That's called averaging into a loser, or averaging into a winner. It doesn't work unless you have unlimited capital and unlimited time in futures. FALSE! The "markets" are not designed to make sure you win or lose. They are what they are. That is like saying nature designed the tree to fall in the wrong direction after you screwed up how you used the chainsaw to fell it. Layering in. Really? C'mon man, I am living proof that that strategy can fail big time. And that's what happened in 2007, no?
I would respectfully disagree. I don't think the market is this free-floating, zero-rules, free-market, capitalist utopia that everyone seems to think it is. The entire world is based on finance, which is managed by large banks, and I highly doubt the entire world economy would be left to chance based on basic free-market supply and demand principles. Those who have the money have the power, and they will not relinquish it. When you're trying to maintain and build power, you don't play games of chance. People think the market is this thing where everyone interacts and chart patterns ultimately form, but I firmly believe it's a rigged-game and then sold to the public as "chaos" so that you become so confused and misdirected that you never come around to seeing the full picture: it is in fact very ordered.
Very interesting take. I see a lot of "trading as a career" or "trading for income" but if I'm about to take on excessive risk, I need to be paid at least 1 order of magnitude (preferably more) more than I otherwise would in a job with equivalent time, stress, and sanity spent. So, for example, if I am an engineer (currently am) making $200,000 a year with zero risk to the downside on my account (because the boss doesn't subtract money from my paycheck every month if I make a wrong decision), for trading to be worthwhile I would at least need to make $2,000,000 a year, and desirably more. Why else do it? Endless stress trying to beat out the market isn't worth it unless you get paid big time. I don't want an income; I want a fortune. The knowledge/information gap is so large, and I understand it now. I will never have access to information that large banks and hedge funds probably take for granted, and like you said, trying to gain that information and build that infrastructure could take many years. I guess the way forward for me is to try and get in with the right crowd and use their money or connections to try and take down some serious coin without having to build my own account, however, like you said, 20%pa isn't exactly an exciting life. Lately, I've begun to think that my entire approach to wealth and trading is wrong. Everyone talks about risk, which is essentially trying to cover your ass when you are wrong, but perhaps the opposite approach is needed. Maybe rather than trying to optimize portfolio management and worry about how much you are going to potentially lose, the solution is to target opportunities with asymmetric upside and worry about risk second. Go big or go home, type of deal. I personally find that when I am 99% sure of where the price is going to go next (sometimes you just know), and it hits, I wish I had leveraged more. Maybe the solution is to bet really big when you're almost certain you're right and then not bet at all any other time. This would kind of blow the 1% per trade nonsense out of the water but perhaps that's what's needed to have asymmetric gains.
The patterns form because everyone interacts. That is how you get support/resistance levels. EVERYONE thinks the markets will hit resistance and fall, so EVERYONE sells at the perceived resistance level and the market falls once enough people sell at that perceived level. When the dust settles, in hindsight, everyone goes "yep, that was the resistance level". Self-fulfilling pattern. It takes a few algos from big firms to go NOPE, let's believe in the instrument, and buy buy buys, and the resistance is broken. Then the sells go "oh, it's not really resistance any longer" and pile in with longs. That's the natural undulations of it. So you see, it is not "designed" that way...It is we who are the designers of it.
I don't know , I think he's right. The times I made money were when I was in at a good area, price was going in my favor, and I kept adding into my position so that when it finally hit, my 3:1 trade because 6:1 or more. If your initial position is far enough away you can add to your size and still cover to breakeven if necessary. I tend to give money back which is the reason I can't sustain profitability, but I found that while I don't have a statistical backtested strategy (edge, so to speak), reading the market on a discretionary basis in real time has produced the most promising results and one I would like to further pursue. These results were largely based on getting into trades at good areas and then aggressively adding to positions when right, so that when my profit target was hit I was hitting with big size (relative to the initial position).