Accuracy Feedback
Dear Michael, Allow me to indulge my thoughts with regard to this post that I found very interesting. First of all apologies if this is not the correct mail address to send this to but I could not find another way to reply to the post. To begin, it sounds like this chap has never had a serious loss and I hope he never does. The tone in his email is quite extraordinary. Just like the the athletes he described he was, they are the ones that if they start to loose competitions they tend not to be able to turn it around. The main reason being that they don’t realise that loosing is part of the game. The only difference is how you deal with the losses that will ultimately determine if you will succeed or not. I say this because I was a promising football player (or soccer I should say) in England until several substitutions during games caused doubt in myself and I slowly but surely disappeared from the scene. Ultimately where I think he is mistaking is equating frequency with magnitude. I won’t even go into monthly return target that he appears to be setting. That’s a recipe for disaster. The market just doesn’t allow you nor are their enough opportunities to do so unless you take huge leverage. And we know what can happen then….In sports, frequency equals magnitude. That is, your number of tournaments/competitions entered (frequency) will equal to the number of races won or lost (magnitude). In trading this does not. You can be wrong over 70% of the time and still have a positive return. The reason being that magnitude in trading has a component to it called risk management. The old adage “cut your losses short and run your profits” is probably the oldest cliché in the market place but one whose power is often overlooked and misunderstood by most participants, professionals and non. Kind regards, Leonardo Cecchini
