Comment on Mr Consistent returning incredible returns

NPANT commented on 29 Jan 2014, 10:06 AM

Yes, Madan reading your blog and other winners of the challenge one thing is clear, Trading is a game of persistence and hard work. I myself have been not good game at the game until now, but have been able to come up with some observations : (1) All the four winners featured now had blown their initial accounts though the initial account sizes can vary widely from 10,000 to 10,00,000. Though this is not a necessary condition, but it seems it happens. A novice should also not draw wrong inference from it, that if he is blowing up his account he is going to make a top trader. Infact the learning is even the Gods stumble in their initial phases, so it better for a novice to start slow and focus on basics. (2)All showed the gumption and belief in self to get up, to do a brutally honest introspection of the self, identify the mistakes and over come the mistakes. (3) All had the patience to stick to an art which paid them in negative to 0, for some 2-3 years. Which tells about their persistence, positive attitude and passion for learning than trading.

Also, about the most often referred wizard of literary world of trading – Mark Douglas, (Jack Schwager – in brackets because he does not talk on pyschology per se) and Naseem Taleb – none have been a great trader themselves. But, if we see, if we summarize all their 1000+ pages tomes in single word, it is Stop-Loss. Mark Douglas refers it as able it do what is needed, Naseem Taleb refers it as Black Swan (simpistic example : basically if you are leveraged even by 10%, and your startegy say’s markets can not go down by 90%, one fine day something unexpected, unimagined (black swan) might happen that might put you out of business.)

So, it seems first step to start with is to develope the ability to execute the SL – without any sort of fear or false temptation/greed of reversal from SL point. If it is some reasonable SL with a risk limit of 1-5% of equity per trade, it is unlikely one will blow up his initial account, because that would give him a time to do the reality check and go and discover the basics. This basic thing every trader learns after having blown up the account. Though these should be the initial step, Risk Management and Money Mgmt learning happen to be the final steps for most of the traders – basically every trader starts with reinventing the wheel.

View the full comment thread »