2+2 Stock Trading Competition

[Sniper]

Dan,

While you are correct that most "contest" winners employ a non-diversified short term strategy; I take issue with your closing comment.

[ QUOTE ]
I suggest that starting traders would be wise to believe they "may lose/probably will lose" all their trading capital at least one time during the first 4 years of experience.

[/ QUOTE ]

Why would anyone start trading with an expectation of losing all their trading capital?

With a bit of education, anyone can be a successful investor/trader, if they are willing to put in the required time.

[Dan Mezick]

[ QUOTE ]
Why would anyone start trading with an expectation of losing all their trading capital?

[/ QUOTE ]

To learn the craft while expecting to pay for the lessons. A trader named mark Douglas has written some trading books dealing in psychology. In these books he advocates setting aside some capital for "tuition"-- he suggests a 40K account.

It is probably not a good idea to expect to win at trading unless you have done an enormous amount of psychological and technical work in advance.

This is why I say "tuition" can be expected to be payable. It's like the difference between Party play money and a real cash game.


Perhaps the biggest curse a trader can have is sudden trading success as he first begins to trade with real money.

Trading is a very dangerous business unless and until you learn the craft. It's a professional skill, like being a lawyer, or an engineer.

Most of the more well-known traders have had at least one experience where they faced an "unexpected" drawdown of 50% or more, or even went broke, in the trading account.

These kinds of episodes really are avoidable, in theory.

In reality, they are some of the most important (and profitable) episodic lessons in the life of a trader.

I'm not sure anyone can just decide to be a competent trader, even if they are willing to put in the required time. There are certain personality/temperament properties that help immensely.

Many of these are the same needed for successful poker.

[Sniper]

I also highly recommend Mark Douglas' books! As you state, psychology plays a major role in trading and poker success.

However, I still disagree that starting with an expectation of losing is the right mindset. One of the benefits new traders have is the ability to learn from the successes and failures of those that have come before them.

While drawdowns are inevitable, the expectation of going bust as the cost of "tuition" is certainly not the right psychological mindset for a new trader.

Do you not agree that the success "traits" for trading and poker, can be learned, by anyone willing to invest the proper and certainly significant amount of time required to learn them?

[tek]

OMG, I want my entry fee back [img]/images/graemlins/laugh.gif[/img]

[Dan Mezick]

[ QUOTE ]
Do you not agree that the success "traits" for trading and poker, can be learned, by anyone willing to invest the proper and certainly significant amount of time required to learn them?

[/ QUOTE ]

...to a certain extent. Yes everyone can find a model for the desireable behaviors and imitate them. A good analogy is talent in a sport, say golf. Some participants just have more. In sports, everyone can enjoy the game without being the leader in innate talent.

The same principle is true with poker and trading, but to a much lesser extent ... because of the money aspect.

The rewards from poker and trading come from developing at least some level of mastery, much like an athlete must. In trading you are rewarded for mastery and punished for anything less than minimal mastery of the key behaviors.

With a commitment to mastery comes the price of mastery, which, if you are committed, is a price you are willing to pay.

The price includes a large time investment, and likely, a substantial money investment also. The time investment can be measured in years.

While it's certainly not a 'good' mindset to expect to lose, expecting to win-- immediately-- may point to a desire to get something for nothing.

It's like an intern surgeon expecting to perform flawlessly in his first 100 operating room experiences. This can happen to talented individuals, but such talent is rare.

Note that the surgeon also went to school, paying substantial tuition as well a large investment of time and effort.

Of course, doctors get internship and residency, while traders have no formal process to guide them as they gain mastery. Each must train and figure it out for himself personally.

The issue of "innate trading talent vs. trader training" is the focus of the Turtles, a group of trading newbies taught trend following techniques by the master Richard Dennis.

Yes people can be trained to do this, but they have to love trading. To love trading IMO it must be in your blood to some extent.

Many of the original turtles no longer trade, while many went on to illustrious trading and money management careers.
.
The Turtles Story

You can learn about the system rules they had to follow here:

http://www.originalturtles.org/system.htm#download


[ QUOTE ]
The Turtle Trading System was a Complete Trading System. Its rules covered every aspect of trading leaving no decisions to the subjective whims of the trader. It had every component of a Complete Trading System.


[/ QUOTE ]

[AceHigh]

[ QUOTE ]
It has nowhere to go but up!!!

[/ QUOTE ]

Or bankrupt...remember dead cats don't bounce.

[zephed]

Stupid newbie question, say I purchase x shares of a stock. I want to place an order to automatically sell if it hits or goes lower than a certain price. What operation do I perform?

Sell + # of shares + stop (price)
or
sell + # of shares + limit (price)
????

What does each operation accomplish?

[Warren Whitmore]

Count me in!! Sounds great.

[Warren Whitmore]

Rats, I dident see this post until just now. Is it too late to join?

[zephed]

I think you can still sign up.