1)ANYTIME a trader is IN the market his money is at risk. Hoping, wishing, and thinking the long haul will pull you out is myth unless you are Buffet and have billions to throw around and can afford to WAIT for the market to come back. The average trader cannot do that. When your funds are exposed to the market you are at risk. When the are out of the market risk has evaporated into nothing. Why not use that decrease in risk to my advantage? 2)It Is HARDER TO assess probabilities the further out in time you go in the market. Many would disagree with me on this. But, the further out in time you go extrapolating you are encountering more variables, more potential variables, and more unknown variables yet to be invented or arrived at. These are all thrown into the mix. So, when you throw your money at all those variables the odds INCREASE against you. To make to short; it is easier to attempt to calculate probabilities in the market say 10 or 15 minutes out than 1 week out or 1 month out. In other words, I can be more successful telling you what the market will probably do in 5 minutes than what I can tell you it will do tomorrow. Why not use that increase in directional probability to my advantage? 3) by short term trading I increase my ability to compound profits because when the market goes up (bullish context) I exit at peaks wait for a PB enter again at LOWER prices than my previous exit and am thus able to use the profits made from my previous exit to AGAIN make more money. In other words, I am grabbing profits when the market gives them to me wait for the drop ..enter again..grab profits again...rinse and repeat all day long as viable setup present themselves. Why not use that increase in probability for compounding to my favor? 3) If 1 and 2 and 3 are true then by short term trading I am actually putting the odds in my favor for successful choosing of the direction of the market, AND the odds increase I will preserve my money, and the odds increase I will increase my capital. If we believe the line fed to us that short term trading is more risky then why did they go to nano second trading?
I am not successful at this. I was doing technical consulting for him. Rich people like to have business expenses, what else will they do with 18 bedrooms with their 3 kids...
Theoretically that is correct. But in real life other factors have a huge impact on that risk. I stayed for 2 hours long today in the ES. I am sure that somebody that was going short, had more risk then I had. A succesful trader can stay 100 times longer in the market than an idiot who thinks he is a trader, with less risk. Time has no 1 on 1 relation with risk. I could get out of my long quickly instead of staying 2 hours, to limit the risk. But then I would miss 75% of the profit and that would have a bad influence on my risk/reward ratio, so increasing the risk... I drove already roughly 2 million kilometers with my cars and never caused an accident. My ex wife drove almost never but had 3 accidents. Theoretically my risk was bigger as I was driving at least 50 times longer, but reality proved the opposite. The real risk depends of a lot of parameters. The most important/essential to me is: how good are you in handling the risk?
"Over the last twenty years, the fund has posted annualized returns of 6.17%." Clients have to keep kicking in the 2% management fees each year? I doubt that is considered in the whopping 6.17%.
Perhaps you are forgetting compounding (#3 above). In and out, if one has the strategy to do so offers the opportunity to make much more. For instance, show the 2 hour entry and exit on the the ES on a chart. Chances are much more could have been made by multiple entries and exits as opposed to holding two hours, even after deducting commissions. And yes time and risk are related. If you are n the market you are at risk unless you are 100% certain which way it will go and your position is in that direction.
You are a better driver(trader) BUT you were STILL at risk every time you drove. You weren’t sitting at your home watching tv. Or perhaps your wife was just unlucky? AND regardless of your skill anyone texting and driving COULD have hit you. Skill is important however there are variables beyond our skill set or even awareness.