Hey Bella,<\/p>\n
I was just getting some hummus and crackers when a quote from Charlie Munger popped into my head and I immediately rushed to my email so that I wouldn’t forget about it later. \u00a0Basically it goes “Tell me where I’m going to die, that is, so I don’t go there.”<\/p>\n
So I knew of no better person to ask in regards to trading since I’m guessing you’ve seen numerous traders blow up before.<\/p>\n
If you’re not busy I’m just wondering which places and things I must avoid at all costs to not blow up. Some are obvious I think like don’t use options to make total account bets and stuff like that. But I’m just wondering what you think are the less obvious ones.<\/p>\n
@MikeBellafiore<\/p>\n
1. You would rather be right than trade right.\u00a0 For short-term traders adding to a position with price trading against you is arrogant.\u00a0 Losers add to losers.\u00a0 No one cares what you think about XYZ stock.\u00a0 Get over it.<\/p>\n
2. A trader without edge is a trader about to go over the edge. Strategies work and then they don’t.\u00a0 Too many follow “gurus” who are not teaching a strategy with edge.\u00a0 Learning a strategy with edge still requires you to internalize that edge for your trading.<\/p>\n
3. Trading a time frame great for your neighbor and expensive for you.\u00a0 If you think slowly and comprehensively, as described in Thinking Fast and Slow\u00a0<\/em>by Professor Kahneman, being an active scalper will not work for you.\u00a0 If you are a fast-thinker, trading a macro strategy is just as foolish.<\/p>\n 4. Commissions, commissions, commissions.\u00a0 I have heard countless stories of traders with commission structures that give them little chance to succeed.\u00a0 You might call this a trading death by a thousand cuts.\u00a0 As way of comparison, our professional firm traders are charged less than $1 per thousand for their trades.<\/p>\n 5. You have no trading skill.\u00a0 Unlike what the Financial Media Entertainment propagates endlessly, trading is a game of skill and not “talking your book.”\u00a0 Take a course.\u00a0 Read some books.\u00a0 Trade on a demo.\u00a0 Study trading.\u00a0 Develop an edge.\u00a0 Then dip your toes into the shallow end of the trading markets, incrementally risking more only after success in real-time.<\/p>\n 6. You bet too big.\u00a0 Bet 1k on a trade after you have proven in real-time you can successfully bet $750.\u00a0\u00a0 Leaping from 1k of risk to 10k of risk per trade will lead to risk of a trading account blowup.\u00a0 Incrementally increase your risk.<\/p>\n 7. You have no process to improve as a trader.\u00a0 You either get better everyday as a trader or you are eliminated.<\/p>\n