He says he did literally the opposite of what I said lol So he stopped in low vol or at least reduced risk (which makes sense!)
It is the addictive nature of trading itself. The intermittent winning and losing is more addictive than constantly winning. Especially for active traders. The brains starts to crave that rush it gets from winning trades which are all the more intense if they come after losing trades. There are also other phenomena at work like the 'near miss effect' which make both gambling and trading highly addictive.
Jan feb 2018 was one of single most obvious vol longs I have seen in my career. Who doesn’t buy a bucket load of vol when atm implies is like 8. What derelict sells that?
If you have a technical or pattern based 'system' of trading then sometimes it is going to give dumb entry signals. You could either override the signal but if you are disciplined then maybe you don't ever want to do that. Im not sure if the entry was the problem or if it was his risk management. Was he ok with losing 25m on that trade, was it his expected loss when he put that trade on..
So from the video, he says something like he did size down. But kept going. Like a degenerate. Or is that degenerate? If you have a 70% probability of making 25 million and a 30% probability of losing 25 million, seems like an OK risk to take. I agree with @ZBZB we need more interviews.
Lewis Borsellino and Marty Schwartz have a few things in common. Lewis had an information edge in the S&P pits. Some would argue on the legality and ethics of how he got that info of what paper (brokers who traded for institutions) was doing. The moment that went away in the pits, Lewis had a couple of losing years and then decided to screen trade only. He went on to lose even more money. He wound up bankrupt and is now currently selling low-end IT security to small businesses. He is not doing anything trading related now. Marty Schwartz has always leveraged inside information back when it was easier to obtain (for him) and worth more. He basically admits it in his book but instead refers to this info as "stock tips". Marty also drank some of his own kool-aid and believed he could trade. He traded with OPM and when things got rough he went back to the inside info-well from his network of contacts that he built at the AMEX. He actually thought his "Magic T System" had an edge. Good luck getting any specifics on his "Magic T System" in his books or from listening to his former CME broker (that Mr. Topstep guy) babble on. I think his system is nothing but a bunch of oscillators that he calculated by hand even after the mass consumer availability of Personal Computers. Marty lost his info edge decades ago, he probably realized his Magic T System was total shit in the last 20 years. He just said "fuck it" and decided to be a total degenerate and sell premium with OPM.
These are the reasons I didn’t believe that old-timers still make serious money nowadays. Only here on ET I found signs that some may still do, but those also end up with doubt and discussions like these. We also know about trading desk closures, Steven Cohen complaining that it’s not possible to make money without inside info, hedge funds underperforming, traders losing $millions on oil, natural gas, gold, etc. News about big wins and big traders are rare. So what’s the current state of the whole trading biz, and did it go underground due to everyone protecting any remaining edges they may still have?
Whats is this infatuation with old timer results? There are risks you can take in your 20s and 30s that you cant in your 50s and 60s. You can take big risks and afford to lose it all when you are young, but you don't want to be broke when you are old. Otherwise you risk going the way of Livermore (although he was hardly broke when he went)