In each of the Market Wizards series, traders mentioned learning from and being inspired by the earlier interview subjects. In every field of action, successful practitioners study top performers from the past, to learn from and improve on their methods. It is clearly false that trading books (or trader interviews) contain only platitudes. Either you haven't read any good ones, or you didn't pay attention. What you are claiming is that wilful ignorance is superior to research and relentless improvement, including that based on other traders' experience and insight. This is obviously a gross blunder, it would be like a mathematician not reading any Gauss or Fermat, or a boxer not studying Ali or Duran.
Positive expectation is good obviously. However, negative expectation bets can be good if they improve the risk/return of your portfolio. A good example is buying puts after significantly extended up-trends - may be a net loser, but if it reduces your drawdowns more than your returns, it is positive for overall risk-adjusted performance. Same bets over and over are fine as long as you combine them and adjust your size accordingly. E.g. if I have two great stock ideas, but they have 0.7 correlation, then it is better to go long both than just long one - I get some non-correlated diversification. The only mistake is if I go too long without accounting for the correlation. Sizing is easy. Work out your 'career ender' loss, using conservative estimates on all variables. Then, size your bets such that maximum expected loss, to a high level of confidence, is less than your 'career ender' loss. Trade accordingly. Worst case scenario is you don't have enough capital to earn a higher income than your expenses - but that's still ok, just grind for 2-3 years then take your fabulous CAGR/max DD ratio to various hedge funds and get hired on 100k+ and if you keep up the performance you will be rich in 3-5 years. The only way to lose is if your CAGR/DD ratio is not good. By contrast, if you try to break out quickly, by taking more risk, you are more likely to blow up for good, and you may bias your trading by 'reaching' for big-shot trades, overtrading on marginal bets, and other psychological errors. If you are decent at trading, and have 250k+, then 20% a year is 50k per annum. That's enough to 'survive' for 2-3 years, which is long enough to prove you can make 20%+ per annum with <20% drawdowns, which is an excellent record and should get you hired at one or more trading shops. And if you are really good than you are looking at 2:1 or better CAGR/DD ratio, which is enough to get snapped up, or (setting your max DD to 20%) bang out 40%+ per annum, which is enough to grind your way to greatness as a one-man band, unless you spend like a maniac.
Trading is risky, and a lot of the psychic satisfaction is in banking decent coint and making 20%+ per annum. If you are making less than a plumber or a police officer, there is little point in it as a profession - you are more of a hobbyist/amateur. Nothing wrong with that, but it's not what this thread is about. Also, if you can live on less than 60k a year, you either have a rich benefactor, or you aren't in a major trading centre (London, NYC, Chicago, Hong Kong, Tokyo etc), which means your future prospects are less than if you did live in such a place. Personally I can't live long-term outside a major metropolis, life just becomes too boring. I would rather just advise rich people on investments for a cushy no-risk 200k a year than grind out 50k a year trading from the middle of nowhere.
IMO naive contrarianism sucks. It's the rationale for noobs to fade a trend for ages, lose truckloads of money, then puke out at the blowoff top (or bottom). So many people hear 'be contrarian' that it is almost the conventional wisdom. I agree with Soros about being a 'contra-contrarian'. Sometimes the contrarian position is to get and stay long on size at repeated new highs during a long bullish trend (e.g. AAPL since about $120 per share in 2009). Steinhardt also made a good observation - contrarianism (a 'variant perception') doesn't mean you will be right; it only means you will almost always get paid big IF you are right - and if you can hold on until you are proven right. Whereas you can be right and make little, or even lose money, if you are betting on consensus (or overleveraged). Basically, if your position is contrarian, your payoff is better when you win. And if your position is super contrarian, maybe your odds of being right are better (because the opposite position is probably crowded and due for a reversal). I always monitor sentiment and where I think the 'crowd' (which is often hedge fund managers and speculators, rather than the public) is positioned.
Actually AAPL was a good short sale (for a trade) earlier this year, after it had run from $400 to $640 in a couple of months, then started selling off while the market was rallying (negative divergence). Yes, it was not exactly the best short of all time, and not super-profitable, but it was a clear trade and had limited risk, and a decent payoff (risk about $30, payoff was $60-100 depending how good your exit timing was). I didn't personally short it because I had been long and just got flat instead, but a more flexible trader could have ridden that move for sure.
Darkhorse, how would you rate Alpha Masters? The Amazon reviews are rather negative, but there's only a few. How would you rate it out of 5?
I actually wrote an Amazon review on it. Three stars I think. Redeeming in places - good fodder for a coast to coast plane trip, and the profiles are genuinely interesting - but overall 'meh.' If you haven't picked up 'Invisible Hands' yet, that one is absolutely fantastic.
awesome read.. thanks for the link.. fav author.. maybe its the slanderousness in me that can identify with him so much... and i love his views about how the gov is all buying out volatility making things even more antifragile..
i read this whole book last night "Trading Realities: The Truth, the Lies, and the Hype In-Between" pretty interesting.. it was an easy read.. gave me a little insight into the Gold/yen trade.. borrow yen for cheap buy gold pay back etc.. etc.. the book went into HFT and basically statsical relevant trends on small times scales "like 3 and 5 minute" are worthless.. but on the tick level there is evedence of statiscial significant trends.. thought it was itneresting i always listen to someone talk about something thats not so "random walkish" i've read a good bit of a few of his other books.. excel for options traders. .and trading options at expiration... looking for something more on futures term structure/ pairs trading that doesn't cross your eyes with tons of math and yet no frank descriptions