“I found that I cannot trade against myself”
– Globetrader (in making an earlier comment). This passing quote carries quite a bit of meaning for myself. While there are endless analogies between sports and trading, one big difference is that a large part of many sports (golf, tennis, squash etc) are about playing against yourself; you can create opportunities and make points through effort and courage alone. In one respect, trading can also be thought of as a game against oneself, because you have to be alert to your own weaknesses and strengths. However, I believe the big difference is that you cannot ‘trade against yourself’ in the sense that once you have your approach/strategy in place, you cannot really make opportunities from nothing. It is in this part of the game that we are reactive to the external signals of the market. Most of the time, I view trading not as ‘me against me’, nor as ‘me against the market’, but as ‘me and the market’. The market is what it is.
“The reality that you may need to earn income another way is just that, reality.”
– Michelle B. This point is really hitting home. Despite my progress, it does feel like I am just treading water at times. I will discuss this topic, along with the idea of “opportunity cost”, in my next post.
– Tyro Trader tells a tale of a friend who devised a highly profitable fx strategy that generated high returns on paper, but crashed and burned at the real money stage:
“… he woke up at 5:00am to trade what he calculated was the prime time for his strategy and made 20-50%/month for two months, risking only 2% of his capital per trade. He said that he made a couple mistakes and he should have made 80-100%.”
“Today I bumped into him and we went out for a drink. Far from making his $20k in January, he lost $7k. In the first week of Feb he lost another $3k, so his fund was down 25% in the first five weeks! When I found him, he was in the process of closing his account, returning what was left of his friend’s stake and sending out resumes for real work. In six weeks he went from having a system that printed money to being out of work and out of money.”
I recommend reading the full account.