I often wonder if Bernie Madoff wasn't looking for the holy grail all the time he was keeping the game going... maybe he thought his research was going to turn the corner at any day.. I can just see him sitting up nights with Tradestation testing MACD settings only to wake every morning to find his hopes dashed...
Truly Successful traders know what the chances of a trade pivoting or continuing a down trend. A smart trader that has a position can tell from prior experience if the trend is near exhaustion and their losses will slowly turn around and make them money. An experienced trader also knows when a trade has a very small chance of working out and knows when to bail immediately. I, believe that traders that make bad decisions, is due to inexperience and not understanding the psychology, value, and economics behind a trade. Normally I can tell when a trade has a smaller chance of success so likewise I put up a smaller position. If it doesn't work I know when to flip the trade and go the opposite direction. I also know when I'm wrong and that the market doesn't view things the way I have viewed them. Alot of trading is knowing how long people will stand by their decisions before dumping the stock and how long new traders will enter the market and keep following the trend. If you know that people aren't going to change their mind anytime soon and your losses are continuing to compound it'd be smart to follow the trend instead of going against it. For instance if the market is on a down trend and you know that the momentum of traders who stand by that decision are their it'd be prudent for you to dump your longs and go short. When you detect exhaustion it would be a smart idea to cover. Wait for the pivot and see the circumstances (news) to determine, if the market is coming to its senses and realizing that we're dumping or shorting a perfectly good stock. If its on a day where theirs good news and the foreign markets are doing good chances are the markets will turn around. This happened on Friday I saw Wells Fargo hit negative -0.80 cents in comparison to prior days close. The Bears were starting to get weak. I bought Puts but I got squeezed a little. However I tripled my amount of investment in calls in proportion to the puts to take advantage of the pivot on my options. I ended up making 4 times more on my calls then what I lost on my puts. Knowing a prudent exit strategy and understanding when the market is about to pivot is very important. Understanding uncertainty and knowing that bears are starting to cover is another important facet of trading. Markets are readable like a book but you have to train your mind to see what is unseen. Most can not do this and likewise they fail at effecient trading just like Bernard Madoff, and the countless list of scoundrels, or ineffective traders.
Experience can be a double edged sword, but chances are the more experienced trader has a much higher chance of making gains than an amateur.
Madoff was a salesman, not a trader. Good traders are not good salesmen. If you believe you are a good trader and a good salesman, YOU ARE SADLY MISTAKEN.