You guys blowing out your accounts left and right

jinxu · Mar 25, 2018

comagnum said:
Pro traders, at least those that have done well, typically risk less than 1% of their capital per trade, some may risk as much as 2%.

Even the math expert traders like Ed Thorpe are in agreement that risking more than 2% of your capital on a trade is just to risky - otherwise known as on the road to ruin.

How many of the 'Market Wizards' blew up?
Discussion in 'Professional Trading' started by Cutten, Jun 26, 2009.
https://www.elitetrader.com/et/threads/how-many-of-the-market-wizards-blew-up.168151/

Edit:

This book was written in 1989. I thought it was closer to 2000. Why do so many people keep referencing old "outdated" information?

Here we get interviews with trading "wizards". What you are actually getting is the same tired advice of cutting your losses etc. etc. I suspect that people who read this book think they are being let in on insights and "secrets" of how these traders are so successful. After all if these "wizards" cant tell you who can? Ever try truth and logic? If you did, you would see what a crock this book is. Most traders are using the advice in this book, so why arent they as successful as these "wizards" are? Most people including publishers believe these people have "secret knowledge" and if you pay their outrageous prices for courses and books they sell, you'll be a success. Baloney. People who believe this believe in magic. They subconciously believe that if the wizard touches them with their starry wand or takes their magical advice they become instantly successful. Sure you do. The truth is so simple, many people overlook it. The truth is you have to have true knowledge and great mastery. Thats it. You have to figure the truth out yourself, instead of having it spoon fed to you. Unfortunately, many people believe in magic. They want something for nothing. This attitude is what causes sorry excuses for books like this to be published. Success always requires a price to pay. That price is hard study and hard work to gain mastery. Thats something these market "wizards" dont tell you and if you look through most if not all trading books, they dont tell you either. Why? To keep you paying up. They keep you chasing for the gold at the end of the rainbow. Did I let the cat out of the bag? Heck no! In the intellegence service they have an old saying " The best way to keep something secret is to lay it out in the open." True words indeed. Some people will find the truth and most will always miss it right under their noses. Read Acres of Diamonds by Russell Conwell. There are many good books on trading. Unfortunately many are over priced. Before one had to pay these prices for what he needed. Luckily, Toni Turner has written several outstanding books on day trading and short term trading. They are reasonably priced and offer valid knowledge. Her books are better than the Market Wizard tripe and are very practical. Also beware of greed. Its the greatest reason people get killed trading. Trade to pay your bills and put food on the table. Dont learn the hard way. Greed will nail you one way or another. Count on it. Call it money karma.

Xela · Mar 25, 2018

jinxu said:
This book was written in 1989. I thought it was closer to 2000. Why do so many people keep referencing old "outdated" information?

Partly because some of it retains its validity and relevance, and partly because it sometimes gets updated, as well (for example, in this case, there's also a more recent book called The New Market Wizards).

jinxu · Mar 25, 2018

Xela said:
Partly because some of it retains its validity and relevance, and partly because it sometimes gets updated, as well (for example, in this case, there's also a more recent book called The New Market Wizards).

It was written in 1994?

Xela · Mar 25, 2018

jinxu said:
It was written in 1994?

Sounds about right - thanks.

(I think the main books from which I initially learned to trade profitably, which still retain all their validity and relevance, were written in the 1970's.)

sss12 · Mar 25, 2018

comagnum said:
Pro traders, at least those that have done well, typically risk less than 1% of their capital per trade, some may risk as much as 2%.

Even the math expert traders like Ed Thorpe are in agreement that risking more than 2% of your capital on a trade is just to risky - otherwise known as on the road to ruin.

The thing of the 1% positioning is that you have to have either big winners or a very high percentage of winners to move the needle on your overall portfolio, don't you ??

Xela · Mar 25, 2018

sss12 said:
The thing of the 1% positioning is that you have to have either big winners or a very high percentage of winners to move the needle on your overall portfolio, don't you ??

No; you don't: it's enough to have a "reasonable" percentage of "reasonable-sized" winners, if you have a method that trades often enough.

Scataphagos · Mar 25, 2018

southall said:
I would be suspicious of anyone who claims they have never even came close to losing it all.

Then you can be suspecious of me, Buckeroo.

My capital was hard to come by, and I figured that if I "lost it all" I was out. Period. There would be "no restocking of capital... no 2nd chance". Therefore, I always traded with as tight of stops as I felt I could get away with.

(Biggest mistatke I ever made... which I guess one could say was the equivalent of "blowing it all", though it was before the time when I started trading... 1st time I got enough money together, I paid cash for a BMW. Wish I would have bought MSFT stock instead... could have later bought a BMW DEALERSHIP with the gains.)

Scataphagos · Mar 25, 2018

Xela said:
No; you don't: it's enough to have a "reasonable" percentage of "reasonable-sized" winners, if you have a method that trades often enough.

Correctamundo!

By "1% positioning" I presume OP means "1% capital risk to the portfolio", not "position = 1% of the portfolio"(?).

With a decent trading strategy, one can trade low-risk... by going 100% equity exposure with <1% stop. One can even have some leverage in the position and work within 1% stop loss. (You and I do so routinely.)

More difficult to manage a portfolio of issues that way due to logistics, but one could trade significant size in the bigger ETFs and/or index futures that way.

Neuroway · Mar 25, 2018

Xela said:
No; you don't: it's enough to have a "reasonable" percentage of "reasonable-sized" winners, if you have a method that trades often enough.

I agree. It is hard to find anything wrong in what you say, dear Xela. But let me add one more thing to that. "Reasonable" is like risk. A matter of taste. What's reasonable for someone might not be reasonable at all for another. There's no golden rule that applies to everyone on this planet. We're all born different. We have different values, different goals and of course, live different lives.

Neuroway · Mar 25, 2018

Scataphagos said:
Correctamundo!

By "1% positioning" I presume OP means "1% capital risk to the portfolio", not "position = 1% of the portfolio"(?).

With a decent trading strategy, one can trade low-risk... by going 100% equity exposure with <1% stop. One can even have some leverage in the position and work within 1% stop loss. (You and I do so routinely.)

More difficult to manage a portfolio of issues that way due to logistics, but one could trade significant size in the bigger ETFs and/or index futures that way.

Hmm... Tell me, if you expose 1% of your portfolio, how could you lose more than 1% of it, for the rest is not exposed?

The percentages have been mixed up in the course of this discussion. It went from volatility to risk and finally to exposure. These are not the same thing.

An exemple: By going 100% exposure with a 1% stop on some stuff that has a 2% daily volatility, statistically speaking, you may expect to be stopped out of your position in half a day or so.