A. in poker grinding out small pots is definitely the way to make a consistent but small living. In AC or Vegas there are literally hundreds of players doing that at every kind of limit. At the high-limit tables there tend to be more aggressive and perhaps better players but its possible to make a solid living at every limit. B. I agree with your thoughts on chess. I've played the same openings now for about 20 years and its pretty hard to shake me out of them. At least 5% (maybe more) of my games are winning right out the gate in positions I've been in hundreds of times.
I think Warren Buffett's two rules for investing apply to both daytrading and long-term investing. Despite Buffett's pretensions about being a long-term value investor he was quite the daytrader in his hedge fund days in the late 50s and early 60s. His two rules are: #1. Don't lose money #2. Don't forget rule #1. The entire concept of daytrading is dedicated to these rules actually. The largest swings occur in a stock overnight, when news is released after close or before the open. Daytrading allows people to "sleep well at night" because their portfolios will suffer less overnight volatility (i.e., zero). Longer-term traders, in order to sleep well at night, must follow other principles in order to avoid losing money because the volatility of the portfolio will greatly increase.
IMO Picture two guys, a winner and a loser with the same sized trading accounts, say $35k, take a $1000 loss. The winner will do something like shrug and say "whatever". There won't be much of an emotional reaction and he will be on to looking for his next trade. The loser will get nervous and upset and stew about it for days. His emotions will cause him afterwards to skip trades and miss opportunities. Winners are fearless, losers are fearful.
i disagree again. EVERY loss is NOT due to a mistake. i have setups that i recognise, and enter a trade based on that. the trade goes against me by my predetermined risk, and i get out. that is a mistake? only if i am trying to never have a loss... of course, we can get into a discussion on, my stoploss was "wrong", i didn't recognise my setup properly, etc etc the point is, unless you are planning on being perfect, some trades are just gonna be losers, but you were perfectly justified in taking the trading and taking your loss, therefore such trades cannot be (or shouldn't be) classified as mistakes.
I agree and disagree with both of you, and the distinction to make is an important one. I agree that one can do everything as they should and still lose. I call this being "incorrect." There are probably better words so as not to affect the fragile psychology, e.g., the odds didn't pan out etc, but the effect is the same - you lost money. The important thing in this case is not to get discouraged by this. Still, you must make note of it, as if this happens much more than it "should" then the market may be warning you that something has changed and you should look elsewhere, at least "for now." One can do everything as they should not and still lose, I call this being wrong. Most traders KNOW when they have done this. This is infuriating...But we all do it from time to time. One can do everything as they should not and still win - I call this putting a smile on my face, looking up at the sky, and saying...I promise I won't do it again... nitro
A couple of points: A. in the above discussion it all depends on how you define "loss". If I buy AOL at 11 and it goes down to 10 one day and then it goes up to 12 the next I did not lose. Although paper losses are definitely real, if I still believe in the company I may buy more now that a good company is even cheaper. In which case, the fact that AOL went down is a big win for me. If I sell at 10 its because i realize a mistake has been made and I take my loss. Once I take a loss it is absolutely clear that a mistake has been made by me. Perhaps I underestimated headline risk for AOL. Or overestimated the potential of the magazine division. Or misinterpreted what the chart was saying. Something went wrong. B. The other side of frustration is success. Maybe I'm different but the only way I've ever learned anything - whether it was chess, poker, business, or investing, was by making mistakes and being enormously self-critical in figuring out what went wrong. That doesn't mean I beat myself up over it. Far from it. I'm thankful for the opportunity to learn. But its the fear and hate of losing that propels me to examine every aspect of a mistake and confront whatever demons allowed that mistake to exist. And by demons I mean both the emotional as well as the intellectual.