Jorge you understand it.
Frankly im at a loss for words on how many people have a hard time with this.
Frankly im at a loss for words on how many people have a hard time with this.
Your brain, your mind, and death
- Thread starter lilduckling
- Start date
the one scenario besides just losing mney on spreads which you could easily dump an account on is using max leverage, just max it out every single time and eventually you will dump the entire account.
Unfortunately this is the way that most traders blow out.
It would make it a little more interesting if you could only use a reasonable amoutn of leverage as well.
Unfortunately this is the way that most traders blow out.
It would make it a little more interesting if you could only use a reasonable amoutn of leverage as well.
as far as using really tight stops in volatile stocks, true you would get stopped out alot, thus slowly chipping your account down.
However, it wouldn't happen for EVERY trade. So on the ones that didnt get stopped out, you would desperately be hitting the sell (or cover) to exit. Because you're trading high volatile stocks.... some may have slipped quite a bit from your entry by the time you exit. Again.... stress would come into play and start to cloud the fairly new traders mind.
With this strategy, you would end up with a giant monster sharpe ratio.
However, it wouldn't happen for EVERY trade. So on the ones that didnt get stopped out, you would desperately be hitting the sell (or cover) to exit. Because you're trading high volatile stocks.... some may have slipped quite a bit from your entry by the time you exit. Again.... stress would come into play and start to cloud the fairly new traders mind.
With this strategy, you would end up with a giant monster sharpe ratio.
Actually, what if you got lucky and hit a streak of 10 straight massive wins with that max leverage ? The key to making this work it to cut winners short and lets losers run, just coincidence that those two areas happen to be what most newbies struggle with the opposite of. But to say a new trader will fail at trying to blow the account up just because they are trying to is really flawed logic. If it was truly that easy, then all anyone would have to do is go into every trade saying I want to lose big on this trade and according to ducks logic they would fail at losing big and actually win because they will accomplish the opposite of what they are trying for. If only it was that easy.
so volente we are in agreement then
PLEASE!
your saying its just as hard to blow an account with no leverage than an account with leverage!
i completely understand your point of this post, and its a great topic...
but if your completely exposed (e.g. 10-20 times your capital, assuming 5-10% collateral requirements) you will go bust in a year, you'd be lucky to last that long. a stock just cannot go up every day. and so what if you win, that means your pos. sizing goes up next day.
your saying its just as hard to blow an account with no leverage than an account with leverage!
i completely understand your point of this post, and its a great topic...
but if your completely exposed (e.g. 10-20 times your capital, assuming 5-10% collateral requirements) you will go bust in a year, you'd be lucky to last that long. a stock just cannot go up every day. and so what if you win, that means your pos. sizing goes up next day.
Find a tradeable with a very wide bid-ask spread. I suggest Propane futures at NYMEX (the nice people who also let you trade Crude Oil). Perform the following steps 3 times a day:
- Flip a coin. If heads, go long 5 contracts at market (pay the ask). If tails, go short 5 contracts at market (accept the bid).
- Wait 20 minutes
- Exit your position at market. (pay the ask / accept the bid)
About what ?
Quote from volente_00:
About what ?
that under this scenario with parameters given later on the thread, that a new trader, when trying to shrink the account would actually increase it.