If you risk just 1% per trade, you will be able to take 410K to 4 million in 20 years.... if you are good. The point is to get rich when you can enjoy it, not when you are wearing geriatric diapers. If you see a very compelling trade, that you have been awaiting for years, to bet 1% would be stupidity, an act of cowardice and self doubt. You've got to bet big on the compelling trades to make big money. 1% or 2% risk on trades will preserve capital, but won't make you rich.
I think what make one rich is not how much one risk. Look at John Paulson and how he capitalize on the collapse of MBS will give us clues. PA
Isn't the said broker "feature" automation EXCEPT it's a "bit" harder to override? We do have to admit though that for every LTCM there are others that have trade full lifetimes successfully. Some (Livermore.. etc) are just doomed to, at some point, go a little mad and do something crazy and this tendency NEVER leaves. Lifelong successful trading means NEVER gambling... still trying to eliminate my version of this. Main point here is trader x (fill in your name here...) WILL do it again in varying degrees.. As he currently is it is a given, so, barring a transplant what else can be done to save such a trader? Otherwise he'll need to start shooting for 200k up weeks to make this blip look normal on the equity chart...
You hit the point square on... even with automation, the trader must follow the rules. This takes time. If one truly commits to the process, good behaviour will encourage good behaviour and longevity+profits will follow. Foremost, someone has to want to change their habits. Creating good habits is a serious mental commitment. Self discipline is very hard, especially in a environment such as ours. But, as you poignantly stated: "Lifelong successful trading means NEVER gambling" My version of solving this has been to quantifiy absolutely everything. Henceforth everytime I make a decision, I know exactly what my odds are...
But that takes too long Come to think of it my current futures account has a risk management feature requiring me to call to add contracts to trade. They don't argue when I call (when I called to reduce the guy couldn't barely figure out how to do it!) but there has been a time or two when I tried the extra contracts and got rejected.. thought of calling.. then returned to my senses... Plan now is to call only when I get to the next risk level. Regarding habit change consider the way a dog is trained. If we were dog traders it would be possible to reach a stage where the bad habit is completely removed given consistent training. An inconsistent trainer, in our case, the markets, never achieves the hoped for result. The occasional reward for doubling down the most lethal. No wonder most fail at this, so much seeming randomness. And these human failures actually make unreal profits possible for others including those on the opposing side of Neke last week.. explains why the better traders prefer less automation.
I strongly agree with this statement. With all due respect to Neke, I think what we have witnessed here is some gambling via averaging down, otherwise known as adding to loser aka gambling not trading. It works most of the time, until it does not. No Heat
Without Disrespect, the way NEKE trades, it is inevitable that large drawn down will occur and blowing out of the game is very possible. Every poster was cheering on him last year when he made 46.5K (20%) in one week and no one criticized how he gained that 20%. He Tripled down on GS options (50+50+50) and make 16K, double down on AIG options (300+200) and make 37K, and reversing on GOOG options on the fly losing 18K. All these trades are all emotional trades without planning and risk control, YET NO ONE questioned him. Please pay attention to ILLIQUIDâs posts. Quote: Beware leverage masking randomness/edge deterioration. This is an example why many aspiring traders fail -- they just don't know how to learn how to learn, if you get my meaning. Maybe call it metatrading. They just see the numbers and results, and don't care exactly how one gets there. They cannot distinguish between leverage and edge. They cannot project into the future just how damaging being "apparently" successful at trading can be, after you quit the day job and get all nice and comfy in your trading chair. They don't see how and why trading one's own account to put food on the table has nothing to do with percentage returns, managing opm, or setting some insane target to impress others. I am sure NEKE will come out of this a better, stronger and more consistent trader.
LoveTrading, you quoted a beautiful illustration of my recommendation to Neke. It was expiration week and his Monday and Tuesday trades were great. That should've been the end of his trading that week
As bad as it sounds to most, losing 20% isn't necessarily due to poor risk management. If gains will far exceed losses or the probability of that loss is very low, then it could be reasonable.