On... the Paradox of Trading
The purpose of trading is to earn an income. Or is it?
Obviously, the final objective of trading is to earn money to support your living expenses. However, the initial objective is actually to grow your account. Because if you treat your trading profit as an income in the early stages (and spend your profits instead of reinvesting them), then your account will not grow or at best grow at a relatively slow rate. What's the point of trading then, if you can't spend the profits? It's a paradox.
If you roll a snow ball down a slope, initially it takes a lot of effort. The longer you roll, the larger the snow ball gets. The magic happens when the snow ball reaches a certain size, and without effort it will roll downhill on its own. However, if you keep taking chunks of snow out and not allow the snow ball to grow, it will not reach the stage where it will self propel.
A roller coaster requires energy to pull the coaches up in the initial stage. Once it crosses the first peak, gravity takes over. The accumulated energy will self propel the roller coaster for the rest of the journey. However, if you don't keep providing energy to push the coaches up and over the peak, it will not reach the stage where it can self propel.
Just like a snow ball, if you keep taking out profits from your trading account and spend them, your trading account will not reach the stage of 'escape velocity '. Just like a roller coaster, if you don't keep reinvesting your profits and provide 'energy' to your trading account, it will not reach the stage where it can self propel.
In my opinion, the purpose of trading is to grow your account until you can beat a certain threshold. Initially, trading is a job where you can earn, but you cannot spend. And that is why trading is a paradox.
Obviously, the final objective of trading is to earn money to support your living expenses. However, the initial objective is actually to grow your account. Because if you treat your trading profit as an income in the early stages (and spend your profits instead of reinvesting them), then your account will not grow or at best grow at a relatively slow rate. What's the point of trading then, if you can't spend the profits? It's a paradox.
If you roll a snow ball down a slope, initially it takes a lot of effort. The longer you roll, the larger the snow ball gets. The magic happens when the snow ball reaches a certain size, and without effort it will roll downhill on its own. However, if you keep taking chunks of snow out and not allow the snow ball to grow, it will not reach the stage where it will self propel.
A roller coaster requires energy to pull the coaches up in the initial stage. Once it crosses the first peak, gravity takes over. The accumulated energy will self propel the roller coaster for the rest of the journey. However, if you don't keep providing energy to push the coaches up and over the peak, it will not reach the stage where it can self propel.
Just like a snow ball, if you keep taking out profits from your trading account and spend them, your trading account will not reach the stage of 'escape velocity '. Just like a roller coaster, if you don't keep reinvesting your profits and provide 'energy' to your trading account, it will not reach the stage where it can self propel.
In my opinion, the purpose of trading is to grow your account until you can beat a certain threshold. Initially, trading is a job where you can earn, but you cannot spend. And that is why trading is a paradox.
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