On... KEN

A commonly quoted statistic in trading is that 90% of people lose money or break even and only 10% of traders make money.  Is that really true and where did the numbers come from? Intuitively it seems rather pessimistic considering the stock market index has only gone up over time, if you zoom out. If the stock market is an average of all the participants return, then wouldn't at least 50% of traders make money? I would expect that at least 50% of participants make money, or even more. Probably just me being optimistic.  I think if it were really true that only 10% of traders make money and the rest break even or lose, I would pinpoint it down to one main reason. Of course there are many reasons like trading is difficult, most people don't have the personality to trade, people are not taking trading seriously, etc. Those are all valid reasons but they are general reasons why you don't succeed in any activity and not trading specific. The reason I think many people fail is b...

Just because you're 'doing nothing ', doesn't mean you're not doing something.  In my previous job as a geophysicist, I do spend quite some time thinking and reading, instead of tapping the keyboard all day long. Reading and thinking is actually a very important part of the job. Although when you're thinking and reading, it actually looks like you're not working. Contrast that to jobs that require physical activity like a waiter, labourer, etc., you can actually tell when someone is working or not.  In the realm of investing/trading, most of the time you seem like you're not working. Except for day trading, the other forms of trading and investing don't really require a lot of time clicking on the buy and sell buttons. Clicking buy and sell probably makes up only 10% of the activity. The other 90% of the time would be spent on reading, looking at charts, listening to podcasts, thinking, etc... Activities that doesn't show youre actually working o...

If there's nothing to do, then do nothing.  In my previous post , I mentioned that everytime I see a signal, I should take it. This implies that I have to be very active. In essence, it is, but only when you see an entry/exit signal. Otherwise, you should not do anything. You see the investing business is quite different from any other business or career. In your normal activities, business, career, etc.... The more you do, the more you gain - it pays to be active. However, in investing, the less you do, the better. Laziness ( bordering on sloth ) is actually an edge. To quote Jesse Livermore - "It was never my thinking that made the big money. It was my sitting. Got that?" The first instance where you should sit on your hands is not to put trades where there are no good trades to put on. Don't force yourself to trade for the sake of trading. Be patient! Of course, no trades = no money. But that's much better than putting on bad trades and lose money. In the last ...

Scaling solutions always beat non scaling solutions and that's what we should pursue in my opinion. In my opinion, fast food chains like McDonald's  Kentucky Fried Chicken, etc... Are better business models compared to boutique restaurants or niche cafes, because fast food chains have the ability to scale easily. If you run a boutique restaurant, your ability to expand the business is dependent on your chef/cook. Assuming your menu has been a hit and your customers are increasing, you won't be able to easily set up a new restaurant as you need the chef to pass on his skill to another person. Compare that to a fast food chain where the recipe can be easily replicated and you can set up new stores easily as long as you continue to be profitable.  Another example of scalability is whether your endeavor is capital dependent or time dependent. If you're selling your time, I.e. being paid as an employee in a company, your upside is limited. You can only work a certain amount ...

Recently, my wife asked whether I'm making money in investing. If I am, then it's easy money and I should continue? Otherwise, quit?  How soon should you be investing before you conclude that you're making money or not? Sure you can invest for a week and see if you're up or down. But does it carry any conclusions whether you're a profitable investor? To the layman, if you tell them you're making money after a week, the conclusion might be investing is easy money and you should continue investing. Or if you're not making money, investing is hard and you should quit.  In my "previous life", I was a geophysicist. My degree took 3 years, and after that I took 1 year masters before I got a job. Even after joining the workforce, I was in the graduate program for 3 years. That is a total of 7 years before I was considered a "fully trained " geophysicist by my company.  A doctor takes many years of education before they can practice medicine. Wou...

 Last post , I wrote that trading should be done like you're running a business. If so, what kind of business would I be running?  The business model that I best want to replicate is a casino business ( see this video , if you want to skip the rest of the blog post ). Most people that I talk to, thinks that investing or trading is a form of gambling. Is trading or investing really gambling? This topic is rather divisive and it depends on who you ask. Well if it truly is gambling, I would want to play the part of the casino, because as they say, the house always wins.  How does the casino make money? By having a positive expectancy.  They don't have to make money on every bet, but over large number of bets, the profit has to be bigger than the loss. In terms of trading, my winning percentage is not really that great but as long as the average winners are bigger than the average losers, that is good enough. Year to date for 2021 ( over 133 number of trades ), my winnin...

Trade like you're running a business, not like it's a hobby. Because business makes money and hobby costs money.  Well, to be honest, a lot of business don't make money and they go bankrup, but that's not how we want our trading/investing to end. So what is the criteria of running a successful business? To me, three things come to mind. 1.Money, 2.Time and 3.Luck. 1.Money. Every business require money. Capital Expenditure to start the business and Operating Expenditure to keep the business running. So, if we want to run our trading as a business we should be prepared to fork out some capital to get it started and also to expect some monthly expenses to keep our trading business running. Example of Operating Expenditure can be our trading losses. If we're not prepared to take losses, then we can't run our trading as a business. Of course we would like the profit to more than the losses over a long period of time, but in the short term, losses are inevitable.  2.T...