And what do you think the odds were for him having 18 profitable years?
I am reading an interesting book on probability called 'Drunkard's Walk'.
He talks about a trader that beat the S&P 15 years in a row. Several different estimates of odds are presented – all the way to 73,000 to 1. While it is true that if you pick one trader and ask at the beginning, what's the odds, it might be 73,000. However, there are thousands of traders started 15 years ago, what's the odds of one beating the market for 15 years – about ¾. L
If we took thousands and started flipping coins, with the losers (tails) dropping out, after ten flips, we'd still have double digit 'winners' (and they would have millions under management. J )
Interestingly enough, the above trader beat the market for 15 'calendar' years, however, during that time, there were 37, twelve month periods that he did NOT beat the market. I think we can all agree there is nothing special about a Jan-Dec evaluation as opposed to say Sep – Aug. J
We tend to 'reward' success but do not luck nor the circumstances. We tend to fire the manager that 'underperforms' when he is likely to 'revert to the mean' and do better in the future.
From: OptionClub@yahoogro
Sent: Monday, June 14, 2010 6:24 PM
To: OptionClub@yahoogro
Subject: [TheOptionClub.
Hi Robert,
I think that while basic intelligence is important, the very smart actually have a handicap. Take Victor Sperandeo for an example: An options trader and technical analyst who had a string of 18 profitable years clocking an average return of 72%. His first loss was in 1990 with a 35% drawdown.
"The key to trading success is emotional discipline. Making money has nothing to do with intelligence. To be a successful trader, you have to be able to admit mistakes. People who are very bright don’t make very many mistakes. Besides trading, there is probably no other profession where you have to admit when you’re wrong. In trading, you can’t hide your failures." - Victor Sperandeo
Creating or finding a quality system is not nearly as hard as actually following and executing it effectively in the face of the emotional roller coaster. I could give away a winning system and most people would still fail to make a profit with it because they would think they were too smart to follow it or would stop using it after a string of loses. Success in the market is more about EQ (emotional quotient) then IQ (intellectual quotient).
Cheers
Derry
http://etfhq.
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