Yep I remember that - Black Swan was excellent. Really looking forward to Taleb's "Antifragile" when it comes out in November. He had a prologue up, since taken down, but you can find it here: http://www.scribd.com/doc/98806047/Prologue Though it's also a good idea to keep a balance between absorbing others' ideas and coming up with your own: "Reading, after a certain age, diverts the mind too much from its creative pursuits. Any man who reads too much and uses his own brain too little falls into lazy habits of thinking." - Albert Einstein
"Wise men speak because they have something to say; fools speak because they have to say something" Plato
"To Plato's definition of man as an animal, bipedal and featherless, Diogenes plucked a chicken and declared, 'Here is Plato's man.'"
I find myself intensely curious about this particular statement of yours. How do you define greatness? Who, in your opinion, is a greater trader? The one that has made more money for investors? The one who is wealthier? More famous? What exactly is the metric used for greatness? I apologize if I am hijacking this thread. Pls feel free not to respond if you think this is a digression.
Not at all. It's an interesting question... I think greatness has to be defined on a personal level. Sort of like the Supreme Court's definition of pornography - "know it when you see it" etcetera. At the same time, if your standards are any good, then others will recognize them (at least some will - such will always be subjective - and to varying degrees). It certainly isn't about fame, though, or even general recognition. Being on the cover of Bloomberg magazine (or any magazine) is not a goal. Nor is making the most money - as John Paulson has demonstrated dramatically, riverboat gamblers can make huge sums of money. They can then go about losing it in equally stunning fashion. I would say there is a sort of trader's arete - the Greek term for all around excellence - that is embodied in traits like skill, creativity, competitiveness and consistency over long periods of time. A truly great trader is one who can do exceptionally well for his investors over a timeframe of decades, and who has demonstrated an ability to consistently make money on a risk-adjusted basis, for all intents and purposes indefinitely. He may have some epic macro exploits along the way, but always with risk management in mind. Unlike some of the guys - Paulson, Thiel, maybe even Robertson and now Bass - who made huge scores along the way but then gave massive amounts back through poor (or nonexistent) risk management, a great trader is as brilliant in defending his capital as he is in growing it. (Making a gigantic binary macro bet - you either kill it or you lose it - is not trading.) Also re, goals, milestones etcetera, I don't have any hard deadlines for when to do such and such, or boxes to check off by a certain date. I just have a strong mental sense of what trading greatness looks like - as embodied in mentors-from-afar like Jones, Bacon, Druckenmiller, Kovner and Soros - and seek to create my own version of that path.
Your goals are understandable and admirable. I truly wish you the best of luck. And I have to marvel that someone on ET used the term "arete". Most unexpected...
Platonism.... over simplified bottom lining smooth blow ups! A good trader makes the smart wall street manipulaters look stupid.. dumps a shit ton of money out of the market and keeps from getting addicted ie Livermore
Top performance against the best competition for a sustained period is usually the criteria for greatness in any competitive field. So for trading, that would be anyone who has an excellent CAGR to max drawdown ratio, in relatively efficient markets, for say 10 years or more (the longer, the better). I'd say you need to make a relatively decent sum also i.e. 10 million+. No need for investors - that is fund management, which is not the same thing as trading (they intersect but obviously you can trade without ever managing client money). Great returns from very inefficient markets, or those with structural edge (e.g. Salomon Brothers in the 1980s) would be great 'money-making' but not great trading IMO, the reason being that it is not sustainable, and not the result of world-class skill but rather the result of weak opposition (a bit like an NFL team beaing Minor league teams all the time).
1 - a certain type of market action, after a complacent consensus has developed in the marketplace, may imply better than normal odds of a fairly strong and rapid trend, if there is supporting (and non-consensus) macro evidence that the new trend is justified. I.e. if the market has gone one way for a long time, while the macro has gone another, and then the market has a collective 'aha' moment - then price are likely to trade somewhat differently to normal. More likely to 'trend' and experience higher than normal volatility, gaps, 'surprise' news etc. 2 - countless examples e.g. nasdaq April 2000, housing early 2007, credit in autumn 2007, commodities in H2 2008, financials and stocks/risk in general in early 2009, Europe in summer 2010 and summer 2011. 3 - long 3-6 month out-the-money options; outright positions with relatively close stops, once the momentum has started; trend-following strategies with wider stops once the momentum has definitely got going; spread trades - long the stuff that benefits from the new macro story, short the stuff that gets hammered by it.