Re:
It is almost as deadly for a beginning trader to have a sudden 50% increase in equity value as it is for him to have a 50% decrease, due to the bad habits such sudden wealth almost inevitably causes
Good gracious well put!! I resemble those remarks... only change '50%' to '100%' both ways ;(
I would also add, as so many have helped clarify here, that sufficient capital is KEY and I mean MANY MANY times your initial thoughts as to what would be sufficient is required. Consider this: When I gamble, suppose I have a $5,000 credit line and begin playing craps at an average bet of $100 per role of the dice. Assume the average time for the shooter to roll, stickman to call, dealers to pay, and one player to argue with boxman, is about a minute. How much will be 'gambled' in 5 hours of play a night? It's much higher than expected and much higher than initial bankroll. Assume the house has only about a 5% edge (since you can't help but play the idiotic hard eight bets now and then after seeing the self-titled movie). Every hour you will gamble 120% of your entire stake! But since you win some and lose some, your bankroll is decreasing by $600 an hour. In only about 4 hours you're can't keep up the absolute losing $ pace but the % loss pace continues 'till bust. You've 'gambled' many times your inital stake... enjoy your free shrimp cocktail, you earned it.
Because so many beginners (myself once included) don't take the time to extrapolate out their current trading on a spreadsheet, they may not realize that their bankroll all but ensures they will be wiped out in a relatively short amount of time.
Point two which I have learned from this thread: novices are woefully unaware that they are trading at a HUGE disadvantage. Contributing factors are myriad but most important: the provider you are using is not nearly adequate for the style you're trading. Or, traders delve into stocks/options without a deeper understanding of what tools could have and SHOULD have been taken advantage of but were not. Once aware of the information you hadn't known, it will become clear that because you did not investigate the environment (and it's always a hostile one when $$ are involved) well enough ex-ante, losses were a foregone conclusion.
RO |
