Trying something new where I write down one-off things I’m thinking about as it relates to markets.
There are a lot more trading legends from the 1970s/80s than there are from the 2010s/2020s.
Minimal competition and being an early mover in a new space tends to result in low hanging fruit and outsized returns (as compared with when an industry matures).
The current “new” thing is AI. Few years ago it was crypto. Before that, machine learning.
In the information age, the “new” thing seems to change more quickly (or that’s my perception). Boom/bust cycles seem to be moving faster now than ever.
There is a great Twitter (X) post that shows people fighting supposedly over someone saying, “Machine learning is just statistics!” - always makes me laugh.
The 10:1 leverage ratio shows up often in the trading “scripture” for those who turned small amounts into fortunes or otherwise achieved jaw dropping CAGRs.
If you run 10:1 for any prolonged period of time, you’re going to blow up.
Most people don’t have the emotional fortitude and discipline to run that kind of leverage.
Those who do run that kind of leverage often end up wiping out especially if they don’t stop after big success.
Luck plays a role in big success.
If luck doesn’t find you early, you might be able to find it via determination and persistence.
Determination and persistence show up over and over among highly successful people in trading and business in general.
Great quote from the McDonald’s movie (The Founder) on persistence.
The Founder is, IMO, a great movie on entrepreneurship especially from the ~40 minute mark to just after the hour mark where Kroc/Keaton is hustling to make it happen despite all kinds of rejection. Eventually he tells his wife, “They’re chasing me now.”
Most traders/investors who hit it big diversify into multiple strategies after hitting it big thus reducing their drawdowns but also returns. Dept of Keep What You’ve Got.
There isn’t much real-world evidence that you can successfully go from style to style (mean reversion to trend etc.) with success - you end up getting chopped up.
Staying consistent with one approach is proven over time and you can achieve big returns.
Big drawdowns and big volatility tend to correlate to big returns.
Diversifying across methods does work, but, per above, you won’t end up with something exceptional.
Clear goals are an overlooked but critical part of trading success - probably true of business at large as well.
That’s it for now.
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If you like what I write and see that I eat, breathe, and sleep trading and markets, consider taking a look at my investment firm which uses trader principles to manage money. More here: https://tricapm.com/tdx
Good one, as always