This is an excerpt taken from Education of a Speculator... {pg 143} {"Afterward I scold Howie for risking everything in one toss. He tells me "If you are going to gamble, the only way to do it is to GAMBLE! The only person who can grind it out is the bookie because he gets 5% off the top regardless" I have never forgotten this advice. Often, when I am down and out after some terrible speculation, I'll come right back with another large trade. "You're going right back?" Susan asks. Desperate times call for desperate measures. "I'M GOING FOR BROKE," I always respond. If it was right for Howie then, it's true today, some 43 years later!"} If you approach the game with this mentality for a long enough time, blowing up is not only a probability it is an inevitability... Like I said in an earlier post, this man is trying to box with the Trading Gods only his arms are toooooo short! PEACE and good trading, Commisso BTW.... JEM excellent post
Going for broke is a plan that is easily achievable. Commisso good to see you again, last time was on the TM boards. Cheers Mike
well, i definitely see your line of reasoning. yet, the idea of 'regression to the mean' argues for such an approach (well, I can't speak to 'going for broke,' because that's not the way I do it.) He might be boxing, but he's also trading with a keen respect for statistical realities. and every scalper knows he is making the house rich.
HAHAHAHAAHAHAHAAHAHAHAHAAHAHAHAHAHAHA Chasin come on bro, he is not trading with a keen respect for statistical realities... This man like myself uses the past to make aggressve bets on the future... BUT the man also bases his risk and exposure on the past... This is a MAJOR FOLLY... Just because pipes never burst at the CME dose not mean it can or will not happen... Just because two planes never hit the WTC does not mean it can and will not happen... This man does not see statistical reality he only sees one side of the coin! PEACE and good trading, Commisso
A big move is often followed by a big retracement. hahaha. Independent trials argue for a large loser to NOT be followed by another large loser.
Bro, You are STILL missing the point! and i have a funny feeling that no matter what I say or no matter how many accounts this guy blows up you will continue to miss it... While a big move upward _SUGGESTS_ a big retracement downward (based on past trials) it does not garuntee that the move can or will not continue indefinately! You cannot base your risk and exposure based on the past! Anything can and will happen! Victor Niederhoffer is not the Alpha and Omega of this shit... There are bigger forces at work and he neglects to realize it! The one thing a trader can be absolutely certain of is that he can never be absolutely certain what a market will do next! PEACE and good trading, Commisso
taleb says the same thing. He makes bets based upon the past just like everybody else, but he doesn't increase or decrease his position size based upon how confident he is in the trade. Niederhoffer always did, and it killed him. Actually, the first time he blew up, he actually blew up twice. First, he made huge bad bets on the Thai Bhat and went down about 50%. Then , instead of fessing up to his clients about what happened, he went double or nothing on the S&P's and lost the rest. Overall I think he lost about 97% of his fund. He completely asked for being ruined. Now, most people after an experience like that would be very discouraged about taking that kind of risk again. But no, not niederhoffer, his ego was too big. So he blew up again. I agree with what a previous poster said about taking the big risk if you have a small account of your own money. When you have a large account of other peoples money, you have a responsibility to them to manage the risk. That is the difference between being an amateur and being a professional.
Trading is so unlike any other activity that I can think of, that excellent advice for other parts of life blindly applied to trading, without any forthought, can be very dangerous. Getting back up after being "knocked down" is of course essential to make any meaningful progress in life. I wouldn't say the big difference between winners and losers is simply getting back up again, I think it would be better to say "learning from the mistake, adjusting one's strategy, and making another attempt." As traders, I think we can agree that blowing up your account is a bit different to "demonstrating some weakness." However, okay, it happened. What lessons did Niederhoffer learn from the experience? Well, judging by his actions, not many. He proceeded to blow up again. Maybe a lesson we can learn from Niederhoffer could be, "if you keep betting the ranch, you'll end up buying the farm (as a trader)."
we look at a 5 minute chart and make statistical inferences of, say, the closing prices (++---+----+++....etc). We compress the chart to a daily, and do the same, using the same principles of probabilities. Note how a few closes of either sign doesn't determine the trend. We further compress it into a weekly, monthly, etc., compressing thousands of events into a handful, and still have no qualms about applying the same rules of probabilities to the price action. So. Let's take all of Dr. Niederhoffer's years of trading, and compress them into a couple of events. If you compress all the prior successful years into one event, and the blowup into one event, you wind up with (+-), like a trader who does this on two trades: (+1000, -1200). I think he'll be OK. Anyway, his open profit is positive.