Looks like you have had a perfect system without using any stop loss or money management considerations. Or your money management set-up doesn't require any stop losses. Amazing!
Trading actually is a very poor business model in that you have to increase your risk to increase your winnings. I mean total risk has to be increased. This is different to a brokerage business where your overhead is inelastic to relative changes in revenue. For instance consider a mortgage broker. He rents a office and he closed 10 loans last month and 30 loans this month. Rents(risk) stays the same but his revenue goes up by a factor of 3. Compare this to a "trader". Regardless of his risk to reward ratio he would have to increase his risk by a factor of 3 to increase his winnings by a factor of 3. Another problem with trading is you don't learn as much through experience as you would think. This is because the market is not random. Charts don't mean as much as one would expect. Indicators are worthless and anything can happen anytime. Things that worked last time maybe not work this time. Compare this build up of resdiual value to that in a Medical practice. The more patients a Doctor sees the more he learns. The better doctor he becomes. The more loans a broker does the more referrals he gets, the more experience he gains and the easier it becomes to generate more revenue without increasing his risk. The market is sort of like a video arcade. A video arcade exists only because someone invested in machines and rented space to put them in order to charge people to use them. The video arcade owner doesn't care whether of not you win or lose. Only that you pay to play. This is similar to wall street. They make their money off of inside information and off of charging for order flow. Wall street has no vested interest in anyone making money other then their clients. In other word, the market doesn't exist for money to be made by non professional traders, it exists only for them to pay to play. John
I always have money management in place, as you would expect, and I have a maximum position I do not exceed proportional to capital deployed for trading. If in advance you have defended yourself against the advent of a Black Swan it can never land on your doorstep.
Let me add this. I am not saying that you can't make money trading. I am just pointing out that it is not the perfect business that some imagine it to be. I am suggesting that for those that are bright, hard working, committed and willing to learn and can deal with people there are many other types of jobs out there that you can make $200k a year. John
Thanks for your confirmation of Not using any stop loss in your money management set-up. A great tip to us the newbies!
Great comment. My problem is I have been addicted to learning, but the same cause and effect relationship doesnt happen all the time in trading so you are learning less than you think.
I think you are trying to dig up a point I didn't make, Oddtrader. If a newbie knows he has made a mistake, stoploss. But does he know .. or more generally does he even know anything like enough to be playing for real in the trading arena?
Hello John, This is incorrect, mainly because a trader should only size up when the risk goes down or price is moving your way. So when the risk is $1.00 , buy 10 shares .50 , buy 20 shares .25 buy 40 shares .10 buy 100 shares So only size up when, the risk minimizes or price is moving your way or a price statistics that have 85%+ success ratios.