone with a simple trend-following method and a dart board could make a million dollars.” (Quoted from Wikipedia). It appears a large part of his profits would have come from market inefficiencies, and his ability to pyramid, another aspect that I think is an integral part of his success.
Years later you have Tim Sykes the penny stock trader of the 2000’s. While most can agree he acts like an immature child, he reached financial success at a young age, but I believe a good part of that was do to luck, and not skill. He started with $12,000, and turned it into 1,650,000 within a few during the dot-com bubble. That is not the reality of an efficient market.
I have a brother who in 1.5 years took $2,000 of spare cash and made $20,000. He put $10,000 to student loans, and rode the other $10,000 back to $2,000. He had a very crude system of by oil companies on good news. He also seemed to have no idea of what ‘Stop loss’ or ‘Risk control’ means. He knows now.
We also have the young man who worked for a Silicon Valley startup, who less than a decade ago bought $3,000 worth of bitcoin when it was at $0.08, and now has over $25,000,000 in the bank.
The question I’m asking is how do some people outperform the market, not by 25%, %50, or even %150, but by multiplying their money by 10x or even 1,000,000x over a relatively short period of time?
We also have Jordan Belfort Selling OTC stocks with %50 spreads, when with blue chips he might get %1.
My thesis is the primary elements that lead to such performance is
1. Pure luck
2. Extreme emotions of most market participants. Greed leading to bubbles, and Fear leading to crashes.
3. A market or instrument with relatively few participants with little sophistication(SP E mini futures vs Local concert ticket secondary market.) or (Apple stock/options vs OTC companies)
4. Volatility (Bubble, or crash like price action).
5. Extra ordinary risk. Not cutting losses, or investing %100, or %200 in a position, or correlated position.
Essentially, I have concluded that the more inefficient a market (Location, Asset Class, instrument, etc) is the higher the probability of Outstanding success is, and therefore I would be wasting my time trading /CL, AAPL, or any other popular instrument. The only way to make extraordinary gains is to look for extraordinary inefficiencies, and to be willing to take on extraordinary (something I know is not a great Idea). At this point I am a college student who has been trading for less than 1 year, and I am still learning, and obsessed with the markets. While I know a lot, there is certainly more that I don’t know, which I why I posted this looking for your opinion. I want to see what I’ve got right, and MORE IMPMORTANTLY what I’ve got wrong. I most of you reading this have far more experience, wisdom and knowledge of the markets and trading than I do, and I want to get your opinions on my general theory concerning the relationship between luck, inefficiency, risk, and reward.
Sincerely,
Robert
Right now I’m thinking about Richard Dennis who turned a few hundred dollars into roughly $200 million over many years, but he seemed to make it mostly during the inflationary markets of the 1970’s , during a period in which “anyone with a simple trend-following method and a dart board could make a million dollars.” (Quoted from Wikipedia). It appears a large part of his profits would have come from market inefficiencies, and his ability to pyramid, another aspect that I think is an integral part of his success.
Years later you have Tim Sykes the penny stock trader of the 2000’s. While most can agree he acts like an immature child, he reached financial success at a young age, but I believe a good part of that was do to luck, and not skill. He started with $12,000, and turned it into 1,650,000 within a few during the dot-com bubble. That is not the reality of an efficient market.
I have a brother who in 1.5 years took $2,000 of spare cash and made $20,000. He put $10,000 to student loans, and rode the other $10,000 back to $2,000. He had a very crude system of by oil companies on good news. He also seemed to have no idea of what ‘Stop loss’ or ‘Risk control’ means. He knows now.
We also have the young man who worked for a Silicon Valley startup, who less than a decade ago bought $3,000 worth of bitcoin when it was at $0.08, and now has over $25,000,000 in the bank.
The question I’m asking is how do some people outperform the market, not by 25%, %50, or even %150, but by multiplying their money by 10x or even 1,000,000x over a relatively short period of time?
We also have Jordan Belfort Selling OTC stocks with %50 spreads, when with blue chips he might get %1.
My thesis is the primary elements that lead to such performance is
1. Pure luck
2. Extreme emotions of most market participants. Greed leading to bubbles, and Fear leading to crashes.
3. A market or instrument with relatively few participants with little sophistication(SP E mini futures vs Local concert ticket secondary market.) or (Apple stock/options vs OTC companies)
4. Volatility (Bubble, or crash like price action).
5. Extra ordinary risk. Not cutting losses, or investing %100, or %200 in a position, or correlated position.
Essentially, I have concluded that the more inefficient a market (Location, Asset Class, instrument, etc) is the higher the probability of Outstanding success is, and therefore I would be wasting my time trading /CL, AAPL, or any other popular instrument. The only way to make extraordinary gains is to look for extraordinary inefficiencies, and to be willing to take on extraordinary (something I know is not a great Idea). At this point I am a college student who has been trading for less than 1 year, and I am still learning, and obsessed with the markets. While I know a lot, there is certainly more that I don’t know, which I why I posted this looking for your opinion. I want to see what I’ve got right, and MORE IMPMORTANTLY what I’ve got wrong. I most of you reading this have far more experience, wisdom and knowledge of the markets and trading than I do, and I want to get your opinions on my general theory concerning the relationship between luck, inefficiency, risk, and reward.
Sincerely,
Robert
...the right guy for the job, forces within your control are working, forces outside of your control are working, etc etc,
